Local government

Key study that justified Nyssa reload center now doubted by long-time board members

VALE – At least two members of the board that oversees the Treasure Valley Reload Project recently rejected findings in a crucial economic analysis used five years ago as the primary justification for the $26 million project.

During a meeting of the Malheur County Development Corp., Tuesday, Nov. 7, Grant Kitamura, the president of the board, and board member Kay Riley reacted to questioning as if they had never seen or heard of information contained in the Treasure Valley Reload Center Market Feasibility Study from ECONorthwest, a Portland firm.

The study, which cost $131,000, was one of the key pillars that convinced state officials the reload project was feasible and worth the $26 million investment of public dollars.

The 77-page study was completed in 2018. Crucial information from the study was incorporated into the development company’s proposal submitted to the state, which opened with a letter from Kitamura, seeking approval for the project.

“The project plan before you will deliver on the efficient movement of commodities, transportation cost savings, and public and private benefits,” Kitamura wrote in his letter.

The feasibility study reviewed shipping, market demand estimates, profits and operating costs among a host of factors to justify the rail center.

The findings from five years ago came under question as the company board moved to fill a long-vacant seat. Mike Walker, an Adrian farmer who retired from construction management, has regularly questioned the project. Pending approval of the Malheur County Court, he will join the board.

Under Walker’s questioning, board members disavowed numbers used to justify the terminal. Their remarks come as the state officials are once again trusting project leaders to come up with a new and feasible business plan for the stalled Nyssa project.

At the Nov. 7 meeting, Kitamura and Riley took issue with some of the conclusions in the company’s own report of five years ago.

“One of the assumptions it had was that all onions currently rail exported out of the area would move through TVRC. So, everyone would shut down their railroad siding and warehouses and move everything over. Is that a valid assumption?” asked Walker.

“Not at all. That’s not a good assumption,” Kitamura said.

Walker also said the ECONorthwest report projected a yearly volume of 2,500 rail cars loaded with onions and moving out of Nyssa.

That wasn’t right either, said Riley.

“That’s a pretty lofty goal by a long way,” he said.

Riley said because of low harvest yields in the past few years there isn’t much demand for the rail center because more trucks are available.

“But as the pendulum swings, at a future point, there will be a lot of demand for it,” he said.

Walker also said the report broke down the top truck destinations for onions, including places such as Los Angeles, Seattle-Tacoma, Salem and Salt Lake City. Initially, plans from Americold – the Atlanta-based conglomerate selected to operate the rail center – was for onions to be trucked to the Nyssa facility with some reloaded onto trucks for shipping instead of rail.

“The market share for rail shipment to those locations is virtually zero,” said Walker.

Walker asked the board if they thought that would change.

“No,” said Kitamura.

Riley said 80 to 85% of local onions goes east.

“I don’t know where they (ECONorthwest) gathered their information,” said Kitamura.

Riley then asked if the information in the report was “Treasure Valley specific?”

“I think it was specific to the Treasure Valley,” said Walker.

“Well, they’re wrong,” said Riley.

Walker then pointed out the ECONorthwest report forecast that of the onions shipped out of the area that travel more than 1,500 miles, the reload center would collect “roughly 45% of a market share of all those onions. Is a 45% market share of trucked onions over 1,500 miles a realistic figure?” he said.

Kitamura said he didn’t know.

“I don’t remember the exact statistics you are talking about. I don’t know where they gathered them. I don’t remember being interviewed for that,” said Kitamura.

Walker said he figured, after collating the information in the study, that the reload center would gather about 15 to 20% onions that now go by truck.

“You can run the numbers using the 2021 crop and you’re probably looking at 700 (rail) cars a year,” he said.

Again, Kitamura said he didn’t know but pointed out a “supermajority goes back east.”

Walker said the ECONorthwest report showed a detailed outline of operating costs of about $1 million.

He said eventually the development corporation would have to borrow $5 million to finish the reload center.

“You have to make some profit so you have money in the bank,” he said.

Walker estimated the reload center probably needed to clear $2.2 million a year to be profitable.

“How can you do that with 700 rail cars? You have to be charging like three or four thousand dollars every time you load a rail car. Is that realistic?”

Kitamura suggested the data in the ECONorthwest report was no longer relevant.

“Everything has changed from five years ago,” he said.

Board member Corey Maag said the reload center wasn’t a realistic proposal if it just relied on onions.

“I know how it was planned and that was one of the biggest faults of the whole deal. Onion shipping won’t be 12 months a year and this thing needs to operate 12 months a year. We were set up to fail to just limit it to onions right off the bat,” he said.

Project leaders have long insisted that other crops could be moved out of Nyssa but no firm plans to do so had been developed.

Walker said an important move in the future is the ability of the board to “articulate a business plan, numbers, shipping rates, how much money does it make.”
“Otherwise you won’t be able to borrow money or get ODOT (the state Transportation Department) to approve,” he said.

Riley then asked Walker if his first motion as a board member would be to “just throw in the towel?”

“I’ve put a lot of effort into this to make it work. We’re not dumb or naïve. The viability of this thing has been something we have evaluated the whole time we’ve been here,” he said.

Walker pointed out Riley had never said that “in a meeting I’ve been to.”

Then Riley asked the board if he could change his vote supporting Walker’s appointment.

“I am dead serious. Either that or I will resign. Because I have listened to enough negative for five or six year or however long,” said Riley.

No new vote was taken and Riley has yet to resign.

Kitamura said last week after the meeting the board knows the reload center must diversify the products it will ship.

“You have to have other products. We know that ­– now,” he said.

Shawna Peterson, the executive director of the development corporation, said in a later interview the ECONorthwest study isn’t particularly significant as she moves ahead with a new business plan and a search for a firm to operate the rail center. She said she read the report when she was appointed to be the executive director.

“It is a good reference. But I am not relying on those numbers because they are outdated. Even if I had confidence they are actually accurate it isn’t enough to be useful. I need current information,” said Peterson.

When asked why the public or the state should trust any new information on the rail center if the ECONorthwest study contained inaccurate information, Peterson said her sights are set firmly on the future.

“My focus, and what I understand ODOT’s to be, is on developing an updated business plan for the project. I am not recommending the board approach that by critiquing the original project proposal, which is now over five years old,” said Peterson.

Peterson said she intends to “present a new plan that is both current and reliable and trust ODOT has the ability to appropriately review it.”

“At the same time, much of my energy is focused on building state and public trust in the team and the plan with transparency and open communication, which I believe is critical to success,” said Peterson.

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

Previous coverage:

State halts funding for Treasure Valley Reload Center, imposes conditions

Wallula rail center’s back in play, adding new factor for Nyssa Project

State will not enforce deadlines on rail reload project, waiting for new plan

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