VALE – The departure of the multinational company earmarked to operate the Treasure Valley Reload Center may be far more significant than county officials admit as the beleaguered project now faces yet another major delay.
Americold notified rail project leaders in a letter dated July 13 that the shipping depot was not “financially viable.” The legal notification said the company was pulling out of a deal inked with the county in 2021. The company noted there was “no known or scheduled completion date” for the Nyssa project.
Directors of the Malheur Count Development Corp., the public company set up by county commissioners to oversee the reload center, discussed the Americold departure during a meeting Tuesday, July 18.
One director cast the development in a positive light.
“To a degree I am optimistic about it,” said Kay Riley, a former onion executive.
Riley said the relationship between the development company and Americold, while agreeable, wasn’t a “perfect marriage.”
That’s because, he said, Americold was a real estate and storage company.
“We haven’t been on the same wavelength. They had a hard time getting out of their business model. From an onion producers’ perspective, we don’t want to store anything,” he said.
Riley also helped found the Treasure Valley Onion Shippers, which had negotiated with Americold to move onions out of Nyssa.
“They don’t want to do what we want to do,” he said.
Officials with Americold, based in Atlanta, didn’t respond to requests for comment. Shawna Peterson, executive director of the development company, said she will begin to look for a new operator immediately.
Peterson said last week she believed there are “comparable operators to potentially engage.”
“Think of it like the airlines – there are many generally ‘comparable’ airlines that can get travelers from point A to point B, but each does so slight differently and has different hubs and market emphasis,” said Peterson.
Peterson said the board will “need to look at the different distribution networks of comparable operators – i.e. hubs – and at their respective areas of expertise.”
“I am open to exploring all possibilities and do see a potential upside in perhaps some being nimbler or more focused on rail distribution,” said Peterson.
But Americold was the only company in the country to show interest in the project four years ago when Malheur County Development Corp. invited such companies to show their interest running the Nyssa depot.
And project leaders now have quit projecting an opening date for the shipping center.
Money pressures mount
That’s in part because they don’t have the money to finish construction.
Contractors now are pressing to be paid for work finished months ago. One will now seek about $80,000 in interest for the unpaid balance.
A June analysis by Peterson showed the development company needed $10.6 million to cover such unpaid bills and future construction costs. The Legislature later provided $5 million.
But construction at the rail center site is frozen because building permits have not been issued. Construction was supposed to start May 1, but a series of issues with the permits means contractors can’t pour a foundation or erect the building. There is no schedule when work would begin.
Adele Schaffeld, Malheur County building official said in an email on Wednesday, July 19, that her office still is processing the permits, reviewing information only recently submitted by Anderson Perry & Associates, the project engineers.
A good deal for Americold
The deal between the county and Americold two years ago seemed to solve a list of challenges.
Under the agreement, Americold would furnish world-class service to move agriculture products, chiefly onions. In the past, county officials said the deal with Americold offered local onion producers “preferential rates and services.” The company’s national footprint, said county leaders, also provided a “competitive advantage in procuring rail cars.”
Greg Smith, the former economic director for the county who also served as the project manager for the rail center, touted the deal as one where area onion producers and other businesses would get discounted rates to ship products. By one estimate, onion shippers would save $2 million a year by using the publicly-funded depot.
Smith quit as the project manager in February.
Americold described itself in 2019 as “the world’s largest owner and operator of temperature-controlled warehouses” with 137 warehouses and “over 75% of these have rail cars.”
The deal was sweet for Americold. Under the terms of the pact, the company was set to pay rent at fraction of what is standard and carried a no-fault clause where the company could abandon the project with 60 days’ notice. The lease also stipulated if the company operated the facility for 20 years, it could buy the multimillion-dollar project for $1.
Americold seen as game-changer
From almost the beginning of the project Americold was seen by officials as a game-changer and a crucial component of the rail center. The addition of an operator was important for another reason – money.
In January 2019, the rail consultants, The Tioga Group, warned state officials that an operator for the facility should be a key condition before any state money was released to the project. The consultants wrote that any operator would have to provide “transloading and other services at rates that make the overall truck/TVRC/rail package competitive with alternatives.”
In April 2019, Americold wrote the development company it was interested in running the Nyssa operation, sharing that its experience with “reloading and cross-dock operations is unparalleled in our industry.”
One of Americold’s local managers at the time sat on the development company board.
Months later, the Oregon Transportation Commission, the entity delegated to approve funds for the Nyssa project, was notified just such an operator was in hand: Americold.
A state Transportation Department assessment of the project said having “Americold as the operator of the proposed facility is a significant addition.”
“Among the strengths of Americold are its experience in moving temperature-controlled commodities by multiple modes including working with and negotiating with railroads,” the staff report said.
The report also noted that onion shippers had formed a local consortium that “provides Americold with a commitment for volume and also provides the shippers the ability to bring a buying power that could not be easily obtained.”
Deal with Americold proves to be a challenge
Yet getting Americold under contract wasn’t easy.
The company wanted a firm sense of how many tons of onions would move through the Nyssa facility, a key point for the company so it could calculate what would charge and where the onions would go.
Records show that Smith struggled to get the local onion industry to do its part. One reason may have been that onion producers were reluctant to commit without knowing if the pricing would be better than they had.
Smith, though, sent a string of optimistic reports to the state on the progress with Americold and onion producers. He reported to the state in December 2019, for instance, that the deal with Americold was 60% done and would be completed in two months.
That didn’t happen.
Instead, negotiations dragged on for months as Smith kept promising a contract was close.
Yet the importance of Americold to the project remained a persuasive reason for state officials to keep supporting the project.
“Americold manages the largest system of cold storage facilities in the U.S.,” according to a state staff briefing memo from Dec. 23, 2020, for the Oregon Transportation Commission.
“They also manage a very robust distribution network all across the U.S. Bringing on Americold has opened up new market destinations for produce.”
Local onion shippers, speaking through their Treasure Valley Onion Shippers consortium, said the reload center with Americold in charge “will be an invaluable resource for area shippers.”
Another year, though, would pass before Smith was able to get Americold to commit to a binding contract. When the deal was finally announced in September, 2021, no one in project leadership suggested what they are suggesting now – that Americold wasn’t truly a good fit for Nyssa.
A congenial agreement
In the wake of the agreement, Grant Kitamura, president of the development company and manager of Baker & Murakami Produce Co., in Ontario, applauded the new partnership.
“We are pleased to have a strong operating partner that has a great reputation of inventory management and logistics,” Kitamura said that September.
Days later, in October 2021, the project leaders held a groundbreaking on the dry, dusty farm ground that would become the Treasure Valley Reload Center.
“We were very fortunate to hook up with Americold,” Kitamura told the crowd. “We should be able to load onions a year from now.”
Matt Moore, then an Americold vice president, said his company was “excited to bring Treasure Valley onion into the Americold network.”
“We’ve got a solid sustainable program that really creates value through the whole supply chain,” he said.
In the coming months, development company directors would quibble that the company wanted more in the rail center than was needed. As money troubles loomed, though, they had Smith go hat in hand and ask Americold to cover the shortfall. The company turned down the request for $2.5 million.
Americold did tell Smith, though, that it was ready to spend $5 million of its own money to upgrade three other shipping centers. That was intended to specifically handle the Treasure Valley onions.
Now, Americold’s expertise, market power and money are gone.
Where do we go from here?
Finding a new operator will probably be difficult, said Ron Jacobs, Malheur County commissioner.
“I don’t know if there are that many companies that do what Americold does,” he said.
Jacobs said he planned to focus more on the county’s industrial park, next to the reload center site. The property is rocks, dirt and weeds but county leaders have high hopes regarding developing it.
“I feel that’s what makes the whole project viable. But my main focus is to get the industrial park up and running,” he said.
Jim Mendiola, another county commissioner, said he isn’t sure what the next steps will be on the project.
“I don’t know what to do. I guess we will have to rethink what we are doing. But it is pretty sad when the guys (Americold) getting the best deal jump off the train,” he said.
County Judge Dan Joyce said “I really don’t know” what happens next.
The county had been anticipating getting money from onion shipments to pay off the state loan it owes for buying the industrial property. The county also is obligated to pay Peterson’s contract, borrowing costs and other expenses of the development project.
Erik Havig, Transportation Department planning manager, said last week he isn’t sure of the impact of Americold’s departure.
“I wouldn’t say we are at square one but we need to figure out what the next steps are,” said Havig
Havig said the agency considers it essential for the development corporation to retain an operator.
“That is on MCDC. We have a responsibility to oversee the project and be good stewards of public money,” he said.
The project still has the support of state officials at the highest levels. Last week, Gov. Tina Kotek, in Ontario as part of a tour of eastern Oregon counties, said the project “needs to get done.”
“It is good for the community to have that facility,” she said.
Kotek said she also had “some questions about where we are in the project.”
“This is a critical moment for the project,” she said.
The overall effect on the local onion industry by Americold’s pull out is hard to gauge, though Peterson said it will probably be “negligible.”
“It just maintains the status quo for their shipping options consistent with how they’ve operated until now,” she said. “But I am hearing from the onion industry that this remains important to the future, particularly if trucking options become more challenging and if yields are up,” she said.
Finding another company with the network distribution and market destinations is possible, Peterson said.
“Companies all have different business models, growth targets, market strategies,” she said. “This project no longer fit Americold’s, but that does not mean that it isn’t a fit for another company.”
Ray Burzota, general manager with Central Distribution Inc., an Idaho-Oregon Fruit and Vegetable Association member, said if the reload center were open today, it would give his company more options to ship products. Still, in the interim, he said, the company is getting by using trucking companies and sending roughly half of their onions via direct rail.
“Americold has a lot of locations,” Burtoza said. “There would have been more flexibility.””
Every year, Burtoza said, transportation becomes more of an issue for the onion producers. The overall issue, he said, is finding trucking companies that can ship, load and unload their product. They’re harder to come by, he said.
“Finding the trucks at a decent price,” he said, “has become crazy.”
But, Burtoza said, onion producers have that sentiment every year and find a way to get their products out.
He said it had been over a year since the company had spoken to Americold. But early on, Burtoza noted, Americold visited with the produce company several to assess the volume of onions Central would ship and how often they would use the reload center. From those conversations, Burtoza said, Americold could have offered stops they could use.
According to Burtoza, most of the produce company’s business is located east of the Mississippi River, and the company ships directly to Texas from its own rail dock.
Local onion producer Bruce Corn said he doesn’t expect to see any major setbacks in the wake of Americold’s decision.
Corn, who uses Snake River Produce of Nyssa to pack his onions, said now there “seems to be a fairly reliable source of trucks.”
“I am not concerned my crop won’t get shipped any more than any other year because that facility is not available,” he said.
Editor Les Zaitz contributed reporting.
Previous coverage:
More money will be needed to finish rail reload center while construction remains stalled
County court splits 2-1 over millions more for rail shipping project
Permit glitches impede progress on rail reload project
HOW TO SUBSCRIBE – The Malheur Enterprise delivers quality local journalism – fair and accurate. You can read it any hour, any day with a digital subscription. Read it on your phone, your Tablet, your home computer. Click subscribe – $7.50 a month.