WEDNESDAY UPDATE: Greg Smith, Malheur County economic development director, issued a statement after publication of this story and updates reflect his comments.
ONTARIO – John Fery’s company broke ground on a $4.5 million car wash last November, motivated by Malheur County’s promise that his business would owe no property taxes for five years.
That was no small promise.
Based on county records, Bluebird Express Car Wash could avoid about $335,000 in taxes over five years.
Such incentives help lure new businesses to the community, boost employment and provide a new taxpayer down the road.
But an investigation by The Enterprise found that a car wash isn’t eligible for the tax break and Bluebird now faces property tax expenses it never calculated in its cost of doing business in Ontario. The firm would have to move about 4,500 cars a year through its “signature” wash costing $15 each just to cover such a tax bill.
[ KEEP YOUR LOCAL NEWS STRONG – SUBSCRIBE ]
County officials so far haven’t explained their treatment of a new local employer.
Greg Smith, Malheur County economic development director, manages the tax program. He didn’t respond to voice messages or two sets of written questions from the Enterprise last week concerning an expected tax break that he has so far not delivered.
On Wednesday, Smith issued a statement, responding to the story.
John Braese, Malheur County Economic Development, talks in May at a meeting in Ontario. (The Enterprise/Pat Caldwell).
Bluebird officials said they proceeded to construction on a highly-visible site east of Interstate 84 on the county’s assurance that the tax break was theirs.
“That was a huge part of our decision and one of the biggest reasons we elected to come here first,” said Fery, the operating partner of the Boise-based company. The upscale car wash opened to fanfare in July, its property tax status still unresolved.
Fery said the Ontario location employs 10 people with plans to add five more.
Those new employees make an impact on the city, said Adam Brown, Ontario city manager.
“Ten to 15 jobs are big for a community our size,” said Adam Brown, Ontario city manager.
Fery believes building in Ontario was the right decision.
“We are so excited to be in this incredible community,” he said.
Yet he said he is confused about why a promise made by the Malheur County Economic Development Department never came through and what will happen going forward.
He complained to county officials recently that he has tried for months to get a straight answer.
Instead, he got “the longest runaround I have seen,” he wrote last month in an email to a county official.
“I have a feeling something isn’t right,” Fery said an interview last week.
Tax-free zone
The city of Ontario features an important lure for economic development officials – an enterprise zone.
In such a zone, certain businesses can be freed from paying property taxes in exchange for putting up new buildings and employing people.
Such zones are common in Oregon. There are 73 in the state and they are usually free from controversy.
The program is a familiar one in Malheur County where solar companies used it to garner huge tax breaks over the past decade. The program is also intensely local. While BusinessOregon, the state economic development agency, oversees the program, the key decisions are made locally.
“All we do, essentially, is award the zone itself. The county applies to us for the enterprise zone. They are managed by the local zone manager,” said Scott Fairley, regional development officer at BusinessOregon.
The cities of Vale, Ontario and Nyssa plus Malheur County in 2015 inked an agreement to work jointly on such efforts. The agreement assigned the job of managing the zone to the county’s economic development director Greg Smith.
Smith has a long history in economic development work across Oregon. Malheur County pays his company, Gregory Smith and Company, $180,000 a year to manage its economic development work. Smith at the same time holds two other full-time jobs and serves as a state legislator.
As manager of the enterprise zone, Smith is expected to advise businesses on whether they qualify for a tax break and then work with them to get it.
After Smith signs off on the tax break, the proposal goes before the Malheur County Court for approval and then to Ingram.
A business seeking the tax break has to apply before it breaks ground.
By law, the tax break is available to companies “providing goods, products or services to businesses or other organizations.”
The law is clear about who isn’t eligible. The tax break isn’t available for a company providing “goods, products or services to the general public.”
Dan Cummings, Ontario Community Development director, said he told Bluebird Express Car Wash officials early on that the business wouldn’t be eligible because, as a car wash, it did not qualify as a non-retail business.
Malheur County Economic Development Director Greg Smith. (The Enterprise/File).
“They said they had already been told by Malheur County Economic Development Department that they did,” said Cummings.
County Assesor Dave Ingram said he didn’t consider whether the car wash qualified for the tax abatement or not.
Since Smith had the final say on the proposal, he said he waited to hear from him whether the business qualified. Art Fish, of BusinessOregon, said no such tax break had ever been granted to a car wash. He said since the car wash is considered a retail business, it wouldn’t qualify.
Bluebird went ahead.
The city of Ontario issued a building permit on Oct. 29, 2018, and on Nov. 1, the company completed its application to get the tax break. A copy was submitted that day to the county assessor.
Ingram said still has no notice whether Smith decided on the application.
On Wednesday, Smith said in a statement that “unfortunately, retail and service sector businesses are not eligible for the Enterprise Zone Tax Incentive.”
He also said that “records will demonstrate that a pre-application for Bluebird Express Car Wash was never approved nor signed.”
A copy of the form submitted to the county, however, was signed by a Bluebird official.
DOCUMENT: Bluebird application for tax exemption
With the application filed, BlueBird participated in a telephone conference that records indicate happened on Nov. 13.
On the call were Fery, Ingram and John Braese, of Malheur County economic development. Smith was supposed to participate, according to an email at the time by Braese, but didn’t.
Fery recalled that during the meeting, Braese told him his request for an enterprise zone tax abatement was good to go.
“He was like, yep, no problem,” said Fery.
Ingram said recently that economic development officials were premature in telling Bluebird that its Ontario project would get the tax break. That’s because, he said, there were questions about whether the business qualified.
By law, Smith was required to “prepare a written summary of the conference.” Such a summary would presumably reflect who said what. County economic development officials are required by law to turn in that summary when the application is submitted to the county assessor. Ingram said he’s never seen it. Smith and Braese didn’t respond questions about whether they produced that required summary.
Ingram said he later had “a conversation with the manager (of Bluebird) and told him to get in contact with Smith and make sure this thing was on track.”
Fery said an email two weeks after the car wash opened that he still didn’t know the status. His frustration was clear.
Fery said once the company filed its application with Malheur County Economic Development last November, company officials made “multiple attempts” to get information from agency officials.
“Every week since, we have contacted and even visited John Braese in his office to check on the status of our application,” Fery wrote in his email to Ingram. “Each time, we get a variation of an answer, ‘next week or ‘it’s in the county assessor’s hands’ or ‘you were on the agenda, but they cancelled the meeting.’”
Ingram said after he got the email, he contacted Fery to say the decision wasn’t in the assessor’s office.
“I said that is not right. It is not on my end,” said Ingram.
Eight months after getting the application, Ingram still had no word on what Smith had decided on granting the tax exemption.
Ingram said he then alerted Dan Joyce, the Malheur County judge, about Fery’s email and the enterprise zone issue with BlueBird.
Joyce, who serves in a full-time paid county job, told the Enterprise Friday that he knew little about the issue. Smith reports to the county court.
“Does it qualify? That is the biggest question and I think that is either a city or state level question,” he said.
But it is not. The zone manager – Smith – gets the final say on whether a business should get an enterprise zone tax abatement.
In his statement Wednesday, Smith contradicted the county judge.
“I am responsible, within the parameters of the law, to determine and negotiate for the allowance of property tax exemptions,” he said.
Ingram said there should not have been a months-long delay regarding whether Bluebird qualified.
“The timing of this is if they didn’t qualify, they should have been notified earlier and that wasn’t my call,” said Ingram.
After the Enterprise began questioning county officials about the matter, Braese stopped by to see Fery. According to Fery, Braese told him the car wash could still qualify for the tax break.
“He stopped by to say that he will submit an appeal on our behalf but we have not seen anything,” Fery said.
By law, Bluebird can appeal if Smith “fails or refuses to authorize the business firm” to get the tax break.
That would mean Braese is positioning the county to help appeal inaction or a rejection by his boss. The appeal would go to the Oregon Tax Court.
Norm Crume, Ontario city councilor, said Friday he was surprised to hear about the car wash issue.
Crume said he is “concerned because I don’t know how they are going to fix something that looks like some kind of mistake was made.”
“It appears as though someone made a statement without doing the fact checking beforehand,” said Crume.
DOCUMENT: Greg Smith statement
The Bluebird Express Car Wash in east Ontario opened formally opened in July, adding 10 employees to the local workforce. (The Enterprise/Pat Caldwell)
Have a news tip? Reporter Pat Caldwell: [email protected] or 541-473-3377.
For the latest news, follow the Enterprise on Facebook and Twitter.
SUBSCRIBE TO HELP PRODUCE VITAL REPORTING — For $5 a month, you get breaking news alerts, emailed newsletters and around-the-clock access to our stories. We depend on subscribers to pay for in-depth, accurate news produced by a professional and highly trained staff. Help us grow and get better with your subscription. Sign up HERE.