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Railroad Wye Update August 20, 2010 Page 2 The original intent was to allow coal trains to make a direct connection without having to maneuver in such a way that blocked crossings to the north. For the most part, general freight train would not use the wye at the so-called Bulwar Junction. The Wisconsin Central (WC), which is owned by the CN, operates the line east of New Brighton. The WC/CN brings cars to the junction to interchange with the Minnesota Commercial and the Canadian Pacific. The MC and CP also bring cars from St. Paul and the Shoreham Yard in Minneapolis. If in the future, if the nature of these operations changes it is possible that trains could use the wye. For example, if the Bulwar Junction and yard were no longer used to interchange freight cars, traffic could be diverted over the southeast wye. In the end, this is all speculative since the railroads have been somewhat "close to the vest" about the benefits of the wye beside use by coal trains. It is also important to remember that under the terms of the real estate agreement with MT Properties, if the wye is not built the City must re -purchase a portion of the wye property. The re -purchase price would be in the range of $90,000 to $100,000 and its unclear the parcel would have any practical use by the City. The only logical buyer would be Estes Express, however the company would have to re -configure their site and move the security fence (which the City previously paid to move for the wye). As an aside, the City received the State bond funding in 2006 and we've learned from MnDOT that this project is very unique. It is not clear that the State would finance a project like this in the future, given the State budget problems and other funding priorities. Document Review Should Council want to continue the wye project, staff will need to finalize negotiations with the railroads and bring back a set of documents. We've included some of these documents to provide context and address questions that might arise about the structure of the deal. Next Steps If the City wants to pursue the project, then we'll need to invest additional funds as outlined above. Staff believes there are opportunities to reduce some of these costs by adjusting the size of the easement from the CP. We are also exploring some options to share in future revenues, if and when traffic runs on the wye connection. Staff and the city attorney have been working on a number of different agreements that would need to be finalized and approved by Council in the next 30 to 45 days. While the wye would not be constructed this year, we at least need to have a grant agreement in place with the State of Minnesota by the end of this year.