Special Reports

State’s fund for rail center nearly exhausted but millions in costs remain, records show

Brad Baird kept his tone matter-of-fact, betraying no sign of the financial emergency hindering the Treasure Valley Reload Center.

He told the assembled officials that project managers would spend their $26 million state grant to zero and still have bills to pay.

“It’s obviously something to pay attention of to make sure that we don’t get overextended,” said Baird, the project engineer.

He also presented a written report in that October meeting of the board of Malheur County Development Corp., flagging the excess costs.

“This will need to be addressed in the next 2 to 3 months,” he wrote.

The cost to the public of a project being built to improve profits for onion shippers is closing in on $40 million. That’s 50% over the budget.

Instead, the money problems for the Nyssa project have only worsened, according to an analysis by the Enterprise.  The newspaper reviewed contracts, project invoices and budgets to analyze the shipping center’s construction finances.

Those documents reveal that project leaders have committed to costs that exceed their state grant by at least a half-million dollars. The figure is likely much higher, for there is no public record yet of three months of expenses from the main construction contractor, costs that had been running $100,000 or more per week.  Also not included are bills from Baird’s company, Anderson Perry & Associates, for work in November and December.

No one from the development team disputed the newspaper’s analysis, shared two weeks ago by email.

The people ultimately responsible – the directors of the development company – haven’t answered for the deepening crisis. The directors were each asked to cite any error in the analysis, comment on their knowledge of the depth of the problem, and explain where they expected to get even more money for the shipping center.

Not one responded.

That included Grant Kitamura, development company president and managing partner of Baker & Murakami Produce in Ontario; Corey Maag, company vice president and owner of Jamieson Produce in Vale, and directors Kay Riley, retired from Snake River Produce in Nyssa, Jason Pearson of Eagle Eye Produce in Nyssa and Ralph Poole, CEO of Campo & Poole Distributing in Ontario.

There is no record that the directors have been fully informed about the project’s finances. The development company said in an email to the Enterprise on Dec. 9 that “no records exist” for any updated budget since Baird’s sobering October report.

When the Enterprise asked again, in early January, for any updated budget, Smith responded that it would take his team nearly three weeks to deliver such information – “if records are found.”

The compounding financial problems imperil a project that was supposed to have been shipping local onions nearly two years ago. Project officials now say they expect onions to move by this fall but that’s only if the Treasure Valley Reload Center is done by then.

Smith’s team and the development company have to come up with another $7 million or so to finish the project as planned. The logistics company contracted to run the Nyssa plant has rejected requests it help pay for construction.

But the main source project leaders expect to tap to cover their cost overruns is more public money.

Oregonians have already invested substantially in the Nyssa project, from the original state grant of $26 million in 2017, to a $1.8 million state grant in 2021, to yet another state grant of $3 million last September.

Legislators were told that the last $3 million would get Nyssa done. That wasn’t true.

Malheur County officials last month dipped into the local treasury to spring $2 million more for the project.

At the same time, county government is absorbing many of the day-to-day costs of the development company, such as Smith’s fee and bank costs. Project managers don’t include those costs when listing the price tag for the rail center.

Smith has indicated to company directors in recent months that he was certain he had new sources of funding. So far, he hasn’t delivered.

Last October, he spoke with confidence of getting $1 million from an unidentified source. Asked for any documents supporting that claim, the development company responded that “no records exist.”

Smith also counted on getting $1.5 million from the Eastern Oregon Border Economic Development Board – but that board doesn’t have the mechanism to make such a payment.

Directors have asked few questions in public meetings about where Smith and his team would get the money – or even the scope of the financial crisis. Taxpayers have little to rely on except outdated budget reviews to make their own assessment. Smith recently cut short a development company board meeting, saying his team needed more time to prepare a “packet” on budget matters. His company is paid $9,000 monthly for such tasks.

That leaves unclear how board members can oversee a project when they are blind to its financial details.

Smith’s team has trouble readily producing even basic business records. Asked on Jan. 13 for the development company’s bank statements, Smith said it would take nearly three weeks to produce them – “if they exist.” The company has had the same bank account for more than three years.

What’s clear is that even with the $2 million county bailout, the Treasure Valley Reload Center will take an estimated $7 million more to finish.

That means the cost to the public of a project being built to improve profits for onion shippers is closing in on $40 million. That’s 50% over the budget that Smith and Kitamura once assured the community they would live with.

Project leaders have blamed inflation and troubles at the Nyssa site for the escalating costs. The expenses have piled up for reasons large and small, from an unbudgeted rail spur now priced at $2 million to $150,000 for plantings in a wetland.

Adding to the troubles, project leaders have used an inflated figure for the initial state grant in their calculations. They overstated the sum by $376,000, apparently ignoring state documents showing that the state Transportation Department will keep a share for monitoring project work.

The impact is that project leaders have been counting on $376,000 they won’t get, adding to the shortfall.

Asked for any document showing that the development company board members had been informed of the reduced grant figure, Smith responded that “no records exist.”

Contact Editor Les Zaitz by email: [email protected].


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