Whitefish is moving ahead with a major project called for in plans for downtown.

City Council last week approved entering into a lease agreement with BNSF Railway and beginning the process to hire an engineer to design an pedestrian underpass for under Baker Avenue.

The project has a more than decade-long history rooted in the city’s downtown master plan and the bike and pedestrian plan. The underpass is planned to span under Baker near the O’Shaughnessy Center west connecting to the city’s path off of Railway Street.

The Baker Avenue underpass is estimated to cost $1.3 million.

The city has been negotiating with BNSF for some time to allow for construction of the project. In October the city received a proposed agreement to add the property to its current license agreement that includes portions of the city’s bike and pedestrian path along the Whitefish River.

“This is a very key part of our trail system to provide access to downtown,” Interim City Manager Dana Smith said.

“Previously we had been working on negotiations, but we weren’t getting anywhere on the underpass,” Smith added. “Surprisingly they have now added the underpass to our agreement.”

The lease agreement with BNSF adds the property for the underpass to the lease with an initial term expiring in May 2030. The license has a renewal option for a 25-year additional term.

The city’s most recent payment for its lease with BNSF for the bike loop was $3,261. The annual lease payment is not proposed to change, but Smith cautioned that it could eventually.

“We need to be prepared to pay market rate in the future for these leases,” Smith said. “When we were originally negotiating this lease they were proposing for the property for the underpass an annual base rate of $6,725 with an annual increase of 3 percent.”

The city in 2017 applied for a grant for the project with the Montana Department of Transportation, but did not receive the grant. Since a new funding cycle for a state grant is uncertain at this time and the city planned to use tax increment finance funds to match grant dollars, city staff recommended moving forward with the project funding it almost entirely with TIF money.

The city’s TIF district sunsets in July 2020, and projects using those funds need to be underway before that time.

“The grant is not an option for the underpass,” Smith said.

Smith is proposing that the city take $850,000 that had been set aside in the TIF fund for the purchase of blighted property and $250,000 that was set aside for wall replacement on Washington Avenue and Skyles Place, and combine that with the $400,000 already designated for the underpass for the total needed for the project.

Smith said the city had not made any headway on purchasing a blighted property so it made sense to redirect the funds, and that money for the wall replacement could be found elsewhere.

Council is expected to review an updated TIF plan at a future work session to confirm the funding plan.

The city also anticipates using some paved trail impact fees for the project since a small portion of the project is outside the TIF district boundaries.

Council also approved for the Public Works Department to proceed with a request for proposals to hire an engineer for the project. It will also begin discussion with the Montana Department of Transportation regarding the required permits and any maintenance agreements for the project.

The Baker Avenue underpass is part of a key piece of the downtown master plan in the Whitefish Promenade, which is designed to encircle and connect the downtown to the Whitefish River and downtown parks and provide connections to commercial areas and residential neighborhoods north of the viaduct.