Railroad sues Kennewick for unpaid rent

Annette Cary, Tri-City HeraldJanuary 11, 2014 

The Union Pacific Railroad Co. is suing the city of Kennewick in federal court for at least a decade of unpaid rent -- $915,900 -- plus interest and legal costs.

Kennewick attorney Lisa Beaton said the city has tried repeatedly to resolve a long-running dispute over the rental amount, but it has been difficult to find anyone at the large company who has the authority to negotiate.

Union Pacific spokesman Aaron Hunt countered that the railroad has made numerous efforts to resolve the dispute.

At issue are the city's sewer and wastewater pipelines on 5.7 miles of railroad right-of-way property south of Highway 240 from Steptoe Street in west Kennewick to Fruitland Street in east Kennewick.

Union Pacific and Kennewick signed a licensing agreement in July 1975 for the city to use 4.7 miles of the property for $420 per year, the lawsuit said. A separate agreement in October 1975 covered the remaining mile and was renewed in 1985 at $525 per year.

The agreement for the longer stretch allowed the railroad to change the terms without prior notice, and in 1998 it raised the annual rent to $35,000, the lawsuit said.

Kennewick described the rent increase as unreasonable and has made no payments since 2003, the lawsuit said.

In 2003, Kennewick notified Union Pacific that it had failed to pay the annual rent for the longer section and sent a check for three years' rent at $410 a year, the lawsuit said. Union Pacific rejected the payment and asked for back rent for three years at $35,000 per year for a total of $105,000.

In April 2008, Kennewick contacted Union Pacific and proposed reaching an agreement on its back rent and negotiating a one-time payment for a perpetual license, the lawsuit said.

More recently, the city has told Union Pacific it will pay a reasonable rental rate for its past and future use of the 4.7 miles of right of way, and the railroad has continued to allow it to maintain and operate the pipelines, the lawsuit said.

In spring 2001, Union Pacific raised the rent on the one-mile segment incrementally over a five-year period to a new rate of $12,500 a year, the lawsuit said.

But in September 2003 Kennewick sent Union Pacific a check for $4,200 to cover the previous eight years rent at a cost of $525 a year, the lawsuit said. Union Pacific rejected the payment and asked for back rent totaling $13,800.

Kennewick has not paid the total amount due each year on the one-mile property since 1994, the lawsuit said.

Union Pacific believes the current fair market value of annual rent for the property is $117,660 -- $97,060 for the 4.7-mile segment and $20,600 for the remaining mile, the lawsuit said.

As the population of the Tri-Cities has increased, the appraised values for both Union Pacific parcels have increased and the railroad correspondingly has increased the rent for both parcels, Hunt said.

Union Pacific has requested a jury trial and retains the right to require the pipeline be removed at the city's expense within 90 days if the license is terminated.

-- Annette Cary: 582-1533; acary@tricityherald.com; Twitter: @HanfordNews

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