Memorandum
City of Lawrence
City Manager’s Office
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TO: |
David L. Corliss, City Manager
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FROM: |
Diane Stoddard, Assistant City Manager
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CC: |
Cynthia Wagner, Assistant City Manager Toni Wheeler, Director of the Legal Department
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Date:
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October 27, 2011 |
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RE: |
Santa Fe Station Update |
Please place the following item on the regular agenda for a City Commission meeting in November 2011:
Receive staff report regarding the Santa Fe Station and provide direction to staff, if appropriate.
Background:
In the summer of 2008, the City Commission provided direction to staff to work on the acquisition of the Santa Fe Station. Since that time, staff has worked with BNSF Railway, the owner of the Station, Amtrak, the Kansas Department of Transportation, Depot Redux and other stakeholders regarding the following activities:
The City Commission has provided direction for City staff to work toward the acquisition of the station. However, to date the Commission has expressed concern with acquiring the station without a grant as the acquisition would require the City to complete numerous improvements to the Station- some of which are immediate deferred maintenance items (such as the roof) and others are required ADA improvements. Staff has been working on Commission direction to negotiate a transfer with BNSF that could be executed if the City receives a grant to fund the necessary immediate improvements.
Amtrak Projects:
Amtrak received funding through ARRA for various improvements to the exterior of the Station. Amtrak has recently completed upgrades to the signage on the building. When it was determined that the original neon signs were beyond restoration, Amtrak agreed to replace the two “Lawrence” neon platform signs and add an Amtrak neon sign in place of the original “Santa Fe” sign on the front of the building. Also, Amtrak has been involved in an extensive project to replace the concrete platform, which involves making the platform accessible for people with disabilities. These projects have involved significant coordination between Amtrak officials, Depot Redux, the City and Hernly Associates to ensure appropriate preservation of the historic structure.
Amtrak Letter of Offer regarding ADA Improvements:
Amtrak has taken a significant interest in the Lawrence Santa Fe Station. Carey Maynard-Moody from Depot Redux has attended several Great American Station events and elevated the issues surrounding the Santa Fe Station with Amtrak officials. Amtrak has been kept apprised of discussions of the City Commission regarding the Station. Amtrak would like to see the Station acquired by the City, but has understood the interior ADA improvements are a liability concern for the City to proceed with the acquisition of the Station absent grant funding to complete the upgrades. The City has recently received a letter from Amtrak indicating that Amtrak would be willing to fund these interior ADA improvement, provided that the City design and construct the station improvements and the improvements are reviewed and approved by Amtrak. Amtrak would also require the City to have an agreement with Amtrak to use the Station upon ownership transfer under similar terms of its current agreement with the BNSF Railway. This letter demonstrates a significant commitment from Amtrak to this station and the community.
Hernly Associates has estimated the interior ADA improvements at approximately $140,000, including contingency funds. Recently, the summary of estimated project costs was updated for this spring’s High Speed Intercity Rail program grant round. The updated estimates showed that the entire restoration project would be approximately $1.4 million, a figure that includes the interior ADA improvements. Backing out these costs, it brings the total figure to just under $1.3 million. The full project includes addressing all deferred maintenance items, the roof, the HVAC systems, restoring the interior, reconfiguring the hallway to make use of the former shipping entrance/exit, parking lot improvements and site work.
BNSF Agreements:
The City has been discussing the potential acquisition with the BNSF Railway since mid-2008. BNSF has invested a great deal of time in these discussions. The discussions have involved personal visits from BNSF officials to Lawrence twice to conduct various reviews of the Station. BNSF drafted acquisition documents for the City’s consideration in the spring of 2010. These documents were reviewed by City staff and returned to BNSF in the summer of 2010 with comments. City staff received a response back from BNSF in June 2011 with further revisions to the documents, incorporating a majority of the changes that the City staff requested. Legal staff recommends, if the Commission wishes to proceed with acquisition and the land lease, further negotiation on some of the provisions continue.
There are three agreements necessary between the City and the BNSF to complete the transaction: a land lease, a building conveyance agreement, and a lease back to BNSF for space within the Station. These documents are further summarized below.
Definite Term Lease for Land (BNSF Land Lease) and attachments: This document provides for a land lease from BNSF to the City on the following terms:
· 30 year term then month to month; subject to repurchase clause;
· City may use the land for any lawful purpose, so long as the City’s use does not interfere with BNSF’s operations;
· One-time rent payment of $100 from the City;
· BNSF does not warrant its title to the land and does not covenant quiet enjoyment.
· Environmental: City shall comply with environmental laws and BNSF may require an environmental audit, at the City’s expense, at the conclusion of the land lease to determine whether any noncompliance or environmental damage to the land occurred during the City’s occupancy;
· City will pay all taxes, utilities and other charges of every kind, whether foreseen or unforeseen, which are attributable to the land during the term of the lease. This requires the City to pay any personal or ad valorem property taxes assessed against the land, even as result of BNSF’s or Amtrak’s use of the property. Staff continues to try to ascertain the annual property taxes on the land; As currently written, the land lease requires the City to waive all rights to protest appraised values or to receive notice of appraisal regarding the land;
· City will be required to purchase insurance policies including commercial general liability, business automobile, workers compensation and employers liability, railroad protective liability insurance, and contractor’s pollution legal liability insurance. The costs of this insurance coverage is not known at this time.
· City will pay all repairs and maintenance to the land as needed or desired, at the City’s sole expense, including to any paved areas, sidewalks curbs, parking lots, landscaping and lawn areas;
· If the building on the land is damaged or destroyed, the City is required, at its sole cost and expense, to restore or rebuild the building and associated improvements;
· The City can’t transfer the land lease to another party without BNSF’s consent
· The City agrees to indemnify BNSF from and against all claims, including liabilities arising from or attributed in whole or in part to the negligence of BNSF
Note: While the land lease draft does not yet reflect property on the east side of the Station, it would be the intention of the City to also lease that property. This addition should not add significantly to the terms outlined above. However, in discussions with BNSF, officials have indicated the need to preserve the spur that serves the BNSF office space. Additionally, BNSF will require that the City fence the east end of the property along the tracks, once ownership is transferred. Approximate cost of 400 feet of 6 foot high vinyl coated chain link fencing would be $6000.
Conveyance Contract (BNSF building conveyance): This agreement provides for the transfer of ownership of the building and other improvements to the City on the following terms:
· No cost to the City;
· Agreement protects certain historic personal property at the building, such as historic furnishings;
· After closing, City will be responsible for real estate taxes on real and personal property;
· City responsible for all utilities;
· BNSF is transferring the building “as-is” and the City is acknowledging it is taking building as is and that the building is in need of substantial repairs. Further, BNSF is disclosing and the City is acknowledging that the building may contain asbestos material and the City waives any claim against BNSF related to the condition and the possibility of asbestos in or around the building;
· The City waives and releases BNSF and its affiliates from all present or future claims and demands arising from or in any related to the building, its operations even if the loss, damage or claim is caused by the negligence of BNSF of any BNSF parties. The agreement also requires the City to agree not to enact any ordinance, rule or other regulation that interferes with BNSF’s operations, as determined by BNSF.
· The City waives any claims against BNSF arising from the City’s ownership or use of the building, even if the loss or claim is caused by the negligence of BNSF or a BNSF party.
· The Agreement places on the City the duty to remove, remediate or take other action requested or required by a governmental agency, including an environmental regulatory agency, concerning any hazardous substance or contaminants in the building, whether or not the acts or omissions of the City caused the presence of the hazardous substances or contaminants to be in the building.
· Preserves operating agreement with Amtrak and requires the City to enter into a new station lease with Amtrak on terms and conditions acceptable to the City and Amtrak and approved by BNSF and substantially similar to the existing agreement with Amtrak (City staff has not been provided a copy of the existing operating agreement with Amtrak, however Amtrak has provided the City with a proposed lease);
· Provides lease-back for BNSF for the use of its space in the building (see Lease Back agreement outline)
· Building improvements must minimize impact to BNSF operations and plans/specifications must be approved in advance and in writing by BNSF. The City must provide, at it’s sole expense, temporary space for BNSF and Amtrak should construction require vacation of the building;
· City must maintain the parking lot at the City’s sole expense and must provide BNSF and AMTRAK rights to use the lot without charge;
· Repurchase clause: BNSF can choose to exercise a repurchase of the building and improvements from the City if the City is entertaining an offer to transfer to the lease to another party or if BNSF requires the building for railroad purposes. The repurchase clause requires that BNSF would reimburse the City the costs of the renovations less accrued amortization.
Note: The building conveyance contract does not provide for the receipt of grant funds as a contingency to closing, though such a contingency was provided in the City’s revisions to the documents. It does not appear that BNSF wishes to execute agreements with such a contingency. However, BNSF officials have been willing to continue to work on the documents.
Premises Lease Agreement (Lease Back Agreement with BNSF): This agreement provides for the lease-back of the space within the Station for continued used by the BNSF crew that currently operates in the building on the following terms:
· 30 year term; thereafter it is month-to-month tenancy
· City responsible for utilities and keeping the building in good repair
· One-time payment of $100 by BNSF for rent of premises
· City will pay for gas, water, sewer and electricity used by BNSF during the lease term
· City is required to maintain property and casualty insurance on the building in an amount equal to 100% of the actual replacement value of the building, including any building renovations.
· BNSF may assign, sublease or transfer the lease to any entity owned or controlled by BNSF or any parent or affiliate of BNSF without the City’s consent; Other assignments or subleases will require City’s consent.
Santa Fe Station Operating Costs:
In June 2008, staff prepared a report regarding the Santa Fe Station. The report indicated that operating expenses for the Station, such as utilities and maintenance costs, are estimated at approximately $50,000 annually. It is likely that Amtrak would contribute toward ongoing utility cost, as is the case with the current arrangement with the BNSF Railway. However, it is unknown exactly to what extent the costs would be shared. City staff has not undertaken significant discussions with Amtrak about its proposed lease provisions at this point. Under BNSF’s proposed lease-back arrangement with the City, BNSF would not provide funds toward ongoing building maintenance or utility costs.
Federal Railroad Administration/Kansas Department of Transportation Grant:
The City applied for a High Speed Intercity Rail (HSPIR) grant with the assistance of the Kansas Department of Transportation for the finalization of construction documents for the Santa Fe Station restoration project. The grant was funded and all of the necessary agreements between the City, KDOT and the FRA have been executed. The federal process requires KDOT to competitively procure architectural services through a qualifications based selection process. Hernly Associates was recently selected by the State of Kansas to perform this work. At the conclusion of the project, the City will have construction-ready plans for the full restoration project.
Funding:
The City has worked to secure a grant from the FRA for the final construction plans. Other grant applications have not be successful to date. Additionally, KDOT has recently announced that it will not have a Transportation Enhancement (TE) grant round for 2012. This funding source has funded most historic train depot restoration projects in Kansas, including the restoration of the Union Pacific Depot in Lawrence. It is unknown whether there will be future funding rounds for this program.
Staff recently analyzed the TIGER III funding program announced by the U.S. Department of Transportation in July. Based upon staff review of the final Notice of Funding Availability, it did not appear likely that this funding source would be viable for the Santa Fe Station project. The Santa Fe Station project does not meet the minimum project size funding threshold of $10 million and the City of Lawrence, because we are a metropolitan area larger than 50,000 population, does not qualify for the rural area waiver of the $10 million project minimum.
It is likely that the project could quality for historic tax credits. There are also several other grant programs that may be worthy of exploration.
Action Requested:
Staff recommends that the City Commission provide direction regarding the project. Specifically, it would be helpful for the Commission to provide direction with regard to the Amtrak letter of offer and discussions with the BNSF Railway.
Amtrak has agreed to fund necessary interior ADA improvements, which are a significant amount of the first phase restoration costs. Amtrak’s letter presumes that the City would move forward with the acquisition of the Station. The City would be immediately responsible for operating costs and any other pressing maintenance items, such as the roof replacement.
Regarding the Amtrak letter, the City’s options include:
a) Accepting the offer and proceed with the ADA improvements, invoicing Amtrak for the improvements upon completion. This option would require the City proceeding with Station acquisition and the willingness of the City to undertake the maintenance items and operational costs. More substantial improvements could be delayed until such time grant funding or other funding is identified.
b) Rejection of the Amtrak offer.
c) No action regarding the Amtrak offer.
In a June 2008 report to the City Commission, staff estimated ongoing operational and maintenance costs related to the Santa Fe Station. Below is the summary of those costs. It appears that Amtrak would be willing to share in some utility costs with the City. It should be mentioned that these expenses are also not budgeted at this time.
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Maintenance Activity |
Avg. Annual Cost |
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Custodial |
$4,700 |
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Energy |
$25,000 |
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Grounds |
$2,000 |
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Maintenance and Repair |
$18,000 |
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Pest Control |
$235 |
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Water, sewer, refuse (utilities) |
$4,000 |
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Total estimated annual operating cost: |
$53,935 (plus part-time staff cost) |
Source: Public Works -Building Maintenance Division, 2008
Staff has understood City Commission direction to this point to work toward a contingent transfer agreement with the BNSF Railway. BNSF has indicated that it is willing to proceed with the transfer of the property, but was not interested in an agreement that includes a grant contingency.
The City’s options regarding the ownership issue would be to:
a) continue to work to be satisfied with the documents, but not finalize them until grant funds are identified,
b) finalize the agreements and proceed with acquisition of the building absent another grant.