Memorandum
City of Lawrence
City Manager’s Office
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TO: |
City Commission |
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FROM: |
Diane Stoddard, Interim City Manager |
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DATE: |
July 16, 2015 |
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CC:
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Casey Toomay, Assistant City Manager Toni Wheeler, City Attorney Brandon McGuire, Assistant to the City Manager |
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RE: |
Santa Fe Station Project Authorization to Proceed |
In 2008, the City began working on a project to restore the BNSF depot, also known as the Santa Fe Station, on E. 7th Street at the prompting of a local advocacy group, Depot Redux. The building is owned by the BNSF Railway and is actively served by Amtrak’s Southwest Chief route. Though not on the historic register, the property is eligible for placement on the register due to its significance as a transportation facility and its age and that it is an excellent example of mid-century modern architecture.
A number of exciting steps forward have occurred over the past 7 years. Amtrak invested approximately $1.5 million to replace and improve the platform and the lighting, which also included some replacement of canopy supports that were rusting. The City invested in a Historic Structures Report, which outlined the necessary improvements in the facility and provided a cost estimate to utilize in grant applications. The City approved for a Transportation Enhancement (TE) grant in 2010, but the application was not successful. The City applied for several grants through the U.S. Department of Transportation, one of which was successful and provided funds to create construction-ready plans for the project.
During this timeframe, the City has had significant discussions with the BNSF Railway, owner of the station, and Amtrak, the operator of the Southwest Chief route which utilizes the station. Through these discussions, the BNSF has indicated a willingness to transfer the station directly to the ownership of the City while the land would be subject to a long term land lease. BNSF wished to retain space within the building for its operations, requiring a lease back to BNSF from the City. Amtrak also required a lease to utilize the station, similar to the agreement it has with the BNSF currently. The fact that the station lies on active rail and is utilized by the BNSF and Amtrak has made the transaction more complex and discussions on the project have really involved four parties- the City, BNSF, Amtrak and KDOT. Together, the transaction requires multiple agreements to accomplish- a land lease, lease-back and donation agreement for the station with the BNSF, a lease with Amtrak, and a city-state funding agreement with KDOT. Prior KDOT Transportation Enhancement projects were administered by the City and were a reimbursement grant with the City undertaking all aspects of the project bidding and administration. A recent change to this process requiring KDOT to administer, bid and contract all of these TE projects has also required some additional coordination.
TE Grant
In the summer of 2013, the City of Lawrence received a letter from KDOT indicating that its grant application for the Santa Fe Station project was approved in full. The original grant application included the entire building preservation project (roof, HVAC, ADA improvements, sidewalk improvements around the building and site improvements). The site improvements included landscaping surrounding the historic fountain base on the west side, removal of asphalt parking on the west side and plans for a future new parking lot area on the east side of the building. The total of the approved project was approximately $1.5 million, with a grant of $1.2 million and a City match of approximately $302,000 plus design and construction bidding costs that brought the City’s total commitment to approximately $350,000. As the project progressed, the City was informed that any improvements in the BNSF space could not be covered by the grant. As a result, staff and architects had to reorganize the project to accommodate this new requirement, which involved having to move the east side parking lot improvements to a future phase and come up with a funding structure that could come close to accommodating the original city budget. In January 2014, the City Commission authorized the City’s costs to $385,000 for the project. The City’s match was budgeted and planned for the 2014 capital improvements program. Funds for the match are available and were encumbered for the project in 2014. The construction of the east parking lot and sidewalk could occur at a future time with it possibly being constructed in-house or be included in a TE grant for a trail grant to extend the Burroughs Creek Trail connection to the north and west.
Project Overview:
The construction project will provide for the following items, all in compliance with the ADA and historic standards. These items are itemized on the attached plans, project manual and cost estimate sheets.
Site Work: restore existing brick parking lot on west side, remove asphalt parking lot on west side, create a landscaped area on west side with lighting, sidewalk improvements, fencing and roof storm drainage
Building Work: Exterior: new roof, insulation, work on fascia and planter; Interior: doors, windows, painting, restoration, ADA compliant restrooms, geothermal cooling system, boiler, fire suppression system, solar system and electrical improvements.
City-State Agreement:
In order to proceed with accessing the grant funds, the City will need to authorize a City-State agreement with KDOT. Staff recommends authorizing this agreement in order to enable the project to proceed. KDOT will bid the project and be responsible for project administration. The project will be set up to include a base bid and alternates that enable flexibility in case the project comes in at a higher cost than expected. Provided the project comes within budget, the City will be required to provide its match funding. Should the project exceed budget, the City has flexibility to decline the project, in which case the project would need to be reorganized and re-bid.
BNSF and Amtrak Agreements:
The City had been in discussions for a number of years with the BNSF Railway regarding the transfer of ownership of the station. During times when the project was not proceeding due to lack of funding, land transaction discussions were suspended. Due to the fact that the station sits on BNSF property, that there was some desire from BNSF to maintain a presence within the station itself, and that the station is served with active service from Amtrak, the transaction has been quite complex. The discussions have involved personal visits from BNSF corporate officials from Texas 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. This process continued with a few more rounds of exchanges of documents. The latest documents were received from BNSF in early 2015. City staff is pleased that the current agreements largely reflect the City Commission’s prior direction regarding negotiations on the transaction. Major issues have revolved around environmental liability, which have been satisfactorily addressed in the opinion of City staff. The agreement provides that BNSF will retain environmental liability for activities that it conducted on the land prior to the City’s lease and the City will be required to assume liability for its activities on the land beginning with the City’s lease.
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 land lease exhibit: 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;
· Environmental: City will be responsible for its own environmental impacts and the BNSF will be responsible for any of its environmental impacts prior to the lease to the City. 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.
· 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
Conveyance Contract (BNSF building ownership transfer): 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.
· 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 (see Amtrak agreement section below)
· 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.
Premises Lease Agreement (Lease Back portion of building to BNSF): BNSF Existing Floor Plan BNSF Proposed Floor Plan This agreement provides for the lease-back of the space within the Station for continued used by the BNSF crew. The BNSF has indicated that it requires to utilize this space 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.
A Phase 1 Environmental Study was completed in the fall of 2013. The study recommends no further investigation. Additionally, the City consulted with an environmental attorney to review the agreements.
The transaction will require a lease with Amtrak in order for it to maintain its Southwest Chief operations through the station. Improving the station for Amtrak passengers as a gateway to Lawrence was one of the main objectives of the project. The agreement with Amtrak generally provides the following:
Amtrak has also indicated a willingness to contribute toward the ADA improvements on the building. There are still discussions ongoing regarding these contributions and it should not be presumed that these contributions will be definite. Should the contributions materialize, the City would seek reimbursement from Amtrak at the completion of the project. In anticipation of this, ADA costs will be separately itemized in the bidding.
Facility Costs:
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 for 2015. However, they have been budgeted for 2016. It should also be noted that with the geothermal and solar systems, the utility bills will be minimized.
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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
Requested Action:
Some minor adjustments to the final agreements may be required and also a closing date for the land transaction must be finalized. Enabling staff to finalize the agreements with these details is critical to enable the project to proceed to bidding by the State of Kansas later this year, or early next.
Suggested motion:
Authorize the Interim City Manager to finalize and execute the agreements with BNSF Railway and Amtrak regarding the land transaction and lease arrangements on the Santa Fe Station project and authorize the Mayor to execute the city-state agreement with the Kansas Department of Transportation related to the grant and the construction of the project.