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Railroad Memo October 5, 2007 Page 2 The LOU establishes the basic business terms and responsibilities of each parry. The project includes the following elements: Butcher's Spur The Butcher's Spur is located in the Northwest Quadrant and is slightly more than 7 acres in size. The City is interested in acquiring this land for redevelopment purposes. Although most of the bona fide rail customers are gone (i.e. Midwest Asphalt, Ferrellgas, rendering plants, etc.), Minnesota Commercial has demanded that the City provide a functional replacement. In this instance, a functional replacement would accommodate about 3 or 4 rail cars (300' to 400' of track) and related storage. There is sufficient land within the Estes Express parcel at 400 1s' Street SW to provide for this activity. Once the City has completed the acquisition of the land (October 2007) and the new track is installed (July 2008), Minnesota Commercial will cease operations on the Butcher's Spur. The City and MT Properties will then close on the sale of the land within 30 days of this date (estimated July 2008). In addition, once the LOU is executed, the City can begin the formal abandonment process with the Surface Transportation Board (STB) in Washington, D.C. The STB process will be started this fall and completed some time in February 2008. The City's cost for this project is primarily related to land acquisition (approximately $800,000) and the abandonment proceedings ($15,000 to $20,000). Funding for the costs will be paid for out of the NWQ budget. Under the terms of the LOU the City will pay MT Properties $3.35 for the net difference in land between the Butcher's Spur and the Exchange Parcel (Estes Express site). Minnesota Commercial is entitled to remove any tracks, ties or ballast before the date of closing, otherwise the City can salvage the materials. Functional Replacement (Team Track) The functional replacement will be constructed on a portion of the 2 acre site that is being acquired from Estes Express. Under the terms of the LOU this site is referred to as the Exchange Parcel. Minnesota Commercial will contract with a third party to construct the track and perform related tasks, such as grading, turnouts, ballast and grade crossings. The company has provided a bid for this work in the amount of $174,000 and the City will reimburse them for the work after the project is completed. All of these costs will be paid for out of the City's development fund (460). This work may proceed before the wye track project, but should be completed by July 2008. Southeast Wye Track The final element of the project includes the new southeast wye track. This track will connect the Minnesota Commercial mainline with the Canadian Pacific (CP) mainline. The CP has an operating