Utah Inland Port is paying millions in rent for a rail facility yet to be built

Plan for a multimillion-dollar transloading facility is having trouble picking up steam.

(Francisco Kjolseth | The Salt Lake Tribune) Trucks carrying shipping containers move in and out of the Union Pacific intermodal terminal at a steady pace, west of Salt Lake City. Directly south, at left, is the future site of the transloading facility, which will be the heart of the inland port, as seen on Wednesday, Nov. 10, 2021.

A multimillion-dollar project meant to be the heart of Utah’s inland port appears to be having trouble getting off the ground, but it’s making big bucks for the site’s property owner.

Utah Inland Port Authority officials announced plans a year ago to build a transloading facility, which would repackage freight from rail to trucks and vice versa. Few details about the project have trickled to the public in the months since, other than the facility will be built south of a Union Pacific intermodal hub near 5500 West and paid for with a portion of a $150 million public infrastructure district bond.

“We expect to break ground in April or early May on the first building,” Jill Flygare, the port’s chief operating officer, wrote in a Feb. 11, 2022, email obtained by The Salt Lake Tribune.

Not only has the port authority not moved a shovel load of dirt for the project, but it also has yet to reveal any building designs or construction plans for the facility.

“It keeps getting pushed back because we got a new board,” Jack Hedge, the port authority’s outgoing executive director, said in an interview last month. “... We hope to do a groundbreaking hopefully this summer.”

There doesn’t seem to be any internal agreement about how much the transloading facility will cost. Hedge said it will have a price tag of around $52 million for “full build-out in three phases.” But Flygare told The Tribune it was a figure she had never heard before.

“We don’t know that,” Flygare said in an interview Wednesday. “... I was taken off guard when I saw that number.”

One thing that does seem clear is that the owner of the proposed transloading site stands to make millions for the foreseeable future.

Who’s profiting from the port’s project?

(Christopher Cherrington | The Salt Lake Tribune)

The Utah Inland Port Authority will commission and operate the transloading facility. But it won’t own the land underneath it, or, potentially, the building itself.

Salt Lake County records show the property includes two parcels owned by a company called “BOYER 1100 SOUTH INDUSTRIAL, LC; ET AL.”

In a records request seeking all correspondence, contracts and other documents relating to the transloading facility, the port authority provided a ground lease agreement with “1100 South Industrial, LLC” for a 30-year term. That lease began Jan. 8, 2021, and its current monthly rate is $120,221. By the end of this month, the Utah Inland Port Authority will have paid nearly $2.8 million in rent for a project that has yet to be built, according to the contract. The port authority is also responsible for property taxes.

(A survey included with the lease indicates the property previously was owned by City Creek Reserve, a real estate arm of The Church of Jesus Christ of Latter-day Saints, as recently as 2020.)

Jono Gardner, a partner with the real estate investment firm Gardner Batt, is listed as the landlord contact for the property. Nathan R. Boyer, president of The Boyer Co., signed the lease as the property’s manager.

It appears the property owners will also be in charge of construction, whenever it begins.

“We are under contract with Boyer/Gardner,” Flygare’s Feb. 11 email noted, “who will build the transloading facility to our specifications.”

That construction contract was not included in the documents The Tribune requested, which Flygare confirmed (the newspaper has since filed an appeal to get a copy of it). Flygare also confirmed the agreement is with the same company that owns the parcel.

“They have a joint venture of the property,” Flygare said.

The port authority signed the build-to-suit deal around February of this year, Flygare added. Once the transloading facility is complete, the port authority either can buy the building “based on construction plus a development fee,” or it can lease the building.

“I can’t give you a number today,” Flygare responded when asked how much the facility will cost, “because that analysis, we are still going through. We expect to have that complete analysis done in the next two weeks.”

The port authority secured a $150 million bond last October. Of those funds, $80 million is set aside in a restricted account, Flygare said, and awaiting a decision from the Utah Supreme Court in a lawsuit filed by Salt Lake City.

Another $33 million, Flygare said, “is available for the port authority to draw down and use for projects.”

Does the transloading facility create unfair competition?

It’s not entirely clear why the inland port needs a transloading facility at all. Salt Lake Garfield and Western Railway, a short-line rail company recently acquired by Patriot Rail, already provides transloading services in Salt Lake City’s northwest quadrant.

What’s more, Salt Lake Garfield and Western offers transloading to two of the nation’s major rail carriers — Union Pacific and BNSF — while the inland port authority’s facility would have access only to Union Pacific trains.

(BNSF did not respond to a request for comment at the time of publication.)

Asked whether the port was creating an unfair advantage for one rail company over another, Flygare said it instead would allow for greater market competition.

“Having [the port authority] put a transloading facility where we are is the opposite of creating an unfair advantage,” Flygare said. “Having [the port authority] own the facility is actually opening up access to more users because if you have a single owner or a company owning a transloading facility, you limit access.”

Union Pacific may not be entirely on board, however, with being a partner to the transloading project. Scott Wolford, the port authority’s director of technology and business policy, revealed last month the rail carrier had declined to allow direct access to its intermodal hub, meaning the port authority will have to use the same gate as any other cargo hauler.

“We have had multiple discussions with the Utah Inland Port Authority in reference to direct access between the proposed transload facility and our Salt Lake City intermodal ramp,” a Union Pacific spokesperson wrote in a statement. “We have not closed the door on any request. We look forward to further discussion as this project moves forward and more information comes available for Union Pacific to consider.”

Editor’s note • This story is available to Salt Lake Tribune subscribers only. Thank you for supporting local journalism.