Local government

Malheur County Court promises more money to beleaguered rail center

VALE – The Malheur County Court last week awarded another $2 million for the Treasure Valley Reload Center, deepening the county’s commitment to the project that still needs millions more before onions can move out.
County Judge Dan Joyce and Commissioners Don Hodge and Ron Jacobs granted the request from rail project leaders who said they needed the money to immediately build a rail spur they didn’t intend to install for another three years. They recently learned the rail spur isn’t optional if Union Pacific Railroad is to connect to the Nyssa depot.
Despite the emergency, the county officials were awarding money they don’t yet have. They intend to take the emergency funding out of a $6 million federal allocation expected early next year.
In other developments:

• A contractor last week bid $3.1 million to erect the shell of the shipping center building, the lowest of two bids.
Malheur County Development Corp., the public company managing the project, got $3 million from the Oregon Legislature for that work.
• Project leaders say they still need to get another $3 million to equip the building. There is no money for bathrooms and doors, for example.
• The development company budget overstated how much money would come from the state by $376,000, according to public records. That means project managers have planned to spend money records show they won’t get.
• Malheur officials plan to go back to the Oregon Legislature for a third round of additional funding, though the amount hasn’t been disclosed.
The reload center is designed so onion producers can truck their produce to the site north of Nyssa for loading onto rail cars and shipping to destinations in the Midwest and East. Funding for the project comes from an initial $26 million the Oregon Legislature, $1.7 million from a separate state grant for water service and a $3 million state grant approved by legislators in September.
Project officials reported in October they needed $8.47 million more to finish the reload center.
The county’s promise of $2 million is the only money so far committed to plug that gap.
At last week’s court session, county officials were briefed on the need by Brad Baird, the lead engineer on the project and president of Anderson Perry & Associates, along with Grant Kitamura, president of the development company, Greg Smith, a Heppner contractor managing the reload center and Ryan Bailey, Smith’s aide.
The focus was on a rail spur known as Track C. Smith earlier in the year decided to take the rail line out of the project for now and build it in three years. Recently, project leaders were told Union Pacific Railroad wouldn’t move onions out of Nyssa without that rail spur.
“We now understand that it has to be built for them to even show up,” Baird said.
Work on the three other rail spurs is nearly done, he said.
He gave commissioners a new report showing work on the fourth rail spur “can proceed immediately upon securing the additional funds” and would start in February.
Commissioners pressed Smith and Kitamura on where they were going to get additional money.
Kitamura and Smith had been counting on getting $1.5 million from another local entity, the Eastern Oregon Border Economic Development Board. But that board doesn’t make such grants and made no commitment to award the money.
Commissioners zeroed in on $1 million that Smith and his team have listed as coming from “other” sources.
Smith, whose company is paid $9,000 a month from the county to manage the Nyssa project, refused to tell commissioners the source. He described it as a “regional partner.”
But he also dangled that $1 million before the commissioners, saying that it wouldn’t be coming if they didn’t approve his team’s $2 million request in county money.
He said the source “doesn’t care to be announced” for fear of winding up on “the front page of the paper.”
Smith said the $1 million “will not be a grant. It will be a loan.”
He said he’d only pursue the money if the county put up its share.
“I will feel compelled to do my best to bring an additional one million dollars forward,” he said.
Kitamura, however, has identified the source as the Morrow Development Corp. of Heppner. Its website says it loans no more than $500,000. Smith’s company is paid $100,000 annually to manage Morrow Development. The Malheur project has yet to apply for such a loan.
Jacobs had expressed misgivings about giving more county money to the project. He said last week he was persuaded that the fourth rail spur was important for the shipping center ­– and for the county’s ambition to build its own industrial park.
Jacobs voted to approve the $2 million because he had “more conversations with a number of people outside of MCDC about how important it is to get this Track C built.”
“We have to keep this process going. It’s not like I won’t continue to try to get the onion growers to step in as well,” he said.
Hodge said in an interview after that vote that “Track C has got to get done.”
Hodge and Joyce, though, said they will not approve more county money for the rail reload center in the future.
“No chance,” Joyce said.
The county already is covering the monthly fee from Smith’s company and thousands of dollars in interest for bank borrowings by the development company.
The extra $2 million from the county and $3 million from the state still won’t cover a basic necessity for the project – a road to the rail depot.
According to Baird’s report, a gravel road to the building site is needed “so the foundations and floor slabs can be constructed.” But, he reported, the road work “is not yet funded.”
He didn’t respond to emailed questions last week about whether construction of the building, which is now funded, would have to wait until project leaders get money for the road. He estimated the road cost at between $400,000 and $1.1 million.
And the report said there was no source of money to finish “building amenities” that include doors, walls, bathrooms, plumbing and a ventilation system. The report did not explain how the shipping warehouse could operate without those features.
“MCDC has had a discussion with Americold to potentially cover these expenses, or they may be covered by potential future funding,” the report said.
Americold is the multinational company holding the lease to run the Treasure Valley Reload Center. Smith and his team said they have asked the company to contribute $2.5 million to finish the building, but he could provide no records supporting that claim and that sum has not been listed on any recent budget documents.
Smith also couldn’t produce any record prior to October showing Americold has been asked to accept a building with major features taken out that had been promised in the lease.
Late last week, Jim Mendiola, a local contractor who defeated Hodge in the May primary election, said the county court vote was the only realistic move.
“It is too far along to pull the plug now,” he said.
Mendiola said he would “like to see the onion packers get together and borrow some money for that thing.”
“They are the only ones who will profit from it,” said Mendiola.
At last week’s meeting, Smith warned commissioners that there will need to be “ongoing investment” in future years, meaning more money will be required for features such as a sewer system and more rail lines.
“This project, once you get started, never has an ending,” Smith told the commissioners.

News tip? Contact reporter Pat Caldwell at [email protected].


Rail project fails in $1.5 million request; another $1 million source isn’t documented

Reload project managers mum on interest costs for contractors

County court appoints two to rail reload board but one abruptly drops out

PUBLIC MONEY, PRIVATE EMPIRE: Greg Smith serves many public masters – for a price

EXCELLENCE IN JOURNALISM – Available for $7.50 a month. Subscribe to the digital service of the Enterprise and get the very best in local journalism. We report with care, attention to accuracy, and an unwavering devotion to fairness. Get the kind of news you’ve been looking for – day in and day out from the Enterprise.