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Railroad Wye Update July 23, 2010 Page 3 Real Estate Components The wye track will be built an a portion of land that the City acquired in 2007 from Estes Express Lines (the other portion will be constructed on CP nght-of-way). This land was previously a vacant lot adjacent to their trucking terminal. In January 2009, the City sold the roughly 2 acre site to MT Properties. Part of the land was used as a functional replacement for the Butcher's Spur in the Northwest Quadrant The rest of the land was intended to be used for the wye. As was discussed when the land transaction was approved in 2009, if the parties do not proceed with the me project, the railroad can demand that the City re -purchase the wye parcel. In this event, the City has the ability to review title and environmental conditions and possibly void the agreement it these conditions are unacceptable. Because state bond money is being used for the project, the City must maintain an interest in me underlying real estate for a period of time. The amount of time is equal to 125% of the useful life of the public improvement. In this case, the City would receive an easement from the railroad (MT Properties and Canadian Parc) for 30 years. At the end of this time period, the easement would be terminated and ownership of the tracks would revert to the railroads. Negotiations with MT Properties for an easement have gone wall, however working with the Canadian Pacific has been a challenge. This topic will be addressed later in the memo. One last issue worth noting, is the City's role in working with the State to amend the tax statutes to exempt publicly owned wye connections from taxation. This was a demand made by Minnesota Commercial in order to move forward on the project. Current Status Since the land transaction was completed, the City has focused its attention on finalizing the various agreements that will be needed. The State of Minnesota has "blesserim the structure of the deal, but has not reviewed the final documents. At a minimum, the City needs to have a grant agreement in place with the State by the end of this year to secure the funding. Construction will most likely be delayed until 2011. In terms of the railroads, MT Properties and Minnesota Commercial have agreed to the basic framework of the lease and operating agreements, as well as the proposed easement. The biggest stumbling black has been in working with the Canadian Pacific. CP Demands When the City began serious discussions in December 2009, it appeared that the CP would cooperate. Since that time a variety of CP officials have became