A shipping center to move onions and other produce from truck to rail cars to reach major markets could be built on this acreage just north of Nyssa along the Union Pacific Railroad line. (The Enterprise/Pat Caldwell)

NYSSA - Greg Smith will have to run a political agility course in Salem on Thursday to win $26 million for Malheur County’s rail project.

Smith, the county’s economic development director, is leading the effort to erect a new rail shipping center in Nyssa.

The center, in the works for more than three years, would bring new rail service to the county’s agriculture industry, create new jobs, and could jumpstart expansive industrial development.

State Sen. Cliff Bentz, R-Ontario, wrote state officials in 2017 that the Treasure Valley Reload Center would be a “truly transformational investment.” He was a state representative at the time.

“I can’t think of anything that has been as important to the economy of this county in the last 30 years,” said Larry Wilson, Malheur County commissioner.

Smith faces the Oregon Transportation Commission this week to answer critical reviews that emerged in the past month. The commission holds final say on whether the Malheur County project goes forward with state money.

Smith’s task is to convince the powerful commission to release state money that legislators two years ago reserved for the rail project. He didn’t respond to written questions or interview requests from the Enterprise about risks raised by the outside reviews.

Officials with the Malheur County Development Corp., the public company set up by county commissioners to develop the shipping center, also declined to answer written questions from the newspaper last week.

“We will answer all the questions and concerns ODOT wants,” said Grant Kitamura, who is the development corporation’s board president, CEO of the onion packing firm Baker & Murakami Produce Co. and also serves on the state Board of Agriculture. “Then they will be public.”

He declined further comment, criticizing the Enterprise’s reporting on the project as negative.

“I really think all of the issues – which are valid – will be answered and defined at the meeting,” said development corporation’s vice president, state Rep. Lynn Findley, R-Vale.

The project’s ancestry traces to 2006, when a state study said Malheur County needed more industrial land to better use its existing rail system. In the years following, more property was made ready to use for industry.

In 2015, county officials began meeting with the local agriculture industry about the idea of a rail shipping center. In 2017, legislators set aside $26 million for the project, a feat engineered by Bentz. The money, though, came with conditions.

Smith and his team in December 2017 submitted to the Oregon Department of Transportation the outlines of the reload center. Bentz remained a key cheerleader.

“The project will jumpstart our local economy and provide far eastern Oregon’s businesses with a competitive edge in the every-growing global market,” Bentz wrote to Transportation Department officials.

Nearly every local government in Malheur County lined up behind the project.

“The ability to move our commodities to both domestic market in the east as well as west to international markets is of the utmost importance,” the Malheur County Court wrote in a Nov. 29, 2017, letter.

Local business leaders, from bankers to tire store managers to coffee shop owners, also wrote of their support.

And the onion industry stressed the need in letter after letter.

Such a rail center would “allow the farmers and shippers to continue sending their crop to market quickly and effectively,” wrote Tiffany Cruickshank, transportation manager for Snake River Produce Co. in Nyssa. “An industrial park as part of this project would be attractive to potential businesses to help grow Nyssa, Malheur County, and the state of Oregon.”

Such support convinced state officials to dip into the $26 million to provide Malheur County the cash to develop more solid plans, ahead of getting the rest of the money.

The planning effort took about a year, cost more than $350,000 in consulting fees, and resulted in a lengthy report to the Transportation Department last September. Malheur Economic Development Corp. said it was ready to go, and Smith projected onions would be rolling out of Nyssa by train by this fall.

DOCUMENT: Proposal for Nyssa reload center

Since then, Malheur County’s plan has been poked and prodded by outside experts.

In general, those reviewers thought Malheur County was on to something.

“The conceptual trans load operation is similar to comparable, successful operations in Washington and California, and raises no technical feasibility issues,” wrote the Tioga Group, a consulting firm hired by the state to review the Nyssa project.

“Tioga has no doubt that Treasure Valley shippers would benefit significantly from the additional shipping options, improved rail service, and cost savings envisioned by project sponsors,” the report said.

DOCUMENT: The Tioga report

A special review committee appointed by state officials concluded that the Treasure Valley Reload Center “could be a catalyst for additional investment in Eastern Oregon, and that it could spur business development” and “provide more transportation options for commodity exports from Treasure Valley.”

The committee recommended the Transportation Commission fund the project – with conditions.

Matt Garrett, director of the state Transportation Department, advised the commission last week by letter that the Nyssa project would help export produce to the country and “across the globe.”

He said that the Treasure Valley Reload Center “could incentivize business to stay in or relocate to Oregon to take advantage of the new facility rather than locate across the Snake River in Idaho.”

DOCUMENT: Transportation Department director's letter

Chris Harder, director of Business Oregon, said such projects “could result in significant benefit” to the state.

“A successful facility could provide both the local community and state considerable direct, indirect and induced economic benefits,” he wrote.

DOCUMENT: Business Oregon director's letter

But at every step, reviewers also urged caution. They said the Transportation Commission should require the Malheur County project to address financial and logistical concerns before releasing money.

“I just think they are necessary conditions put on us by the state and we have to live with it and address it,” said Wilson.

A theme throughout the reviews was that the Malheur County project hasn’t yet struck a deal with Union Pacific Railroad, which would serve the Nyssa project. That is a “major risk” to the reload center, Tioga reported. The special review committee said its recommendation of funding for Malheur County rested in part on “a stronger level of commitment of service from the UPRR.”

Both Garrett and Harder said the same thing.

“Commitment to service from the rail operator is crucial,” Garrett wrote.

State records show that Malheur Economic Development Corp. last fall paid $25,000 to the consulting firm RailPros Field Services for what the firm’s invoice Oct. 17, 2018, said was “representation” in “final negotiations with Union Pacific Railroad.”

Smith and RailPros didn’t respond to written questions about what the county obtained for that $25,000. Smith said recently that he expected another letter of support from the railroad, which was expected to have representatives at Thursday’s Transportation Commission meeting.

Union Pacific has sidestepped specific questions from the Enterprise about its commitment to the Nyssa project.

“Union Pacific is continuing to work with Malheur County Economic Development Corporation regarding the Treasure Valley Reload Center project proposal,” wrote Tim McMahon of Union Pacific corporate communications.

 Wilson said the timing is key.

“We are not going into this half-cocked but we really can’t go out and set rates and negotiate when we don’t have a timetable for when we are going to open,” he said.

In a Jan. 16 letter to the Transportation Commission, RailPros said while it was now working for Malheur County, it also has “contracts in places with UPRR.” The company said the railroad’s letter last fall of interest in Nyssa was significant.

“UPRR would not provide such a letter if they did not see this as being a viable project and one they were willing to support,” the letter said.

None of the reviewers supported handing Malheur County the $26 million based on what has been proposed so far. The additional work they want to see likely means a delay in breaking ground on farmland north of Nyssa.

From Tioga: “A revised review of benefits and MCDC financials based on clear institutional roles, the UP agreement, the operator agreement, final property price, revised volume forecast, and phasing options should be made available to ODOT prior to final funding.”

From the review committee: Funding should come only after a firm rail commitment and an evaluation of “opportunities to expand service to other commodities and markets beyond onions with the goal of helping the facility to operate year around.”

From Garrett: “I believe that the OTC should request a clearly articulated course of action from the project sponsors related to these challenges as a prerequisite before public funds are fully allocated.”

From Harder: “Business Oregon is unable to recommend final approval.”

Les Zaitz: les@malheurenterprise.com; Pat Caldwell: pat@malheurenterprise.com.

PREVIOUS COVERAGE BY THE ENTERPRISE:

Reviews list risks, concerns with Nyssa rail project

Nyssa shipping project draws more state concern

Top state official recommends no state money for Nyssa rail project until risks addressed

Million-dollar errors dogging Malheur County's rail center project

County economic development director says Union Pacific is committed to rail reload project

Money to construct Nyssa rail reload center delayed

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