Did Utah Inland Port’s actions balloon the price tag for LDS Church property?

Rail company had a federal grant in hand to pay for the project at no cost to the state, but the port authority’s successful bid may have derailed that plan and added millions to the purchase price.

(Rick Egan | The Salt Lake Tribune) The Utah Inland Port Authority is in the process of purchasing land from The Church of Jesus Christ of Latter-day Saints near 6 South and 5600 West for a rail yard. Friday, May 20, 2022.

The Utah Inland Port Authority’s pursuit of 41 acres for a rail yard may have driven up the price tag for the church-owned property by millions of dollars, according to recently obtained documents, and put a federal grant at risk.

Salt Lake Garfield and Western Rail, a short-line company, has long aimed to move its operations out of Salt Lake City’s Poplar Grove neighborhood to improve quality of life for west-siders. As the company has expanded through the years, its rail cars frequently back up traffic at grade crossings, leading to more pollution, delays and safety issues.

SLGW, recently acquired by Patriot Rail, received a $13.6 million federal grant in 2018 to move its operations via a project called the “Western Interchange” — in partnership with the Utah Department of Transportation. SLGW also agreed to chip in a $9 million-plus match, so the Western Interchange would come at no cost to the state. The project had backing from the governor’s office, Salt Lake City officials, the Salt Lake Chamber and more.

In securing the grant, SLGW identified a swath of vacant land at 6 South and 5600 West as an ideal site for its plans, since it already adjoins easements owned by the rail company. The 41-acre parcel is owned by Suburban Land Reserve, a real estate arm of The Church of Jesus Christ of Latter-day Saints. SLGW entered into negotiations with the church soon after securing its federal funds.

Last July, SLGW offered the church $5.4 million cash for the property. In March, the rail company agreed to up its offer to $6 million.

The church’s brokers then decided to solicit bids instead. The Utah Inland Port Authority swooped in with the highest offer, evidently to the frustration of SLGW’s operators.

“Although Port leadership has asserted that the Port and SLGW are ‘partners,’ the Port’s attempt to acquire the SLR Property directly jeopardizes the [federal] Grant,” John Fenton, Patriot Rail CEO, wrote in a May 25 letter to the Salt Lake City Council and Mayor Erin Mendenhall.

The port board approved “friendly condemnation” of the church property on May 19 but did not provide any public information about the purchase in advance, including parcel numbers, the site’s location, or how it would benefit the port.

Fenton noted the port authority’s dearth of public disclosure in his letter, which The Salt Lake Tribune obtained through a public records request.

“The lack of transparency that surrounds the Port’s board meetings makes it difficult to engage substantively in the public Port process,” he wrote, “since the SLR Property in question was not listed on the Port board agenda, nor were public copies of the condemnation resolution made available until several hours after the meeting ended.”

How much did the port bid for the land?

The Tribune previously asked for information on how much the port authority planned to pay for the church lot. A person hired to handle public relations for the port responded June 7 that “they’re still negotiating” the transaction. But Fenton’s letter notes the port authority submitted a bid of “more than $10 million.”

That’s “nearly twice SLGW’s $6 million offer,” he wrote, “and close to five times SLGW’s own appraised market value.”

It is unclear why the property would hold much value to anyone but SLGW, since it is essentially landlocked by the company’s railroad to the south and Interstate 80 to the north. Last month, Patriot Rail commissioned an appraisal that valued the property at $3.7 million with “adequate access” and $2.2 million without access.

“We cannot understand why a public agency is driving up the cost of a critical parcel needed to execute the Grant,” Fenton wrote, “particularly given that SLGW is unaware of any other bidders for the SLR Property.”

The inland port’s outgoing executive director, Jack Hedge, who is poised to become the port president, previously told The Tribune other bidders beyond SLGW and the port had been interested in purchasing the property. A church spokesperson also previously said “the Utah Inland Port Authority was the successful bidder among several interested parties who made offers on the land.”

A church spokesperson did not respond Thursday to a request for comment for this story.

Fenton noted in his letter that inflation has already “severely” eroded the Western Interchange project’s scope, and the port authority’s decision placed the proposal at further risk.

“If SLGW cannot acquire the SLR Property at fair valuation,” Fenton wrote, “without restrictions or conditions, the entire $13.65 million federal ... grant awarded four years ago regretfully will be lost, and SLGW will be unable to move its operations out of [its] East Yard in Poplar Grove.”

SLGW apparently tried negotiating when it learned of the port authority’s plans. In April, SLGW managers suggested buying an easement for $5.4 million, according to the letter, with the port authority retaining ownership of the land in case the company ceased operations.

“Notwithstanding multiple calls and communications to Port staff, SLGW received no substantive response to SLGW’s proposal,” Fenton wrote, “or any other notification from the Port of its intention to proceed with condemnation.”

City wants rail yard moved

SLGW and Patriot Rail began their own eminent domain process for the property May 24, which remains pending.

“The City is aware of the discussions between the Port, Patriot Rail and the Church,” Mendenhall said in a statement to The Tribune. “The City’s priority for any future owner of the property is to ensure they commit to moving the rail yard and significantly reducing rail traffic through Salt Lake City.”

Asked for comment on the purchase price for the property and contradictions over how many bidders were involved, a public relations person for the port authority said it would not comment on issues relating to pending litigation.

“But [the port authority] is working with its board, its legal team and representatives from Patriot Rail,” he added, “to come to a positive solution that works for private business and the state.”

Discussions at a recent board meeting provided clues about the port authority’s motivations in snapping up the church property.

“We have two objectives here we’re trying to accomplish that we believe is in the public interest,” board Chair Miles Hansen said Thursday in response to public complaints about the transaction. “One is preventing one entity of having a monopoly over rail access north of I-80, and the other is ensuring that we get at-grade rail crossings out of neighborhoods.”

Fenton addressed the port authority’s concern about “competitive access” in his letter, calling it “unfounded” since SLGW provides shippers options via interchange agreements with Union Pacific and BNSF.

Board members also addressed complaints about the port authority’s transparency Thursday, saying they will offer better access to documents and processes, as well as potentially more time for public comment and fewer closed sessions.