Reviews list risks, concerns with Nyssa rail project

State officials have listed “concerns and risks” they have about sending $26 million to Malheur County for the rail shipping project in Nyssa.

Here are excerpts about those concerns contained in those reviews, which will be considered by the Oregon Transportation Commission at its meeting on Thursday, Feb. 21.

The Tioga Group

This is a consulting firm hired by the state Transportation Department to review the Nyssa rail project. The group reported Jan. 7.

“Tioga believes the onion market share estimates used as a basis for financial viability, and for estimates of public benefits, are overly optimistic.

Tioga also notes that the project documentation does not make clear which organization would negotiate rates and services with UP and offer them to shippers. This issue must be resolved to enable successful negotiations with UP prior to funding for construction.

Tioga believes that construction funding should be conditioned on a satisfactory agreement between MCDC and the intended operator.

The success of this project and delivery of public benefits depends primarily on establishing a mutually beneficial operating and economic relationship with Union Pacific. At this stage Union Pacific is sending mixed messages.

In Tioga’s opinion funding for construction should not be approved before an acceptable service and rate agreement is negotiated with Union Pacific.

We do not recommend funding the TVRC project is unless a written, binding agreement with UP can be made within 90 days of a conditional grant award.

Site ownership and the price and terms of the purchase should be finalized, documented, and reflected in revised proposal financials with 30 days of conditional approval.”

State Final Review Committee

This group of outside individuals was appointed by the state Transportation Department to review the rail shipping projects. The committee supported the project with conditions in a Jan. 25 letter.

“There were concerns about availability of refrigerated rail cars and how Union Pacific’s announced investment in their ColdConnect facility in Wallula, WA would compete with this facility.

It would be beneficial to see a greater variety of commodities than onions go through the facility, so that it was utilized for a greater part of the year.

OTC [Oregon Transportation Commission] should require the TV project sponsors to provide a stronger level of commitment of service from the UPRR.

OTC should ask the project sponsors to evaluate opportunities to expand service to other commodities and markets beyond onions with the goal of helping the facility to operate year around.”

Matt Garrett, Oregon Department of Transportation director

Garrett and his staff reviewed the Nyssa proposal and two in the Willamette Valley and Garrett addressed his findings in a Feb. 11 letter to the Transportation Commission.

“The estimates for the share of the onion market (the only commodity proposed for the facility) are optimistic, and would not result in year round utilization of the facility.

Service to the proposed eastern destinations could take up to six days longer than from this [Wallula] Washington facility.”

The underlying volume forecast may be optimistic, which makes it likely that the benefits and return on investment (ROI) analysis are optimistic as well.

The estimated track costs may be too low to other recent track siding projects, and might require additional expenditures.

OTC should be seeking more clarity from the rail operator that service to these facilities will occur and that the likely rate structure would make their use competitive to trucking.

The risks that have been identified are significant.

OTC should request a clearly articulated course of action from the project sponsors related to these challenges as a prerequisite before public funds are fully allocated.”

Chris Harder, Business Oregon director

Harder and his staff reviewed the Nyssa proposal  and two in the Willamette Valley and Harder addressed the findings in a Feb. 13 letter to the Transportation Commission.

“None of the applications presented compelling long-term, sustainable business models that do not include ongoing subsidies to remain viable.

Business Oregon has considerable concern about each project’s ability to succeed without long-term public investment or subsidy.

None of the applications document evidence of funds to bridge the gap between the start of construction and the reimbursement of eligible costs and expenses from the state.

Business Oregon believes all three projects require further development to address the deficiencies outlined.

These points are not meant to be all-inclusive; they are intended to highlight significant areas in need of risk mitigation.