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Bell's $35 Million Railroad Yard Expansion Gets Off Track

The City of Bell's plan to purchase property from the federal government and lease it to a railroad for use as a truck yard has been stalled and possibly killed by an environmental justice organization's successful California Environmental Quality Act lawsuit. The litigation has also raised questions about $35 million in bonds that the city issued in 2007 to fund property acquisition and improvements.

Last summer, a Los Angeles County Superior Court judge invalidated a 30-year option to lease between Bell and Burlington Northern Santa Fe (BNSF) Railway for a 15-acre site because the city had performed no environmental review prior to signing the agreement. Judge James Chalfant also blocked a 45-year extension of an existing lease that permitted BNSF to continue using 14 acres of city-owned property. The city did not appeal the ruling.

Since then, BNSF appears to have backed away from the project. Railway spokeswoman Lena Kent said project managers "are still evaluating their options." She was unable to provide a timetable for a decision.

Attorney Gideon Kracov, who represented East Yard Communities for Environmental Justice in the suit against Bell, said he was unaware of any activity regarding the project since Judge Chalfant's decision, which also forced a halt to the city's destruction of old buildings on the property.

"My client would like the city to make productive use of the land," Kracov said. But, he added, "The expansion of the railroad facilities raises very important public health issues."

"Study after study has demonstrated a clear connection between expansion of the rail yards and pollution. The typically low-income communities near the rail yards suffer the highest rate of air pollution in the state," Kracov said.

Bell city officials did not respond to CP&DR inquiries. Bell City Attorney Ed Lee, of Best, Best & Krieger, told the Los Angeles Daily Journal in October that the city had made no decision on whether to conduct environmental review or drop the project. As of the end of January, Bell had filed no CEQA notices with the State Clearinghouse.

Like many of the "Gateway Cities" in southern Los Angeles County, Bell is a center of the logistics industry that moves freight in and out of the ports of Los Angeles and Long Beach. For some time, BNSF has leased 14 acres of city-owned land in Bell on which the railroad stacks empty intermodal shipping containers. The Bell Yard site is within one mile of BNSF's giant Hobart rail yard, where freight is transferred between trucks and intercontinental trains.

In November 2006, the Bell Public Financing Authority a joint powers entity created by the City of Bell and the Bell Community Redevelopment Agency and all controlled by the City Council issued $26.3 million in bonds to fund the purchase of the 25.3-acre Bell Federal Service Center, which once served as a military barracks. The property is located on Rickenbacker Road, adjacent to the land already leased by BNSF and just off the Long Beach Freeway. In October 2007, the Authority issued $35 million in lease revenue bonds to pay off the original debt and to reimburse the city $6.1 million for capital improvement and other costs related to the property. Those bonds come due November 1 of this year, although the city may extend the maturity date to November 1, 2010.

The city's original plan was to retire the debt with BNSF lease payments of about $142,000 per month. The railroad intended to use the property for parking up to 700 trucks. BNSF executed an option to lease 15 acres from the city in September 2007.

The city has apparently been using its own money to fund the debt payments. The official statement for the 2006 debt issuance said that the city "may elect to hold the property for redevelopment" if agreement with BNSF falls through. The property does lie within the city's redevelopment project area. According to the state controller's office report for 2006-07 (the most recent available), Bell's redevelopment agency had $51.5 million in debt and the 670-acre project area generated $4 million in tax increment, of which the agency retained $3.1 million.

The East Yard environmental justice group filed its suit against the city on October 26, 2007, the same day the lease revenue bonds "financial facility agreement" was finalized. In that document, the city stated there was no litigation pending that could affect the validity of the agreement or the BNSF lease. Pointing to the potential for increased air pollution from trucks at the expanded BNSF site, East Yard said the city had to complete an environmental review of the project. The city and the railroad's primary argument in the litigation was that the Interstate Commerce Commission Termination Act exempted the railroad from CEQA because the state law could restrict the railroad's ability to operate.

Judge Chalfant did not buy the argument. "[T]his action concerns the city's decision to lease city-owned land, not BNSF's activities on its own land. Federal law does not preempt environmental review under CEQA of the city's lease of its own land," he ruled in East Yard Communities for Environmental Justice v. Bell Public Financing Authority, Los Angeles County Superior Court No. BS 111726.
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