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State halts funding for Treasure Valley Reload Center, imposes conditions

UPDATE Saturday, Aug. 12 – This story has been revised with new information from project leaders and the onion industry.

State officials are stopping the flow of money to the Treasure Valley Reload Center over whether the partially-done Nyssa project should go ahead. The state is holding $8 million meant to help finish the struggling rail shipping project.

The Oregon Department of Transportation said in an Aug. 8 letter that project developers need to find a new operator soon to run the rail terminal – and figure out how to finish paying for it.

The state agency set no deadline but highlighted what would happen if the Malheur County Development Corp., the public company in charge of the project, doesn’t get an operator or financing.

“It may be time for MCDC to decide that the project is no longer viable and request termination,” the letter said.

READ IT: Oregon Department of Transportation letter

Shawna Peterson, development company executive director, already had urged the board to pause the project to consider its future. Engineers have continued pressing to keep some construction underway despite the uncertain fate of the reload center.

Peterson said Friday, Aug. 11, that “no additional construction expenditures will be approved until the conditions detailed in the ODOT letter are met.”

She said she expected to have a new report by the end of September about the future of the reload center.

“I believe everyone is best served if a rethink and pivot is an option,” she said.

“MCDC has two major outstanding hurdles to completing this project.”

–Oregon Department of Transportation

Project leaders have been counting on additional state money to pay overdue bills from earlier construction and to at least raise the warehouse building. A contractor has been waiting months to erect the steel building, impeded in part by extra weeks needed by project engineers to obtain the necessary building permits. A key permit is now ready – when the development company pays the $40,000 fee.

The state decision is the third major blow to the project in recent weeks. Project leaders, county leaders and the region’s state legislators had hoped legislators would pump another $8.5 million into the Nyssa work. Instead, they got a pledge of $5 million – leaving the project at least $5.5 million away from completion.

The development company intended to use some of that state money to pay three contractors owed nearly $1 million for work already done. One contractor $677,000 finished their work last December.

Not long after legislators went home, project leaders announced that Americold was abandoning the Nyssa terminal. The multinational company had agreed to run the shipping center, but last month invoked a provision that allowed the company to cancel the deal with 60 days’ notice. The company had long been held up as a key reason the public should fund the Nyssa project, with officials citing its marketing muscle nationwide for agricultural products.

Peterson said she was in talks with other potential operators.

“I just do not know at this time how long that will take if those conversations are fruitful,” Peterson said.

Talks with Americold dragged on for nearly two years before the company agreed to run the Nyssa operation.

The local company representing onion shippers wants the project completed.

“I would be very upset and disappointed if MCDC just walked away from this project,” said Corey Maag, president of Treasure Valley Onion Shippers. He also sits on the board of the development company and owns Jamieson Produce in Vale. “There has been too much time and resources put into this project to throw their hands in the air and walk away.”

Peterson’s challenge now is to find a reliable vendor to manage the reload center and to nail down another $5.5 million in financing. That means any shipment of onions out of Malheur County via the Nyssa depot is at least a year away and likely longer. The project originally was scheduled to be up and running in 2020.

The latest tough development for the project comes on the watch of officials who have overseen the project since the start.

Grant Kitamura is an onion industry executive who has been president of the development company since its founding in 2017. He said he didn’t know if he should take responsibility for the project’s current status.

“The board is ultimately responsible for the project but there were situations out of our control,” he said Friday, Aug. 11. “Some of the conditions and situations were not predictable. It was a very difficult situation with inflation and all.”

Dan Joyce has been the Malheur County judge during the entire project history and had a hand in appointing the development company board. He said the public shouldn’t hold him accountable for the project’s failed state.

“I am trying to figure out why they would,” he said.

Meantime, Malheur County remains on the hook for more costs, including paying for the development company’s executive director and covering legal and accounting costs. Those will continue even as construction is stalled.

“MCDC has two major outstanding hurdles to completing this project,” the Transportation Department letter said. Those were “a financing plan that will guarantee the completion of the construction of the facility and finding a new operator to manage the facility.”

Both steps “must be done in a reasonable timeframe,” the letter said.

“Until both these items are resolved, no additional funds” should be spent.

“We will need to see a clear ability to finish constructing the project and a proven facility operator locked in through an operator agreement to consider this a viable project,” the state letter said. “We need a clear determination that this project is still viable.”

Getting such a clear determination will be a challenge. Project officials in the past two years have advanced various financing proposals, most under the guidance of Greg Smith, who until February was the project manager. His various schemes counted in part on money not available for the project or on borrowing money from sources he wouldn’t disclose.

The project did win an extra $3 million from legislators last September under the promise from state Sen. Lynn Findley that such money would finish the building and get onions moving through Nyssa. Findley later blamed project leaders for misleading him on that point but Findley for years sat on the board of the development company, resigning after his presentation to legislative colleagues.

But the $3 million was nowhere near what was needed. The project launched in 2017 with a $25.6 million grant from the state but construction didn’t start until late 2022. Peterson, who was brought in to replace Smith as project manager, eventually calculated that the project was far short of what experts said was needed to build a rail center that could ship onions off to markets in the east.

Malheur County officials last fall agreed to pick up $2 million of the costs, covering the final rail construction. Some of that work was done earlier this year, but more work on rails had to wait until the building was erected.

Joyce said Friday that the county was supposed to be reimbursed for that money, but there is no such agreement in place.

He also said the county wouldn’t advance more money for construction.

“There is no money to give,” he said.

In late June, however, Joyce and Commissioners Ron Jacobs and Jim Mendiola approved giving the development company another $1.3 million to pay off debts.

State officials have long cited tough provisions in its 2019 deal with the development company meant to ensure the reload center get built.

Under the contract, the state could demand repayment if the development company failed to meet milestones, including completion. The state could also terminate the deal if “timely completion” was “improbable, impossible or illegal.”

The development corporation has no cash to repay the state, and there was no provision that Malheur County itself cover such a multimillion-dollar refund.

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