When it comes to government projects, a “money pit” can be loosely defined as a capital improvements project with very little use by the public that consumes an increasingly large amount of taxpayer money more than what was first anticipated resulting in a drain on essential services. Many critics believe that the Rail Runner is a prime example of a money pit where there has been major taxpayer outlay with little benefit to the general public. The disastrous ART Bus project is another example. The Railyard Development will be yet another if it is not done correctly.
In 2007, the city bought the Albuquerque Rail Yards site for $8.5 million. The historic and vacant Albuquerque Rail Yards are within one mile of the Downtown area located south of Downtown between the Barelas and South Broadway neighborhoods. The historical significance of the Rail Yards to Albuquerque in many ways is equal to that of Route 66 Central. Both reflect real milestones in the city’s history, growth, development, commerce, industry and transportation. Both need to be respected and preserved to some extent because of the historical significance to the city.
It was cringe worthy when former Republican Albuquerque Mayor Richard Berry called the ART Bus project “a world class project” and a “game changer” and he and the city council crammed it down the throats of citizens without a public vote. The ART bus project was nothing more than a $130 million-dollar construction project to build a cheesy 9 miles of bus service that has resulted in the destruction and character of historic Route 66.
A truly “world class project” and game changer is the construction and development of facilities or infrastructure that costs billions of dollars of investment in a community, which is what the Albuquerque Railyards Development needs to represent. The 2014 adopted “City Council Rail Yards Master Plan” contains 6 guiding principles intended to serve as a framework to guide the redevelopment of the Rail Yards over many decades. Those City Council enacted principals can be reviewed in the postscript below to this article.
Albuquerque Rail Yards has 18 buildings still standing erected between 1915 and 1925 and include four major maintenance facilities built by the Atchison, Topeka and Santa Fe Railway on 21 acres of land. The Rail Yards have sat vacant and vandalized with broken windows and graffiti for decades. Currently, the area is the location of the seasonal Rail Yards Vegetable and Crafts Market and the Wheels Museum. The Albuquerque Rail yards has been used to film major movie productions and TV shows. Scenes for “Marvels Avengers,” the “Transformers”, “Terminator: Salvation,” Better Call Saul” and the TV hit show “Breaking Bad” have all been filmed at the abandoned and vacant facilities of the rail yards.
RAIL-YARDS MASTER DEVELOPMENT PLAN
On June 16, 2014, the Albuquerque City Council by a unanimous vote of 9 to 0 approved and adopted R-14-23 entitled “Railyards Master Development Plan and Site Development Plan For Subdivision To Provide The Appropriate Policy Framework And Regulations To Guide The Redevelopment Of The Railyard Site”. The Master Development Plan is 73 pages long but with tables, designs and photos it is 224 pages.
The Development plan was prepared by Samitaur Constructs. The “Railyards Master Development Plan and Site Development Plan” is highly detailed and takes great care to identify the historical nature of the Railyards, what affect it will have on the community and identifies what types of development should be considered. You can review the entire Railyards Master Development at this link:
On September 16, 2018 Mayor Tim Keller announced the city had severed its relationship between the city and Samitaur Constructs announcing the city had taken back management and control of the development. The city has upgraded one building, the blacksmith shop, where the Rail Yards Market Place takes place on weekends. Steps are also being taken to activating a second building to accommodate additional vendors and the city has submitted a contamination remediation plan to the State.
LELAND CONSULTING GROUP FINANCIAL REPORT
Leland Consulting Group is a Portland-based development consulting firm that was contracted to study the financial feasibility of redeveloping the Albuquerque Rail Yards. The Leland Consulting Group has determined that it will cost the city between $50 million and $80 million in infrastructure, environmental remediation and structural renovations to develop the property.
The city has completed an environmental study of the site and has submitted a voluntary remediation plan to the state. The city is moving forward with demolition of small non-historic structures for site improvements. The city has also submitted a state capital request for $15 million to support rail yard environmental remediation and site improvements.
The Leland report suggests 3 different levels of development of varying levels of density. The report notes redevelopment will occur over many years, making it impossible to predict the exact mix that would work. All the levels of redevelopment call for “adaptive reuse” of buildings on the property’s north side, which the report calls the Rail Yards’ “front door.” Proposed uses include Central New Mexico Community College’s film center, the existing Rail Yards Market, and new retail, restaurants and commercial tenants and residential homes.
The Leland draft report recommended 10,000 to 20,000 square feet of retail space in the Rail Yards over the next decade. According to the report, the focus should be on food and beverage tenants, vendors related to film or rail travel, existing area businesses looking to expand or “small, local vendors that build on the Rail Yards’ unique, historic and gritty character.”
The Leland development report suggests using large existing buildings near the Rail Yards’ center. The Boiler Shop and the Machine Shop alone has nearly 4 acres of enclosed floor space. There are facilities that would require renovation for concerts, festivals, special events, film productions and even team sporting events. Two scenarios suggest renovating and remodeling existing buildings to create 110,000 to 200,000 square feet of employment space. The Leland report suggests that is more space than likely needed over the next decade.
Housing is also recommended in the report. The report’s various scenarios include 65 to 160 mixed-income housing units near the Rail Yards’ southern end.
The 3 separate development proposals to be considered are : low density development, medium density development and a high-density development. The Leland Report projects $50 million will be needed for the low-density development, $55 million preparation work for the medium density and $80 million for high density development. Leland is recommending that the city select the medium density development. The report does caution that the $55 million to $80 million estimates are strictly preliminary.
The medium density development would require $55 million for utilities, landscaping, cleaning up contamination and making improvements to the deteriorating structures on the property. It has been determined that the ground contamination cleanup is not as serious as was originally thought and will be less costly because the rail yards were once used for steam locomotive repair and not diesel or gas engine repair.
There is no commercial electrical grid service on the site which may require extensive investment or even a separate electrical generating facility. It has also been reported that there are options dealing with the removal asbestos and lead paint contamination that are available, such as not removing the lead paint but “encapsulating” it.
According to the financial analysis:
“As a conservative starting point, LCG recommends viewing these as costs [of $55 million to $80 million] that are likely to be borne by the City … These costs associated with ‘horizontal’ development (site preparation, transportation, utilities) will be necessary in order to set the stage for ‘vertical’ development (i.e., building improvements and new building construction, which are not shown).”
In other words, Leland is suggesting the taxpayer money be used for the $55 million to $80 million site preparation. In comparison, the ART Bus project was $130 million to build infrastructure and platforms up and down central.
The consultant’s estimates do not include the many other possible expenses, or hidden costs, associated with structural retrofits of two of the buildings “where evidence of past fire(s) were observed, which could affect the structure,” and the foundation retrofits and floor resurfacing in some of the buildings that are 100 years old. According to the report a more thorough “property and building conditions assessment” is required.
OTHER SOURCES OF DEVELOPMENT FUNDING IDENTIFIED
The Leland financial analysis report delves into potential funding sources that could be used to fund the Railyard Development but does so with a major caution when it says:
“Most of the funding sources … are subject to a political decision-making and allocation process; the Rail Yards site and vision will need to compete with other projects on the basis of its potential to advance the community’s economic development, equity and place making goals.”
In other words, the project has the potential of becoming a “political football”.
The Leland financial report identifies other revenue sources that could be used to fund the development. Chief among those revenue source would be a tax increment development district, also known as TIDD, for the area and possibly some adjacent areas. Under a TIDD most of the new gross receipts and property tax created by the development could be used to pay the infrastructure costs. Two major examples of successful TIDDs in Albuquerque include the Commons Uptown Shops Development as well as the Winrock Redevelopment project both on Louisiana and North of the Freeway.
According to the Leland Report:
“There is a compelling case for [a] TIDD at the Rail Yards, given the extent of necessary improvements, without which employment, commercial and housing development are unlikely to occur [however a TIDD requires at least 50% of the affected property owners to give the OK and that there are no existing TIDDs in Downtown Albuquerque]” With respect to the Railyards, the historical Barelas, South Broadway and San Jose neighborhoods will therefore have to give their blessing on a TIDD and no doubt will not if gentrification poses a major threat to those communities.”
During the 2019 legislative session, the legislature allocated $7.5 million in capital funding for the Rail Yards. On the November 5, 2019 election ballot, $5.5 million is general obligation bonds is being asked to be approved by voters for the Rail Yards by City voters. City Officials also report that there is $2 million left from previous bond elections and the city is also seeking federal for grants available for blighted areas.
The Leland report proposes $5.2 million in “philanthropic” funds with no substantive elaboration. The Leland market analysis report noted a recent report by the Urban Land Institute “that indicates other western metro areas are more likely to attract outside development and investment dollars than Albuquerque.”
The report suggests another $14.5 million from the state and other mechanisms, such as $5 million in public funds through the Local Economic Development Act (LDEA).
The big problem is that the City and the State are sorely lacking in local major investors, wealthy entrepreneurs, philanthropists and wealthy individuals and corporations having the financial ability and commitment to make major capital investments that will be required for the Railyard Development.
CITY’S RESPONSE TO FINANCIAL REPORT
Chief Operating Officer Lawrence Rael in reacting to the financial report had this to say:
“[The Leland financial report is an] estimate intended to help us plan. … The planning process is ongoing and involves many groups. As we gather input from the community and from the Rail Yards Advisory Board, we will refine the plan and the numbers will come into more focus … This is a once-in-a-generation opportunity to create an economic and neighborhood catalyst in the heart of our city. … We will continue to seek funding in partnership with the State, County, and private sector to keep moving forward on this project.”
Rael added that a TIDD “may be considered” and said that the city will explore funding options and said the city has begun the recommended property and building conditions assessment.
COMMENTARY AND ANALYSIS
Chief Administrative Officer Lawrence Rael was 100% correct when he said:
“This is a once-in-a-generation opportunity to create an economic and neighborhood catalyst in the heart of our city. … We will continue to seek funding in partnership with the State, County, and private sector to keep moving forward on this project.”
Much greater emphasis needs to be placed on the private sector. The city needs to find a major developer and investor who knows what it is doing and will to invest in the city.
SUCCESSFUL CITIES AT REVITALIZATION
Successful cities that have transformed blighted and struggling older areas of their cities have been Tulsa, Oklahoma, Oklahoma City, Oklahoma, Denver, Colorado, Phoenix and Scottsdale, Arizona. El Paso, Texas has dramatically transformed its downtown area. The way each one of these cities did it was with a massive infusion of capital and building large capital projects costing billions of dollars.
Some of the best examples of billion-dollar investments are the building of the BOK Center in downtown Tulsa, the Chesapeake Arena in Oklahoma City, the municipal railway running from the outskirts of Denver and through downtown Denver, Colorado or the River Area in downtown Scottsdale, Arizona. In Tulsa the BOK Center sparked hundreds of millions of dollars of redevelopment in adjoining neighborhoods.
In Oklahoma City, the Chesapeake Arena and adjoining Bricktown continue to expand. Previously blighted areas are being ﬁlled in with business developments, new housing, recreational facilities, and even cultural amenities. A key component has also been law enforcement to make people feel safe enough to move into those areas as they were being redeveloped. A key involvement to most if not all was seeking voter approval of the projects. Tulsa and Oklahoma City have been so successful that voters continue to approve new ones.
What is ill advised is for anyone to think the Rail Yard redevelopment can all be done with local talent and local and state investment tax dollars. It is laughable when the Leland report proposes $5.2 million in “philanthropic” funds making it obvious they do not know what a very poor state New Mexico really is not to mention Albuquerque being in the same position. The established Albuquerque business and development community and the accompanying construction industry tend to suckle at the tit of city government for projects without making any financial investment of their own. Such massive amounts of capital, usually in the billions of dollars, is needed to build large capital projects that could be built on the Railyards.
The city faces the prospect that voters in November will say NO to the $13 million in capital improvements bonds for the Rail Yards development. Given the voters mistrust of elected officials because of the ART Bus project, the defeat of the APS tax levy in February and Mayor Tim Keller’s signing a tax increase last year breaking a campaign promise to put tax increases on the ballot, no one will be surprised if the ity capital improvement bonds (CIP) are rejected by the voters.
The blunt truth is that the City Hall and the State do not have the financial ability to undertake a cleanup and a massive investment and make capital improvements in the billions of dollars to revitalize Downtown Albuquerque. City Hall and the State do not have an understanding nor the business and investment experience background or the “savvy” in the private sector of what it’s going take to get the project done.
The 2014 adopted “City Council Rail Yards Master Plan” contains 6 guiding principles intended to serve as a framework to guide the redevelopment of the Rail Yards. The Rail Yards development in all likely cannot be done on the “cheap” and the city needs to recognize this fact. A $55 million to $80 million preparation work is probably on the cheap.
Architecture and historic rehabilitation to maintain the “integrity” of the site as a whole, with individual structures being rehabilitated will cost millions more. Given the magnitude of the development, the final price tag will probably approach $1 Billion. The Master Plan for the Railyards requires that the development complements all adopted plans for surrounding areas, including the Barelas, South Broadway and San Jose neighborhoods. This is critical to avoid gentrification of these very historical neighborhoods.
The city needs to solicit and recruit a major developer and investor with a proven track record of commercial, residential and historical preservation willing to enter a partnership with the city and make a financial commitment to the development. A major source of funding and private investment needs to be identified that recognizes this fact.
Otherwise the Railyards development will be “money pit” to taxpayers destroying yet another historical gem of the city, the way ART destroyed historical Route 66 in the central corridor.
The 2014 adopted “City Council Rail Yards Master Plan” contains 6 guiding principles intended to serve as a framework to guide the redevelopment of the Rail Yards over many decades. Following are the 6 guiding principles quoted verbatim without editing:
GUIDING PRINCIPLE #1: JOB GENERATION, ECONOMIC DEVELOPMENT & ECONOMIC VIABILITY
The Rail Yards, once an economic pillar for the community, is envisioned to become a hub of economic activity again. The Master Plan provides a framework for renewed economic and business success for the Project Area and is sufficiently flexible to accommodate a variety of potential future economic uses and opportunities. The Plan also provides opportunities to generate quality, living-wage and high-wage jobs and programs that will link those jobs with community residents. The Master Plan recognizes that the success of the Project Area is directly related to the financial feasibility of the overall mix of uses that is ultimately developed. Implementation of the Master Plan should prioritize uses that are financially self-sustaining and, preferably, revenue-generating and minimize the City’s exposure to and obligation for direct costs and subsidies.
GUIDING PRINCIPLE #2: HOUSING INTEGRATING HOUSING :
Housing Integrating housing into the Rail Yards redevelopment of the site is important for three reasons: 1. To ensure the availability of affordable housing in the community; 2. To minimize possible displacement of people as a result of redevelopment; and 3. To create a true mixed-use environment and a constant presence on the site, which will increase the overall vibrancy and safety of the site. The Master Plan supports construction of the required Workforce Housing and includes opportunities for additional affordable and market rate housing. The development of housing at the Rail Yards will be coordinated with the City’s ongoing efforts to rehabilitate existing housing in the surrounding neighborhoods.
GUIDING PRINCIPLE #3: COMMUNITY CONNECTIVITY
The Master Plan complements all adopted plans for surrounding areas, including the Barelas, South Broadway and San Jose neighborhoods. The Plan supports current and planned economic activity in the Downtown area and encourages connections with existing attractions in the area—such as the Albuquerque Zoo and BioPark, Tingley Beach, Rio Grande State Park, the National Hispanic Cultural Center, the South Broadway Cultural Center, Old Town and its museums, Downtown Albuquerque and its amenities, the Alvarado Transportation Center, the Historic 4th Street Corridor, local sports venues, the Albuquerque Sunport, and others. The Plan reinforces the City’s transit goals and objectives, and supports pedestrian, bicycle, auto and public transportation to and from the site.
GUIDING PRINCIPLE #4: LAND USES
The Master Plan encourages new development on the Rail Yards site that balances new economic and design approaches with protection of the integrity and history of the Rail Yards and the surrounding residential communities. The Plan complements the goals in other adopted plans that cover or affect the Rail Yards site.
GUIDING PRINCIPLE #5: ARCHITECTURE AND HISTORIC REHABILITATION
The Master Plan recognizes the significant value of the existing Rail Yards historic resources, i.e. buildings and structures, to a local, state and national audience. The fundamental approach to site development will be to maintain the “integrity” of the site as a whole, with individual structures being rehabilitated and adaptively re-used for modern and functional purposes, in consultation with the New Mexico Society of Historical Preservation Office (SHPO).
GUIDING PRINCIPLE #6: ART AND CULTURE
The Master Plan encourages opportunities for promoting the art, history and culture of the site, the community and the region. The Plan sets aside space for a museum that celebrates the history of transportation, particularly rail transportation. Commercial and residential tenants, local community members, and visitors from near and far will be attracted by heightened aesthetics, comfortable, quality amenities, and a unique cultural vibrancy.