Greg Smith, Malheur County's economic development director, on Aug. 8, 2019, formally rejected Bluebird Express Car Wash's application for tax exemption. The company requested the exemption more than nine months earlier. (The Enterprise/File)
ONTARIO – John Braese dropped by Bluebird Express Car Wash in Ontario on a Thursday afternoon, bearing bad news.
An assistant in the Malheur County Economic Development Department, Braese tracked down the car wash manager to report that the business wasn’t eligible for the money-saving county tax break it had been counting on for nine months.
John Michael Fery, Bluebird operating partner, was stunned when he learned from the car wash manager of the decision by Greg Smith, Malheur County’s economic development director.
Fery’s distress was understandable.
An investigation by the Malheur Enterprise found that county officials strung along the company for months, making false statements about what was happening with its tax exemption application. Only after the state intervened did Smith finally tell the company the truth – it didn’t qualify for the tax breaks.
“The business was never eligible for the tax break,” Smith said in an email to the Enterprise Monday evening responding to excerpts of this report sent to him to verify for factual accuracy.
Interviews with city, county and state officials and a review of hundreds of pages of public documents released by Malheur County Economic Development, Ontario city officials and Business Oregon, the state’s economic development agency, establish what happened.
Smith responded to written questions last week by saying he needed a week to answer.
Providing incentives is one way that local government recruits new jobs and investment. Laws tightly govern those benefits, from property tax exemptions to wage subsidies.
Economic development officials are expected to help businesses navigate complex rules and requirements, economic development officials said.
“Businesses count on accurate information from government agencies in order to make plans for the future,” said Avery Pickard, executive director of the Oregon Economic Development Association. “Business decisions about where to locate and expand are impacted not just by the general favorability of the business environment but by the quality of the information and communication provided by government agencies.”
For that reason, she said the association provides regular training.
Kit Kamo, executive director of the Snake River Economic Development Alliance in Ontario, said such training is to “help us be more knowledgeable and accurate in how we portray what we’re trying to sell in our community.”
Smith has a vital role not only as the development director but as the manager of Malheur County’s enterprise zones – special areas affording property tax breaks to qualifying companies.
That’s who Bluebird Express Car Wash turned to last fall as it planned a $4.5 million plant in Ontario employing up to 15. Company officials said a key to picking Ontario was its understanding from the county that it would be free of property taxes for five years – saving roughly $300,000.
But once Bluebird started the application process last October, records show, Smith left much of the work of pushing the tax break ahead to Braese. He had been on the job about three months and it would be weeks later that he trained in managing such tax breaks.
Nonetheless, Braese helped Bluebird draft its application for the tax exemption. According to email records, Braese wrote a company official in early November that its application describing the car wash as a “processing” plant “looked good.”
In fact, it was an ineligible retail business - as Smith now acknowledges - but Bluebird was months away from learning that.
In his Nov. 2 weekly report to the Malheur County Court – the county commission – Smith said that Braese had “completed work” on the Bluebird project and “forwarded” paperwork to the county assessor.
That wasn’t quite so.
John Braese, an assistant in the Malheur County Economic Development Department. (The Enterprise/File)
Braese had yet to chase down an equipment list from Bluebird to include in the tax analysis.
And crucial documents weren’t anywhere to be found.
Smith, for instance, was supposed to hold a “pre-authorization conference” with Bluebird to assess its application. The conference is “mandatory” under state rules that require the zone manager to prepare a written summary.
There was a conference call in November – but Smith didn’t participate and his agency couldn’t produce any record of it. Smith said in his Monday email that such conferences are “only for eligible businesses.”
And Smith himself was supposed to complete the most crucial document – his approval of the tax break. His agency didn’t produce even a draft of such approval in response to a public records request.
Yet the agency submitted Bluebird’s incomplete package to the county assessor, Dave Ingram. He had a role to approve it as well, but he couldn’t act until Smith had formally approved the application. Without that signature, the tax break was going nowhere.
Bluebird knew none of that.
In mid-November, a Bluebird official called Dan Cummings, Ontario’s community development director. The company needed a tax detail and told Cummings about the tax application. Cummings told the Enterprise he got a surprising response when he told the executive that the car wash didn’t qualify.
“He informed me that they had already been approved by Malheur County,” Cummings said in an email.
In a Jan. 9 email to the company, Braese indicated the tax break was still in play.
He said he had been told that the city of Ontario needed to be notified - “a process I handled today. I requested the city get back with me by Friday with any concerns.”
Once he heard from the city, Braese wrote, “we should be ready to go.”
But Cummings said he didn’t hear from Braese or Smith.
“I never received any communication by phone or email about the application from Malheur County Economic Development in January, before that or after that,” Cummings told the Enterprise in an email. “One would think he would have to either send the application by email or hand deliver it.”
He said Braese has only been to his office once – on another matter.
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At the time of Braese’s update to Bluebird, Smith’s attention was shifting to Salem, where the Oregon Legislature was about to convene and Smith stepped into his duty as a state legislator from Heppner. He still held two other full-time jobs besides the contract with Malheur County that pays his company $180,000 a year.
Bluebird meantime went ahead with construction in east Ontario. Company executives later said that on a weekly basis they asked Smith’s agency about their application.
In an April 16 update, Braese alerted the company there were new hurdles. He blamed the state for the hold up.
“We are awaiting a signature from Biz Oregon, the state agency,” Braese wrote. “The document was presented to them for signature a month ago.”
Braese suggested the company needn’t worry.
“When I called, they found it and are forwarding it to the county,” he wrote.
But, according to officials at Business Oregon, none of that was true.
“At no point do we approve or sign the application for businesses applying for enterprise zones,” Nathan Buehler, agency spokesman, told the Enterprise in an email after reviewing Braese’s message. “There was no document to sign, nor is there any place for us to sign on the zone application and approval documents.”
He said he didn’t know “what phone call is being referenced in the attached email as we have no role in the business approval process” and “I cannot find any document sent to the county.”
Greg Smith, Malheur County economic development director (The Enterprise/File)
Smith last week was asked by the Enterprise to provide any record of his agency sending the Bluebird application to Business Oregon.
“The document you refer to on April 16 is the application itself for the Bluebird Car Wash. As Biz Oregon declined the application due to the scope of the business, the application was denied,” Smith said without providing any records.
In a subsequent email to the Enterprise, Smith said that “the exchange of information regarding the application was handled through a phone call with a Biz Oregon representative.”
Buehler said there was no such call at the time.
On Monday, Smith offered another explanation: “Malheur County Economic Development was hoping a portion of the project could be found eligible.”
But in response to the Enterprise’s Aug. 12 public records request for “any record showing any determination” about whether Bluebird qualified, he responded with one – a draft of Bluebird’s application.
In his April 16 email, Braese also suggested that the Malheur County Court was poised to act on the application as required by local rules: “Should be next week for the county court hearing.”
According to Kim Ross, county court administrative assistant, Bluebird was never scheduled for that week’s court session – or any other.
But Braese advised Bluebird otherwise, writing to a company official that the county court meeting the following week had been scrubbed and he would know “Thursday or so” about getting on the agenda again.
Weeks passed with no court action and Bluebird pressed Braese again.
“Is there an issue why our application has not been heard yet,” Mike Fery, a Bluebird partner, wrote in a July 22 email.
Braese responded within an hour: “Your app scheduled to go one week from Wednesday.”
That would have been the county court session scheduled for July 31.
But Fery reached out to Braese again just two days before that meeting.
“I was looking at the agenda for Wednesday’s meeting, but I don’t see our enterprise zone application,” wrote Fery.
He got no response, but he was right. It wasn’t there.
Bluebird had enough.
At 7:30 a.m. on July 31, John Fery of Bluebird wrote to Ingram, the assessor, asking for help. He recounted what he said were weekly contacts with Braese that resulted in “some variation of an answer” each time about the status of its tax break.
“All of us are simply confused,” he wrote. Could Ingram help?
Ingram reacted promptly.
He walked down the hall to the office of the county judge, Dan Joyce, and shared the company’s concern. He said Joyce essentially shrugged his shoulders. Joyce later would tell the Enterprise that it was up to the city and state officials, not the county, to approve the tax break. He didn’t respond to a message seeking comment for this report.
Ingram that same day reached out to the state’s expert on the property tax breaks.
Art Fish of Business Oregon that evening indicated in an email to Smith that he was hearing about the car wash promise for the first time. Fish said he was alarmed by what Ingram told him.
Bluebird “has evidently applied for authorization to use the Malheur County Enterprise Zone but it is now feeling as if it is in a sort of limbo about the process and next steps,” Fish wrote.
He said he understood the business was up and running.
“This needs to be seriously scrutinized,” Fish wrote. He said a car wash was a retail business “completely ineligible” for the property tax break. He provided Smith a sample form he could use to formally deny the application.
The sample form carried the notation: “For the unusual event in which the local zone manager formally refuses an application.”
Finally, on Aug. 8, Smith slammed the door on Bluebird.
“I am unable to grant approval,” Smith wrote in a letter to Bluebird he provided to the Enterprise. “Your statement of processing dirty cars into clean vehicles was unacceptable” to qualify for the tax break.
John Fery hadn’t seen the letter yet and only knew what his manager told him. On Friday, Aug. 9, he emailed Smith, copying his message to Joyce, the county judge, and Ingram.
“We are all a bit confused as to why our application was denied out of the blue without a commission meeting,” Fery wrote.
A week later, company officials said they still hadn’t received Smith’s letter.
It was sent to the wrong address.
Reporter Pat Caldwell contributed to this article.
Contact: Yadira Lopez: [email protected] or 541-473-3377.
Malheur Enterprise graphic - analysis of tax break claims by county officials. (Malheur Enterprise