The public company developing the Treasure Valley Reload Center will consider suing two former partners to recover some of the $29 million it spent so far on the stalled Nyssa project.
The board of the Malheur County Development Corp. will await an analysis by its executive director – an Ontario attorney – on the potential for lawsuits.
A look back at past performance comes as the development company considers a major change in the unfinished rail project. One board member is proposing that the size of the railroad depot be cut in half to save money.
The MCDC board at its meeting on Tuesday, Sept. 3, also learned:
• $100,000 more is needed – and soon – to finish the task of connecting the Nyssa industrial property to the Union Pacific Railroad mainline.
• A study considered essential to deciding how to run the reload center still hadn’t been turned in by Commtrex, a Texas firm commissioned by MCDC. The $15,000 report was due Aug. 1.
• A renewed agreement with Malheur County will provide county money in the next year to cover up to $150,000 in costs for the development company. The county is urging MCDC to avoid using borrowed money to finish construction.
Launched in 2017, MCDC has burned through more than $29 million in public funds and still needs to invest another $11 million or so to finish the depot as designed.
For now, there is no completion date. The rail warehouse remains in pieces on the ground, rail spurs are incomplete and no company has signed up to run the Nyssa center.
“It’s all a big swan song that we listened to and kind of went along.”
–Kay Riley, MCDC board member
The idea of clawing back money from partners emerged as the MCDC board discussed a plan to whittle down the size of the rail building.
The company since at least 2018 planned on a 60,000-square-foot building and spent more than $1 million buying a steel kit. But flaws in the depot design emerged, adding untold costs. For now, the kit sits on the ground in pieces and crates.
Mike Walker, an MCDC board member, presented sketches of the footprint for a smaller building.
Walker suggested that MCDC buy a new building kit half the size of what had been planned. He said the company could then sell the original kit.
He said the original building was “way overbuilt.”
He placed the blame on Americold, the Atlanta-based multinational company that had been under contract to run the Nyssa depot. The company walked away from the project in July 2023, citing financial infeasibility.
Walker said the original depot building was designed to accommodate Americold’s intention to store onions and other produce. Onion industry officials on the board in recent months have insisted that Treasure Valley onions would not be stored, but rather onions would be unloaded immediately from truck to rail car for shipment.
Walker estimated the original building so far had cost MCDC about $3 million. He said Americold had told the company that “this is the building we need to make this work.”
“We relied on that information,” Walker said. “We spent money and then Americold pulled out.”
He said MCDC should consider whether to pursue claims against Americold and the engineering firm that oversaw the project until last year. Anderson Perry & Associates of La Grande designed the reload center and then supervised construction as costs escalated. Its contract was terminated in 2023.
“We have a duty of care to the county and the state to look at that option,” Walker said. “I hate lawsuits.”
Kay Riley is an onion industry executive who has been on the board since its founding in 2017. He said he shared Walker’s sentiment.
Riley said he had concerns about Americold early on but that he and other board members followed the guidance of their previous executive director. He didn’t identify Greg Smith by name. Smith was the project manager from the start until he quit in February 2023.
Riley said the board also relied on Anderson Perry.
“I don’t know if we were derelict in our duties or not,” he said. “It’s all a big swan song that we listened to and kind of went along,” he said.
He doubted MCDC would succeed against Americold but “I do feel Anderson Perry is culpable to a large degree. It just seems like their work was done pretty unprofessionally.”
Corey Maag, another onion industry executive on the board, said the board had little input on dealings with Americold.
He said the board “put too much merit in what” Smith was saying. “We’re at fault for that.”
He said “I don’t want to spend extra money where we don’t have a case” and supported research into legal avenues.
Earlier in the meeting, the MCDC president also criticized Americold. Grant Kitamura is the managing partner of Baker & Murakami Produce Co. in Ontario and has been the MCDC president since 2017.
He said there were “misunderstandings” with Americold, particularly over storing rather than shipping onions out of Nyssa. He said Americold eventually came in with freight prices that proved too high for the local industry.
“We told them,” Kitamura said. “They didn’t listen.”
Board member Jason Pierson, a Nyssa onion industry executive, cautioned that “this is just research” and no immediate legal action was intended.
Shawna Peterson, the executive director, said MCDC could assess whether it received what partners promised and whether there is any right to recover money.
She said research into the issues was “probably worth exploring,” but there was not “a rush to the courthouse.”
Peterson also briefed the board on new financial challenges for the project.
She wrote to the Oregon Department of Transportation on Friday, Aug. 30, seeking approval to dip into state funds to cover up to $329,313 in rail work.
READ IT: Letter requesting funding
But Peterson revised that figure before the board, saying that Union Pacific had agreed to cover the costs of up to $82,000 in needed railway parts.
According to contractor documents shared with the board and ODOT, the project is short 6,000 anchors, needed to keep rail lines from moving sideways on ties.
Tons more rock is needed to finish essential rail work.
Replacements are needed for parts that don’t match the Union Pacific Railroad mainline along the Nyssa property.
According to Peterson, about $100,000 of the work needed is a new bill for MCDC. She sought permission from state officials to incur the costs. An answer is needed from the Oregon Department of Transportation almost immediately.
Union Pacific crews were scheduled to install switches allowing the reload center depot to connect to the railroad mainline.
“UPPR work on the site will not proceed without this funding,” Peterson wrote. “Time is critical.”
She said Union Pacific has set a deadline of Sept. 18 to finish its work for TVRC.
The switch is considered a prized asset for the project since Union Pacific limits who can connect to its lines for rail service.
Peterson told ODOT that finishing the switch was “a critical milestone” for “attracting sincere interest” by a private company in operating the depot.
The state agency a year ago froze funding for the project, requiring new plans. The Transportation Department has relented in recent weeks, approving remedial rail line work and a consultant’s study. The agency wrote Peterson it recognized the need for the switch line.
“We agree there is a good business case for releasing the funding required to complete the construction of these switches,” the agency wrote in June before the latest request. “Without the installation of these switches, the rail infrastructure already constructed will have no operational value.”
In her latest letter to ODOT, Peterson wrote that “we were previously told that all materials were onsite.” She said in a subsequent email to the Enterprise that information came from Anderson Perry and RailWorks Track Systems.
“Despite my best efforts to project the total cost of completing the mainline connection, additional material and work have been identified that will be necessary,” Peterson wrote.
Peterson in part blamed “staggered communications” but assured state officials that “we are hitting a stride in communication that will prevent this.”
Peterson, an Ontario attorney, took over as executive director in April 2023.
She acknowledged what she encountered in her letter to ODOT.
“This project, including the culture surrounding it, was significantly more complicated than I realized when I assumed a leadership role,” she wrote.
She cast as progress recent work to prepare rail beds as part of the switch project. Peterson said the work was “completed successfully, on time and within budget” and that “I am pleased to be delivering results.”
Contact Editor Les Zaitz: [email protected].
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