Property rights don't extend down to the core of the earth unless they're explicit. You have to be careful about this when purchasing land, often times what you're purchasing is the rights down to a certain depth.

A great example of this is oil. When an oil company installs a pump, one of the things they have to do is get agreement from everyone who has mineral rights down to the depths where the oil is. This can get extremely messy, and can often involve people who are not technically the land owners.

I imagine it's a similar situation here, although it could also be that the city simply has an easement on the land itself.