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Discussions between the City of Centralia and Logistics Property Company (LPC), an industrial real estate company that will develop a 38-acre lot in the Port of Centralia’s Park I development, have come to a halt.
According to Centralia City Manager Michael Thomas during the Centralia City Council’s Tuesday, Oct. 28, meeting, city staff rejected LPC’s proposal for a development agreement on the Fords Prairie Industrial Park. However, Thomas said the city remains willing to renegotiate in order to keep the transaction moving forward.
The Port of Centralia Commission voted in September to approve a purchase and sale agreement with LPC, which was founded in 2018. According to the port, the project is expected to bring 761 new jobs to the community. LPC purchased the 38-acre lot at $5.25 per square foot.
After numerous conversations and meetings, the city and LPC mutually determined that the best path forward may be a development agreement. However, the two parties have disagreed on the city’s offer to provide significant funding toward the cost of the sewer main construction. LPC wrote in its proposed development agreement that it wants the city to pay the company both $1.5 million in sewer line extension costs and $1.362 million for a secondary reimbursement amount. The city rejected this proposal. LPC will pay $3.34 million in sewer line costs.
The city wants a development agreement in place with LPC that specifies the timelines and expectations for addressing all remaining items:
• The use of city funding for the Harrison Avenue sewer main extension
• The Lewis County engineer’s comments and requirements from the supplemental traffic impact analysis
• Deviation requests and frontage road improvements
• A solar installation agreement with Centralia City Light
• The calculation and payment of transportation mitigation fees
If LPC chooses to move forward without a development agreement, Thomas said the city has some requirements that must be met, at a minimum, before a full building permit can be approved. The sanitary sewer main extension plans must be approved by the city and the county. These plans are currently under review.
The city also said it needs to know unequivocally what LPC’s position is on its “last, best and final offer” of providing up to $1.5 million toward the cost of the sewer main construction. If this offer is rejected, LPC will need to pay for the project and may request a latecomers agreement, if it works better for LPC’s construction timeline, according to the city. The latecomers agreement would need to be officially requested in writing prior to these plans being approved for construction by the site plan review committee.
The Harrison Avenue frontage improvement plans must be approved by the city and the county. These plans are also currently under review. Thomas said the county is involved because, although this is a city project and city infrastructure is involved, the project will be within the urban growth area.
“We indicated to LPC that we, the city, had already taken numerous good faith actions to help move this project forward and move (more) quickly than a normal permitting process allows,” Thomas said. “We were willing, and still are willing, to work with LPC and their representatives to create a developer’s agreement.”
Thomas noted that LPC representatives provided their draft proposal on Oct. 10, and the city rejected the proposal on Oct. 24.
“After careful consideration of their proposal, we rejected it and stated, ‘Unfortunately, the terms of the agreement are far off from anything the city could agree to at this time,’” he said. “‘We would welcome a revised draft that more closely represents the offer the city manager made on July 25 and that better balances the interest in the city and those with LPC.’”
As for why the city decided to reject the proposal, Thomas stated that the facility that LPC is building does not need a 36-inch sewer main. However, the city and the county need a 36-inch sewer system down Harrison Avenue to go to and through the property to ensure that future development opportunities are possible down Harrison Avenue, according to Thomas.
“We offered to offset the cost of the differential between the pipe that we needed and their 36 inches and what they were going to put in there,” he added.
The additional $1.362 million LPC requested did not come as a surprise to the city, but Thomas noted that the amount is too much for the city given its budget constraints.
Change orders were also a point of contention between the city and LPC. The proposed agreement stated that after all the permits have been issued to the developer or its general contractor, the city shall not request or otherwise impose changes to the plans and specifications or the construction work. In addition, the city also shall not encourage or support the county or any other agency with authority to request or impose changes, per the draft agreement sent by LPC.
“This would include the city basically telling the county, federal agencies, state agencies, even the Port of Centralia, that, no, you can’t make any change orders, even if you need or see something that needs to be changed because we are now obligated to encourage you not to make those changes,” Thomas said.
LPC also wrote that changes requested by the developer be provided in written form to the city and that the city would have only five days after receipt to approve or disapprove such changes. In the event that the city failed to provide written notice to the developer of its approval or disapproval of the requested changes, the city would be deemed in LPC’s perspective to have approved the changes and would be responsible for reimbursement of any costs incurred by the developer.
Additionally, the city, under the proposal, would reimburse the developer for additional costs such as substantial cost increases, inflation, labor, materials, utilities and extraordinary events like severe weather or natural disasters.
Thomas said as of Oct. 28, the two parties still hadn’t come to an agreement regarding the completion of the project but that the city’s desire is to come to an agreement “within the next few weeks.” Once a final agreement is reached, it would come before the council for approval. He added that LPC had reached out to the county for help facilitating the process.
LPC also visited the Port of Centralia meeting on Oct. 15, with Executive Vice President Dennis Rice and Senior Vice President Joe Sandhu providing an update to the port.
Rice told the port commissioners that the building is registered for Leadership in Energy and Environmental Design Gold certification, will have a 424-kilowatt solar system on the roof, and 36 parking stalls along with electric charging stations and the capability of expanding to 116 stalls.
Sandhu warned of the standstill during the port meeting and said it was due to permitting issues. At the time, he stated LPC had partial permits issued and that the company is paying about $500,000 in total permitting fees to the city. If the project were to come to a shutdown, Sandhu said that LPC is looking at losing approximately $75,000 to $100,000 a day. The company has invested $100 million in the project, he added.
“We have bank loans. We have mobilization. We have materials ordered that were scheduled to be delivered that will be held up. The damage is there,” Sandhu said Oct. 15. “It’s just a domino effect. Not to mention if there’s a tenant. Once they hear there’s issues, tenants don’t want to look at your buildings. They don’t want to come to cities that are not willing to issue permits.”
During the Centralia City Council meeting, Councilor Mark Westley called LPC’s proposal “very one-sided,” while Thomas acknowledged that the draft agreement was made in good faith and was a fair agreement from the developer’s perspective. Councilor Norm Chapman, speaking on behalf of city taxpayers, thanked city staff for rejecting the proposal.
“This is not in the city’s best interest to have those secondary city reimbursements for sewer lines. This is a bad deal, manager. I’m glad you rejected it on Friday,” he said.
