Neighborhood by design | The Sacramento Bee

Originally published: 12/4/03

Once envisioned as a mass of high-rise office towers, then as a shopping and entertainment zone, Sacramento's downtown railyard now has a new future: a residential neighborhood that nearly 10,000 people someday could call home.

The development group negotiating to buy the 240-acre railyard from Union Pacific unveiled plans Wednesday to build up to 4,500 condominiums, lofts and apartments on the site, which sits just north of Sacramento's existing downtown.

Offices and retail shops also would be included as a place for residents to work and shop.

Eric Levine, chief executive officer of Millennia Associates, said the group likely will sign a contract in January to buy the entire property from Union Pacific.

"The negotiations are at a very advanced stage, " he said.

Levine and other representatives of Los Angeles-based Millennia - which is chaired by celebrated architect Jon Jerde - said the elected leaders of the city of Sacramento are running out of time to decide whether they want a new basketball arena included in the plan for the yard.

Millennia expects to submit a plan for the railyard project to the city by March. If the city doesn't indicate by then whether it wants to press forward with an arena, the plan won't include it, Levine said.

"Our preference is to have certainties so we can get on with the job, " he said.

Putting an arena in the railyard would mean that more than 1,000 of the planned housing units likely would be eliminated, he added.

Mayor Heather Fargo said Millennia has never made it clear to her that the arena question had to be settled by the time the group's application is submitted in March.

She said a business task force is continuing to look at financing options for the arena and believes they will come to some conclusions before March.

"I still believe there's some advantages to setting aside a piece of land for the arena and parking, " Fargo said.

Championed by Fargo, the idea of putting a new arena for the Sacramento Kings in the railyard faltered in October when a feasibility study suggested that much of the arena's estimated $538 million cost be paid through a new surcharge on downtown restaurant and bar tabs. The idea triggered withering opposition from the downtown business community.

Millennia representatives have said repeatedly that they don't need an arena to make their development work but are willing to make space for one if the city wants it.

As it prepares to introduce its plan, Millennia will be meeting with various groups that have an interest in what happens in the railyard, from residents of neighboring Alkali Flat to representatives of the Downtown Partnership, which represents existing downtown property owners.

Levine was careful to stress that the new idea for the railyard won't compete with the shops on K Street Mall or the Downtown Plaza shopping center.

The last developer that seriously pursued acquisition of the railyard, Mills Corp., walked away after concluding that city officials didn't support its entertainment and shopping district because it would compete with K Street.

Millennia officials said they could not specify how much retail the new plan for the railyard would contain, but Levine stressed that it would consist of ground-floor shops designed to serve neighborhood residents - not retail destinations designed to draw shoppers from elsewhere.

"We're not competing with anything downtown; we're complementing what's downtown, " Levine said.

Millennia has proposed connecting downtown to the railyard by extending Fifth and Sixth streets over the railroad tracks. The streets would be lined with offices, apartments and ground-level shops.

The Downtown Partnership has yet to take a formal position on Millennia's plan, which still lacks specifics, said executive board member Wendy Hoyt. She said a task force has been set up to examine it.

"We're very excited about the possibility of additional housing anywhere downtown, including in the railyard, " she said.

Fargo predicted that the plan's emphasis on housing would make it an easier sell to the community.

The mayor said the last time she saw the Millennia plan, it included fewer than 3,000 housing units and had a more "suburban" feel. Fargo said she pushed for a more dense residential feel, including high-rise housing that would take advantage of prime views.

"I'm pleased to know they're listening to us. This is an opportunity to help provide housing not only for people who work downtown, but for people who want to live downtown."

Levine and members of his development group unveiled their plans in a 26th-floor conference room in the Wells Fargo building, which offered a panoramic view of downtown, the railyard and the Sacramento River stretching out below.

From this vantage point, the vastness of the railyard site, and its potential, were clear.

"This is possibly the largest urban infill development in America, " said Joel Ross, a partner in the project and chief financial officer of Millennia.

But the railyard is also one of the most challenging sites in the nation. Built on a former lake, it is soaked with toxic contamination. It lacks streets to connect it to downtown, and is cut off from the rest of the city by a freight and passenger rail line.

"I've worked all over the world with governments, corporations, larger-than-life entrepreneurs; this has really been the biggest challenge, " Levine said.

Millennia has been negotiating with Union Pacific for more than a year over the sale of the railyard. One major complication was the difficulty of finding insurance to guarantee that toxic chemicals left from years of building and refurbishing rail cars and locomotives would be cleaned up.

Ross said the policy is now "nearly complete." He would not reveal the amount of money the cleanup is expected to cost, or what Millennia will pay for the railyard.

"The cleanup is the financial responsibility of the railroad, and there will be an insurance policy in place to protect everybody and ensure that the cleanup takes place, " Ross said.

The Millennia partners acknowledged that huge challenges remain, including finding money to pay for streets, sewers and other infrastructure needed before development can begin.

"We're a seasoned, experienced group, " Levine said. "If we didn't feel confident we could pull all this together, we wouldn't be doing it."

Once the largest industrial complex west of the Mississippi River, the former railyard has been sitting largely idle for years. The last of the repair shop "gangs" punched out for good in 1999.

A grand plan negotiated by the city and former owner Southern Pacific in the early 1990s now is considered wildly unrealistic. It would have doubled the downtown office market with 9.6 million square feet of new space. The new federal courthouse was the only part of it ever built.

These days, housing is the buzzword in urban development, and the Millennia partners predicted that the railyard would attract national attention.

The project would emphasize Sacramento's railroad history and would feature a combined train, light-rail and bus station, still being designed by the city.

Millennia also intends to follow through on a previous commitment by Union Pacific to allow the state Department of Parks and Recreation to open a museum of railroad technology in two of the old Southern Pacific shop buildings.

Ross predicted the project will "put Sacramento on the map in this country."

"This will get enormous publicity, " he said. "It will make the city the talking point of the redevelopment world. This will make Sacramento - even more than Arnold."

The Bee's Mary Lynne Vellinga can be reached at (916) 321-1094 or mlvellinga@ sacbee.com. Staff writer Tony Bizjak contributed to this report.