Malheur County economic development director Greg Smith. (The Enterprise/file photo)

NYSSA – A little over a month after the state gave a rail reload facility the green light, the Malheur County project is up against a new snag, facing a directive to cut the amount of land charged to the state for the onion shipping center.

Greg Smith, Malheur County economic development director, told local officials last week that he had been notified of the change by the state Transportation Department. The state agency has hold of $26 million allocated for the Nyssa project.

 “We are to significantly reduce the amount of acres we initially purchased and redirect those dollars to the facility and rail infrastructure,” Smith said in an email on Wednesday, Aug. 21, to the board to the Malheur County Court, and the board of Malheur County Development Corp., the public company established to run the project.

While cast as a new mandate, records and interviews show that county officials were warned six months ago that the state would only fund what was immediately needed to get a rail center built and operating.

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Smith acknowledged that in an email to the Enterprise last week.

“This has been part of the discussion with the state,” Smith said.

He said he expects negotiations with the state to make the case that all of the land sought by the county is key to the project.

But if the state doesn’t relent, the county faces challenges.

The Malheur County Court a year ago approved deals to buy two parcels for a total of $3.3 million. One is featured as the prime site for the shipping center – a 293-acre lot owned by the Farmer family – and the other is a 76-acre lot owned by Nyssa Industries. Both are situated along Union Pacific tracks north of Nyssa.

Smith said the state told him last week that money would be provided for only 55 acres.

That means Malheur County could have to come up with millions to cover the balance or convince the Farmer family to break up the lot to sell a smaller portion for the rail center.

Jim Farmer, president of Fort Boise Produce, didn’t respond to a telephone message seeking comment.

“There are many ways to acquire real estate” without the state funding, Smith wrote to the Enterprise.

He said that “negotiations continue with the owners of the Nyssa Industries property” -– priced at $394,650 under the existing contract.

But Larry Wilson, a county commissioner and minor stockholder in Nyssa Industries, said the county doesn’t have the money.

“The county can’t jump in on it, even if we had the money. That’s out of the question,” said Wilson.

In an Aug. 9 worksheet submitted to the state, Smith allocated $3.2 million in state money to buy all that land, representing the Farmer and Nyssa Industries ground.

“It is the position of the Malheur County Development Corporation that the parcel known as the Farmer property is the minimum amount of real estate needed to operate efficiently,” Smith wrote. 

Smith said he was aware since last year the state wanted to fund real estate for the project only under very specific conditions. 

In September 2018, the county reported to the state it needed approximately 100 acres to build the rail center, create enough parking and build a staging area.

“This leaves an additional approximately 190 acres for future development,” the county said, not accounting for the additional 76 acres under contract nearby.

Smith said last week that officials wanted to buy all 366 acres at the site to “ensure the best opportunity for the county.”

State transportation department officials in February told Smith’s team there would be no blank check regarding land purchases for the facility.

A Feb. 22 fact sheet given to Smith emphasized that the land purchases for the project are a “reimbursable expense when it is reasonable, necessary and directly related to the project. Additional land would not be an eligible expense.”

State officials presented the form to Smith the day after he appeared before the Oregon Transportation Commission with a presentation that covered the land purchases.

“It’s the land needed for the reload facility and the supporting infrastructure around it, such as the access roads, not for developing an industrial park or other supplementary uses. It is for the reload facility,” said Erik Havig, transportation department planning section manager.

Havig said the state “went through all that with the project sponsors, that the land needs to fit the size and scope of your facility.”

“We didn’t put any acreage on it because we are not in final design, but it is not to be land speculation or anything,” said Havig.

Wilson said last week he was surprised to learn of the restriction.

“I think, once again, they (the state) approved our project and then kind of change it after the fact. But we are trying to set up a meeting with the state to iron out the problems,” said Wilson.

Grant Kitamura, president of the Malheur Economic Development Corp., declined to go into detail about the issue.

“We are working on it,” said Kitamura.

The dispute over real estate may have long-term implications for the facility and isn’t the first challenge for the project.

The project has faced intense state scrutiny since January when its operating plan – including queries about rail car availability – were questioned. 

Timelines for the project have also slipped. Smith projected last year that crews would be breaking ground this spring but that didn’t happen as the Transportation Commission requested more details, stalling approval of the Treasure Valley Reload Center.

Now, Smith is projecting the Nyssa plant would not be operating until June 2022.

Smith said negotiations between the county and the landowners continue. The two real estate deals are set to expire Saturday, Aug. 31.

“We must stress the final amount of real estate has not been confirmed and is subject to ongoing negotiations. This has been a point of discussion since September 2018,” wrote Smith.

Jim Maret, Nyssa city manager, said he didn’t think the real estate issue was a major challenge. 

State Rep. Lynn Findley (R-Vale) who is also on the board of the Malheur Economic Development Corp. said he does not think the state requirement is a major obstacle either.

Findley, though, emphasized he did not know very much about the issue since he has been on the road visiting his constituents across eastern Oregon. 

Wilson said the real estate issue is “frustrating.”

“It doesn’t allow us to do any long-term planning,” he said. “We have non-refundable earnest money on it. We don’t want to lose that for the taxpayers.”

News tip? Call reporter Pat Caldwell: [email protected] or 541-473-3377.

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