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HomeMy WebLinkAbout98-278 Resolution No. 98-278 RESOLUTION AUTHORIZING EXECUTION OF A LINE SALE AND DONATION CONTRACT WITH THE UNION PACIFIC RAILROAD COMPANY (Elgin Industrial Lead) BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF ELGIN, ILLINOIS, that Joyce A. Parker, City Manager, and Dolonna Mecum, City Clerk, be and are hereby authorized and directed to execute a Line Sale and Donation Contract on behalf of the City of Elgin with the Union Pacific Railroad Company for the acquisition of the East Elgin Industrial Lead extending from Mile Post 43 . 0 to the end of the line at Mile Post 43 . 8, a copy of which is attached hereto and made a part hereof by reference. s/ Kevin Kelly Kevin Kelly, Mayor Presented: November 18, 1998 Adopted: November 18, 1998 Omnibus Vote: Yeas 5 Nays 0 Attest: s/ Dolonna Mecum Dolonna Mecum, City Clerk August 20, 1998 MEMORANDUM TO: Joyce A. Parker, City Manager FROM: William A. Cogley, Corporation Counsel SUBJECT: Abandonment of East Elgin Industrial Lead Railroad Line by Union Pacific Railroad On June 9 , 1998, I provided you a background and status report on abandonment of the East Elgin Industrial Lead Railroad Line by the Union Pacific Railroad. A copy of this June 9, 1998 memorandum is attached. I have since consulted with appraisers regarding values for the non-reversionary property along the railroad line. I discussed this matter in detail with Mr. Bill Enright who is an MAI appraiser with the firm of Appraisal Associates in Chicago. Mr. Enright has substantial experience in the appraisal of railroad right of ways . Mr. Enright reviewed the appraisal of Arthur Andersen and Associates prepared for the Union Pacific Railroad and various materials related to the proposed abandonment of the rail line. He is of the opinion that the general approach used by Arthur Andersen of comparable sales of properties along areas along the rail line is the appropriate approach to valuation in these cases . Mr. Enright suggested that rather than proceeding with a formal appraisal the City should attempt to negotiate a discount of approximately 10-20% off the $2 . 35 a square foot price provided for in the appraisal of Arthur Andersen and Associates . I am advised that there is $200, 000 budgeted from riverboat funds in 1998 for acquisitions for the railroad right of way. The five year financial plan currently proposes that $170, 000 be budgeted from riverboat funds in 1999 for expenditures related to the railroad right of way. As my June 9 memorandum advises the City has several alternatives regarding acquiring the rail line. One alternative is to proceed with the acquisition of the entire 2 . 8 mile segment of the rail line for trail use pursuant to the Trails Act. The City' s use of the rail line would be limited to a public trail . Assuming a cost of approximately $2 . 00 per square foot for all of the non-revisionary property the cost to acquire the entire rail line pursuant to the Rails to Trails Act would be approximately $1, 666 , 000 . A second alternative would be for the city to acquire only a portion of the rail line property for trail purposes pursuant to the Rails to Trails Act. An example of this alternative Joyce A. Parker 2 August 20, 1998 would be for the City to acquire pursuant to the Rails to Trails Act the segment of the rail line property north of North Grove near the Elgin Salvage property. Based upon current information the railroad right of way north of North Grove to the end of the rail line involves approximately 2 . 36 acres of non-reversionary property and 4 . 31 acres of reversionary property. The City would acquire the reversionary property without charge. Assuming a cost of approximately $2 . 00 per square foot for the non-reversionary property the cost of acquiring the trail line north of North Grove Avenue would be approximately $205, 000 . The City' s use of this segment of the rail line acquired pursuant to the Rails to Trails Act would be limited to a trail use. The remaining portion of the rail property south of North Grove would be deemed abandoned and title to the reversionary property would revert to the property owners adjoining these various parcels . The railroad would then attempt to sell on the open market the various parcels of non-reversionary property. The City could decide whether it wished to negotiate for the purchase of any of these non-reversionary parcels on an individual basis . Such acquisitions by the City could include acquiring all of the rail line property lying within the city owned property south of Kimball Street to Douglas Avenue. As the adjoining property owner of all the property South of Kimball to Douglas, the City would acquire automatically and without compensation approximately . 835 acres of the reversionary rail line property. Approximately 1 . 74 acres of the rail line property south of Kimball to Douglas is non-reversionary property which the City could purchase from the railroad. Assuming a $2 . 00 per square foot cost the purchase price for non-reversionary railroad property between Kimball and Douglas would be approximately $151,500 . Such property not acquired through the Rails to Trails Act could be used and developed in any manner permitted by the zoning ordinance. A third alternative would be not to acquire any portion of the rail line property pursuant to the Rails to Trails Act. Under this alternative if the rail line property is not acquired by some other entity pursuant to the Rails to Trails Act before the end of the NITU negotiating period (currently October 21, 1998 ) the rail line would be deemed abandoned with title to the reversionary properties reverting to the property owners adjoining these various parcels . The railroad would likely proceed to sell on the open market the various parcels of non-reversionary property. As with the second alternative discussed above the City could decide whether it wishes to negotiate for the purchase of any of these non-reversionary parcels on an individual basis and the use of any reversionary or non-reversionary properties not acquired through the Rails to Trails Act would not be limited to a trail use. Please note that the acreage references provided herein are based upon information accumulated by the Union Pacific Railroad. The exact dimensions of the rail line properties Joyce A. Parker 3 August 20, 1998 will be verified in the process of obtaining title commitments and surveys as part of any property acquisitions . As we have discussed we should obtain city council direction on which of these alternatives the city council wishes to pursue. Please place this matter on the Executive Session Agenda for the city council meeting of August 26 , 1998 . W &v WAC mg Attachment cc : Roger Dahlstrom Ray Moller June 9 , 1998 MEMORANDUM TO: Joyce A. Parker, City Manager FROM: William A. Cogley, Assistant Corporation Counsel SUBJECT: Abandonment of East Elgin Industrial Lead Railroad Line by Union Pacific Railroad The purpose of this memorandum is to provide you with a background and status report on the abandonment of the East Elgin Industrial Lead Railroad Line by the Union Pacific Railroad and the city' s efforts to acquire this property for a proposed trail use . The city' s plans for improvements to Kimball Street included the removal of the raised rail crossing of the subject rail line through Kimball Street. Removal of the rail crossing required the abandonment of the rail line . The city contacted the Union Pacific Railroad Company regarding the possible abandonment of the rail line. The railroad had only three remaining users of the rail line and indicated its willingness to abandon the rail line in the event the city acquired the properties of the remaining rail users or the remaining users consented to the abandonment. The city proceeded to acquire the properties of the three remaining rail line users as part of the property acquisitions for the Kimball Street improvement project. On December 24 , 1996 the Union Pacific Railroad Company filed a petition with the United States Surface Transportation Board requesting permission to abandon and discontinue service for the 2 . 8 mile segment of the East Elgin Industrial Lead Railroad Line between Mile Post 41 . 0 and Mile Post 43 . 8 . A copy of a map showing the location of this segment of the rail line is attached. The railroad holds title to the rail line under two different categories of property interests . The first category is reversionary property. The reversionary property was typically acquired by the railroad and its predecessors through easements . Title to the reversionary properties normally would revert to the adjoining property owners upon abandonment of the rail line . The second category of property is non-reversionary. The railroad holds fee simple title to the non-reversionary properties . Title to the non-reversionary properties would remain with the railroad upon abandonment of the rail line. Based upon title examinations completed by the railroad approximately 19 acres of the rail line are non-reversionary property and 14 acres are reversionary property. Joyce A. Parker -2- June 9 , 1998 A federal statute exists which provides for the conversion to public trails of rail lines which are proposed to be abandoned. 16 USC Sec . 1247 (d) commonly referred to as the "Rails to Trails Act" would allow the city to acquire both the reversionary and non-reversionary property and use the property as a public trail . The city' s trail use would be considered to be "interim" as the property would be subject to the future reinstitution of rail service . Under this statute the city' s acquisition of the property and interim trail use is not considered an "abandonment" of the railroad line thereby preventing the reversion of title of the reversionary properties to the adjoining property owners . The city' s use of the property would be limited to a trail use . In the event the ' city elected to discontinue the trail use the city would need to file a petition with the Surface Transportation Board requesting permission to discontinue such use . Upon the granting of the petition the rail line would be declared abandoned with title to the reversionary property reverting to the property owners adjoining these various parcels . The United States Supreme Court has upheld the constitutional- ity of the Rails to Trails Act. Preseault, et al . v. Interstate Commerce Commission, et al . , 494 U. S . 1, 110 S .Ct . 914 ( 1990 ) . Subsequent litigation in the Preseault case indicates that the mechanism under the Rails to Trails Act which prevents the reversion of title to the reversionary properties to the adjoining property owners constitutes a taking requiring the payment of just compensation by the federal government . See Preseault v. United States, 100 F. 3d 1525 (US Court of Appeals Federal Circuit, 1996 ) . The possibility exists that adjoining property owners holding reversionary title interests in portions of the subject rail line properties could file claims for compensation as a result of the operation of the Rails to Trails Act preventing the reversion of title. It would appear that the issue which would be presented in any such claims is the nature of the original easement or dedication given to the railroad or its predecessors and whether this original easement or dedication is broad enough to encompass the proposed trail use . See e.g. Washington Wildlife Preservation, Inc . v. State, 329 N.W. 2d 543 (Minn. 1993) in which the court held that the use of a railroad right of way for a recreation trail is consistent with the purpose for which the easements were originally acquired, public travel, and that the use as a recreational trail imposed no additional burden on servient estates . 329 N.W. 2d at 546 . The railroad is proposing to sell to the city for fair cash market value the non-reversionary property and donate at no cost to the city the reversionary property. In the unlikely event rail service would be reinstituted over the rail line property the city would be required to reconvey the reversionary property and resell the non-reversionary property back to the railroad. Joyce A. Parker -3- June 9 , 1998 The city submitted a letter to the Surface Transportation Board supporting the request to abandon the line and submitted an additional letter requesting an issuance of a public use condition as well as a request for an interim trail use for the rail line. On April 29 , 1997 , the Surface Transportation Board issued its decision and notice of interim trail use and approval of abandonment and discontinuing service over the rail line. The subject order of the Surface Transportation Board approved the city' s request for the imposition of a 180 day public use condition and allowed the city and the railroad 180 days after the decision to reach an agreement for the implementation of the interim trail use ( "NITU" negotiating period) . The 180 day time period was originally to expire on October 26 , 1997 . On May 7 , 1997 , the city and Union Pacific Railroad Company entered into a right of entry agreement which authorized the city to remove the rail crossing at Kimball Street . The city subsequently removed the rail crossing as part of the Kimball Street improvement project. On May 29 , 1997 , the Union Pacific Railroad formally discontinued its operations over the East Elgin Industrial Lead Railroad Line . The Union Pacific Railroad was slow to complete the necessary title research in order to proceed with the ordering of an appraisal for the property. The parties were therefore unable to complete their negotiations for the city' s acquisition of the property during the initial 180 day time period. On October 22 , 1997 , the city filed a request with the Surface Transportation Board for a 180 day extension for negotiating the period to reach agreement for the interim trail use/rail banking. On October 30 , 1997 , the Surface Transportation Board granted the city' s request for an extension and extended the NITU negotiating period until April 24 , 1998 . Unfortunately the Union Pacific Railroad continued to delay its efforts in conducting necessary title examinations and ordering an appraisal for the property. The railroad finally began to work on this project early in 1998 but not in time to obtain an appraisal and negotiate an agreement with the city before the expiration of the NITU negotiating period on April 24 , 1998 . The city therefore filed an additional request on April 13 , 1998 , for a further 180 day extension of the negotiating period to reach agreement with the railroad for the interim trail use/rail banking. On April 23 , 1998 the Surface Transportation Board granted the city' s request for an additional extension and extended the NITU negotiating period until October 21, 1998 . I have now received an appraisal from the Union Pacific Railroad for the 2 . 8 mile segment of the rail line. The Joyce A. Parker -4- June 9 , 1998 appraisal of May 13, 1998 prepared by Arthur Anderson estimates the value of the non-reversionary property to be approximately $2 . 35 a square foot for a total value of $1 , 945 , 806 . The appraiser utilized the sales comparison approach in formulating his opinion of value . The sales relied upon by the appraiser are buildable industrial and residential lots . Comparing these buildable parcels to a remnant parcel such as the rail line property would not appear to be appropriate and has resulted in what appears to be a substantial overestimate of the value of the non-reversionary rail line property. I have spoken to a representative of the Union Pacific Railroad Company regarding the railroad' s willingness to negotiate regarding the value of the non-reversionary property. The representative indicated that the railroad would consider information presented in an appraisal obtained by the city and would be willing to negotiate concerning the value of the property. I am contacting appraisers to obtain proposals to perform an appraisal on the rail line. I will contact you within the coming weeks with a recommendation on proceeding with retaining an appraiser for this project. The city has several alternatives regarding acquiring the rail line . One alternative is to proceed with the acquisition of the entire 2 . 8 mile segment of the rail line for trail use pursuant to the Rails to Trails Act. The city' s use of the rail line would be limited to a public trail . A second alternative would be for the city to acquire only a portion of the rail line property for trail purposes pursuant to the Rails to Trails Act. An example of this alternative would be for the city to acquire pursuant to the Rails to Trails Act the segment of the rail line property north of Kimball Street. The remaining portion of the rail line property south of Kimball Street would be deemed abandoned and title to the reversionary properties would revert to the property owners adjoining these various parcels . The railroad would then attempt to sell on the open market the various parcels of non-reversionary property. The city could decide whether it wished to negotiate for the purchase of any of these non-reversionary parcels on an individual basis . Such acquisitions could include acquiring all of the rail line property lying within city owned property south of Kimball Street to Douglas Avenue . Only the portion of the rail line property acquired pursuant to the Rails to Trails Act would be limited to a trail use . The reversionary and non-reversionary properties not acquired through the Rails to Trails Act could be used and developed in any manner permitted by the zoning ordinance . A third alternative would be not to acquire any portion of the rail line property pursuant to the Rails to Trails Act . Under this alternative if the rail line property was not acquired by some other entity pursuant to the Rails to Trails Act before the end of the NITU negotiating period (currently October 21 , 1998) the rail line would be deemed abandoned with title to the reversionary properties would revert to the property owners adjoining these various • Joyce A. Parker -5- June 9 , 1998 parcels . The railroad would likely proceed to attempt to sell on the open market the various parcels of non-reversionary property. As with the second alternative discussed above the city could decide whether it wished to negotiate for the purchase of any of these non-reversionary parcels on an individual basis and the use of any reversionary or non-reversionary properties not acquired through the Rails to Trails Act would not be limited to a trail use. Please contact me if you require any additional information at this time . 111*"."" WAC nr Attachment cc : Erwin W. Jentsch Raymond H. Moller a 1 a COOK CO. 'i 1 A o _ t cC 3 KANE CO. opip — — - - - -�- - - rr O II J CP a tip C= 00P=_ I END ABANDONME T n o A��.as �! M. P. 43. 8 II !I II a ! EAST ELG [N` ' - > �GOLr� ]8 — 1 ` p 1 3 C_HICACO 9 7 U > > > � \4 Sr.' • �� 9 A ���cG`` I I a _ II T a ELGIN JCT. FNM. • ff\ — . , , • . 4 3 LCCPAsE BEGiNIN JCT. n a P -7 r Ca 48AND 7 I c 31 I COOK ° CO. —, ac si IZ'- - - - - - II - . DU PAGE CO. 1 ILLINOIS Y - � ' - - r _ = ,. _ a _ _ A I T c r a KANE CO. ° mej \k.1 �'°4 s N — _ — a ,. -A _A I n N1 J Z 1 epi a CC 1 cu ��'I e hL'°" D 34 , > II l " - n x II ® 0 II a 1 II A , a nl 59 >c 1 . A O oyrn n n \ - __ 1� . \CI t _ it - - 64 o ?---,..„,_ n 1 G`"$' .. \\ A es BRIDGE Na I BRIDGE T`PE TOTAL LENGTH' DATE EAST ELGIN INDUSTRIAL LEAD i 41.06 ;TaRU PLATE GIRDER - BALLAST DECK I 73.46' I 1903 41.09 (STEEL BEAU SPAN - BALLAST DECK I 21.00' 11911 %.4,2 41.0 TO u P 43.8 I 43.46 IT(1i8ER PILE TRESTLE - BALLAST OECXI 9.5' I 1904 =.ELC(N (NO.L=AO A TOTAL Of 2.8 MILES 43.46-S ISTE=L BEAU SPAN - OPEN CECX I 9.5' 11904 ;v :CANE COUNTY, ILLINOIS NOTE: BRIDGE .43. 46- S IS ON S [DING ; STATION I MILE POST [AGENCY I ELGIN JCT. 1 41.0 I NO LEGEND I EAST ELGIN I 43.2 1 NO _.. UPRR LINES TO BE ABANDONED OTHER UPRR LINES UNION PACIFIC RAILROAD CO. OTHER RA [ LROADS EAST ELGIN I NDUST I AL LEAD 0 50+ YEAR OLD STRUCTURES INCL. 504- YEAR OLD STRUCTURES O rn PRINCIPAL HIGHWAYS sral c ; I „ r !