Eastside Rail Corridor

The Port of Seattle Commission today approved a Memorandum of Understanding (MOU) with King County and BNSF Railway Company that will result in the Port's acquisition and receipt by donation of the 42-mile Eastside rail corridor in King and Snohomish counties from the railroad. Acquisition of the southern corridor for the public is one of the largest and most significant in the history of the federal rail banking program.

Memorandum of Understanding (MOU)

This MEMORANDUM OF UNDERSTANDING is made by and among King County, Washington, a Washington Municipal Corporation (“King County”), the Port of Seattle, a Washington Municipal Corporation (“Port”), and BNSF Railway Company, a Delaware corporation (“BNSF”), as of the ___ day of November, 2007 (collectively, the “Parties”).

WHEREAS:

(A) A critical element to the competitiveness of the Port and King County, Washington in general, as well as the region, is the velocity and capacity of facilities and infrastructure for the transfer of international cargo from ships to freight trains and its movement to the ultimate customer;

(B) The Port desires to acquire and preserve the Woodinville Subdivision as a rail and transportation corridor; and

(C) Consistent with federal railbanking requirements, King County has an interest in developing a recreational trail within the Woodinville Subdivision.

NOW, THEREFORE, the parties have reached the following understanding:

SECTION 1. Purpose. The Parties have envisioned and are working to complete a transaction for their mutual benefit and for the benefit of the public. The parties wish to set forth their understandings in this Memorandum of Understanding (referred to hereafter as “MOU”) with respect to the major deal points of the transaction. This MOU replaces the previous memorandum of understanding among the Parties dated February 26, 2007 concerning the Woodinville Subdivision. This MOU is a non-binding document that creates no rights and imposes no obligations on any Party. However, the Parties are committed to working cooperatively, expeditiously and efficiently to document the components of the transaction through binding agreements, using this MOU as a guide.

SECTION 2. Key Transaction Elements. The key elements of the transaction are as follows:

Subject to the approval of, and conditions imposed by, the STB the Port will acquire all of BNSF’s title and interest in the real and personal property and any reactivation rights and obligations comprising the portion of the Woodinville Subdivision between Renton and Snohomish (approximately mile posts 5.0 and 37.61), and the portion of the Redmond Spur between Woodinville and Redmond (approximately mile posts 0.0 and 7.3) (collectively, the “Woodinville Subdivision”). The portion of the Woodinville Subdivision north of Woodinville and the Redmond Spur shall together be referred to as the "Northern Portion." The portion of the Woodinville Subdivision south of Woodinville shall be referred to as the "Southern Portion." The specific line segments and designated portions will be further defined in the agreements.
BNSF will be paid $103 million in cash in total for the Northern and Southern Portions of the Woodinville Subdivision as described in Sections 3.1 and 3.2.
King County will convey that property commonly referred to as the Fisher Flour site to the Port pursuant to a separate agreement that will be negotiated solely between King County and the Port.
The Port and King County will negotiate a long term lease for all or a portion of the Woodinville Subdivision.
King County and the Port shall develop a consultative process for considering major capital improvements at King County International Airport that would substantially affect the Airport’s regional impact, which process will be set forth in a separate agreement that will be negotiated solely between King County and the Port.

SECTION 3. BNSF – PORT OF SEATTLE COMPONENTS

3.1. The Northern Portion of the Woodinville Subdivision

BNSF will transfer to Port, subject to the approval and conditions of the Surface Transportation Board (the “STB”), all of BNSF’s title and interest in the real and personal property comprising the Northern Portion. At the closing, the Port will pay BNSF an amount equal to the lesser of $103 million or the fair market value of the Northern Portion. To the extent that the fair market value of the Northern Portion exceeds $103 million, BNSF will make a charitable contribution to the Port of such excess.

3.2. The Southern Portion of the Woodinville Subdivision

BNSF will transfer to Port, subject to the approval and conditions of the STB, all of BNSF’s title and interest in the real and personal property comprising the Southern Portion. At the closing, the Port will pay BNSF an amount equal to the difference, if any, between $103 million and the amount the Port paid BNSF for the Northern Portion. BNSF will make a charitable contribution to the Port of the Southern Portion to the extent the fair market value of the Southern Portion exceeds the amount paid for the Southern Portion.

3.3. The Parties will establish a procedure for the appraisal of the fair market value of the Woodinville Subdivision based upon a mutually acceptable basis.

3.4. No later than December 11, 2007, the Port and King County will submit the transactions contemplated in this MOU for approval by the Metropolitan King County Council and the Port Commission of the Port of Seattle. The Parties anticipate final closing of the transactions in the second quarter of 2008.

3.5. The agreements shall permit BNSF to assign its rights under the agreements to a qualified intermediary for the purpose of effecting a like-kind exchange.

3.6. The portion of the Woodinville Subdivision that is included in the contemplated transaction begins at approximately milepost 5.0 in Renton, Washington. If BNSF ever determines to abandon the remaining portion of the Woodinville Subdivision between approximately mile posts 0.0 and 5.0 in Renton, King County will have the right of first refusal to acquire that portion of the line at its fair market value.

3.7. The Parties anticipate that trail use will be established under the federal railbanking statute, 16 U.S.C. 1247(d), on at least the Southern Portion. The Parties recognize that for any such portion, future local, regional or national transportation needs may require reconstruction and reactivation of the right-of-way for rail service by the acquirer, its assignee, or any third party requesting reactivation.

3.8. The Parties shall cooperate to (i) reach agreement on press releases and other public announcements related to the transactions described herein, and (ii) make any filings with the STB to the extent such filings are necessary to effectuate the transactions contemplated by this MOU.

SECTION 4. KING COUNTY – PORT OF SEATTLE COMPONENTS.

4.1. King County and the Port will partner in the negotiations with BNSF for the acquisition of the Woodinville Subdivision. The Port will not unreasonably delay or object to the preliminary understandings already reached between King County and BNSF during prior negotiations for conveyance of the Woodinville Subdivision.

4.2. The Port will receive title to the Northern and Southern Portions of the Woodinville Subdivision at closing. The Port and King County will enter into a long term lease for the Woodinville Subdivision.

4.3. Both the Port and King County support the ongoing freight rail use now operating on the Northern Portion.

4.4. King County shall convey all of its rights, title and interest in the property commonly referred to as the Fisher Flour site to the Port for no additional cost pursuant to a separate agreement that will be negotiated solely between King County and the Port.

4.5. King County and the Port shall develop a consultative process for considering major capital improvements at King County International Airport that would substantially affect the Airport’s regional impact, which process will be set forth in a separate agreement that will be negotiated solely between King County and the Port. That agreement may be subject to any approval or conditions as may be required by the Federal Aviation Administration.

KING COUNTY, WASHINGTON
By:
Ron Sims
County Executive

BNSF RAILWAY COMPANY
By:
Matthew K. Rose
Chairman, President and Chief Executive Officer

PORT OF SEATTLE
By:
Tay Yoshitani
Chief Executive Officer