(The following story by Mary Lynne Vellinga appeared on the Sacramento Bee website on December 28.)
SACRAMENTO — The city of Sacramento’s longtime quest to revitalize its urban core is expected to hit a major milestone today when the shuttered downtown railyard passes into the hands of a private developer — ending nearly 150 years of railroad ownership.
Representatives of Thomas Enterprises, a Georgia development firm, were working furiously Wednesday to nail down the final details of the purchase of the 240-acre property from Union Pacific.
Even after an escrow that lasted more than two years, the closing was coming down to the wire. Members of the Sacramento City Council were called back from vacation for a special meeting today to deal with a last-minute hiccup.
“There’s all kinds of paperwork flying back and forth that has to come together in the next 24 hours,” said Suheil Totah, vice president of development for Thomas Enterprises. “Until it’s done, there won’t be any announcements.”
In its meeting today, the City Council will deal with a request from the Bank of America, Thomas Enterprises’ lender, that the council be more specific about the sources of repayment for a $25 million note that the city is issuing.
The city is using the note, along with $30 million in cash, to purchase 33 acres of railyard land from Thomas Enterprises, as well as the historic train depot on I Street. The land is needed for a planned transportation complex. Repayment will come primarily from Measure A, the county’s transportation sales tax.
The sale of the land and the depot to the city is scheduled to close simultaneously with Thomas’ purchase of the entire yard.
“My understanding is that everything will get faxed after the (City Council) meeting and recorded,” Mayor Heather Fargo said Wednesday.
Totah said Thomas Enterprises’ agreement with Union Pacific to buy the railyard expires at the end of the year, although the development company could conceivably obtain an extension, as it has done before.
“Anything is possible with the railyard,” Totah said Wednesday, declining to say he was certain the closing would occur. “This is not an in-the-box, cookie cutter kind of transaction.”
If the sale is finalized, it will pave the way for Thomas Enterprises to move forward with a planned development that could one day include about 10,000 housing units, enough retail space to fill a large shopping mall, 1,000 hotel rooms and more than 1.5 million square feet of office space.
“I think it’s a significant sign that the railyard will finally be developed to many new uses,” Fargo said.
The most immediate benefit to the city will be that the historic station and the adjacent parking lot will pass into its control, she said. The city plans to take over parking operations Friday, the day after escrow closes.
She said the city will assess the depot’s condition and perform necessary repairs. The city already paid to put a new roof on the station.
“We plan on improving the maintenance level,” Fargo said. “It was frustrating to see the building not well maintained because we all care about it so much.”
In the long term, the city plans to move the historic depot a few hundred feet to the north and make it the centerpiece of a new transportation center that will serve trains, light rail and buses.
City leaders had hoped to build a new arena for the Kings in the railyard as well, but voters in November crushed the proposal to raise county sales taxes to pay for it.
“It may still happen or it may not,” Fargo said of the sports facility. “But the railyard can go on and be successful without it.”
Another public agency with big plans for the railyard is the California Department of Parks and Recreation, which has long planned to convert two of the seven historic shop buildings left on the property to a museum of railroad technology.
“We’d love to get on with it,” said Catherine Taylor, district superintendent for the parks department. “The delay and the delay and the delay — I think everyone has been frustrated.”
The railyard dates back to the late 1860s, when Central Pacific filled in the former Sutter Lake, also known as China Slough, to build a complex of buildings that grew to become the largest industrial complex west of the Mississippi.
Locomotive engines and cars were built and repaired in the shops, which employed about 4,000 people in their heyday during the 1930s and ’40s.
Union Pacific closed the railyard shops for good in 1999, and tore down all but seven buildings — the ones considered the most historically significant.
The city of Sacramento was left with a tantalizing development opportunity on downtown’s northern flank, but one that was heavily contaminated by more than a century of uncontrolled dumping of toxic chemicals.
Even though the front 37 acres of the railyard has been clean for years, only two pieces were ever used — the land on which the new U.S. courthouse now sits, and the city’s Seventh Street extension. Development plans have come and gone, never materializing.
But in the meantime, Union Pacific hauled away about 500,000 tons of contaminated dirt. Another 200,000 to 300,000 tons remain, according to the state Department of Toxic Substances Control, which is overseeing the cleanup.
The railroad also installed a groundwater cleaning system to address a plume of toxics that stretches beyond P Street.
Totah has said that much of the soil cleanup could be done in 2007, once his firm picked up the pace, which has been slow under UP ownership. Groundwater cleanup will take much longer but will not affect development.
“Having a buyer come on board and buy the property will probably jump start the cleanup,” said Fernando Amador, unit chief with the state Department of Toxic Substances Control. “There’s a bigger incentive to get to an end point.”
One of the most complicated aspects of the railyard’s sale was obtaining an insurance policy to cover Thomas Enterprises’ expenses should additional pollution be found, and also to shield UP, which is now responsible for paying for the cleanup.
Fargo said that issue was just settled about six weeks ago. “That was the biggest hurdle, and it took a really long time.”