The Ontario office of the Malheur County Economic Development Department. (The Enterprise/file)

VALE – Malheur county officials are paying $1 million more for Nyssa property than it is worth, according to state records.

A private appraiser hired by the county valued the 290-acre parcel at $2.050 million, not the $3.016 million the county has already agreed to pay. That means the county would pay 47% over the appraised value.

The land north of downtown Nyssa is envisioned as the base for a new produce shipping center and an industrial park the county has been advancing for more than two years. The project, meant to cut shipping costs for the local onion industry, would create the equivalent of 16 full-time jobs.

The state records obtained last week by the Malheur Enterprise show that the county now has to dip into its treasury for nearly $1 million to close the deal for that acreage. County officials have long represented that state money would cover land purchase.

The officials plan to take the $1 million from the county’s contingency fund, according to state records. That would cut in half what serves as the rainy-day account for county emergencies and major unexpected costs. That account is part of the county’s general fund, paid for by $4.8 million in county property tax collections, fees charged for a variety of county services, and transfers from state and federal agencies.

Malheur County Judge Dan Joyce hasn’t responded to a series of written questions since Nov. 7 about the finances of the land deal.

Greg Smith, the county economic development director, didn’t respond to written questions either. Provided excerpts of this story to review ahead of publication, Smith said in an email on Monday: “Multiple, multiple errors” but didn’t cite them.

“Please stop sensationalizing and report a balanced story,” Smith wrote.

 Joyce, Commissioner Don Hodge and Commissioner Larry Wilson didn’t respond to written questions after state records disclosed last week revealed the price and the new plan to use county money for the land deal.

Wilson said in August that the county didn’t have the money to buy land.

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

Minutes of Malheur County Court sessions - the meetings of the county commissioners – show no public discussion of using the county budget to pay for the real estate.

The commissioners may have discussed that move behind closed doors in an executive session on Oct. 16. The public is excluded from such sessions, but the county court has to cite its legal reason for the secrecy. For that meeting, the commissioners said they needed to consult the county attorney and review confidential records.

A memo written the day before by Lorinda DuBois, the county administrative officer, indicates that tapping the county treasury was part of that private session. DuBois wrote that she couldn’t attend the executive session but she wanted to provide comments “in regards to using county contingency funds for the purchase of the land for the reload facility.”

DuBois noted that Malheur County has “always operated very conservatively” and that “we are the poorest county in Oregon.” Three sentences in the memo, which DuBois released under a public records request, were redacted so it’s unclear what she advised the commissioners about the plan.

DuBois put at the top of the memo: “The information contained in this memo is not intended for the public.”

State borrowing needed

The state records released to the Enterprise show the county also expects to use public money to pay at least $178,000 in interest on borrowed money it needs to pay the sellers.

County officials originally based their plan for the Nyssa industrial effort by assuming the state would put up the money for the land. When that proved not the case, county officials in recent weeks have scrambled to figure out how to pay for more than $3 million in real estate they had under contract.

In September, they turned to the idea of borrowing, adding debt where they vowed there would be none. Earlier this year, the county told the Oregon Transportation Commission that one of the “keys to long-term financial success” of what is called the Treasure Valley Reload Center was “no debt.”

DOCUMENT: Malheur County loan application

State economic development officials last week committed to lending up to $2.4 million to the county to buy the real estate - not enough to pay for all the ground. The county would take up to 22 years to pay off the loan, the records showed.

Smith, the county economic development director, publicly briefed the commissioners on Nov. 13 on the land financing. The minutes don’t record that he publicly disclosed that the financing required nearly a $1 million of county money.

Shifting money needs

At the heart of all the financial maneuvering is the county’s plan for a rail reload center, born from discussions in the onion industry four years ago.

           The idea is to help one of Malheur County’s largest economic sectors defeat shipping challenges that hindered the ability to move the region’s onions to East Coast markets. Then-state Rep. Cliff Bentz orchestrated legislation in 2017 to set aside $26 million in state money for the Treasure Valley Reload Center.

           As originally envisioned, the shipping center would be a central location for producers of everything from onions to apples to truck their loads for transfer to trains heading east. The county set up a public corporation, the Malheur County Development Corp., and an onion packer from Ontario was picked to lead its board.

           Farmland north of Nyssa was selected as the place for the new shipping depot. County officials in 2018 set out to buy up property in the area, contracting $3 million for the main site to include a future industrial park. They did so expecting the state would pay for all of it and county taxpayers would end up owning valuable industrial property at virtually no cost.

           That changed earlier this year, when state Transportation Department officials alerted the county that they had assumed wrong. They said the state’s money could only be used to buy 65 acres needed for the shipping center and that none of the $26 million could be used by the county to develop an industrial park.

           Smith and others suddenly had to scramble to find millions to cover the land deals they had already struck with the Nyssa landowner.

           Business Oregon, the state agency, stepped up in September to offer a loan to cover part of the land cost. The county subsequently applied, listing county property taxes, future land sales and future profits from the reload center as sources for loan payments.

DOCUMENT: Oregon state report on loan

           But the state agency and the Transportation Department both required professional appraisals of the Nyssa land before they would write any checks to the county.

           The $2.050 million appraisal, issued Oct. 31 by Agri-Access, provided fresh information about the county’s land dealing.

DOCUMENT: Land appraisal for Malheur County

           The key piece of land at the reload center site is the so-called Farmer property. County officials agreed in 2018 to pay $3,019,900 for 290 acres of farmland. One of the commissioners, Wilson, is a real estate broker.

The money would go to the family of Jim Farmer, president of Fort Boise Produce of Parma, Idaho. Farmer was on the board of the Malheur County Development Corp. when the county contracted for his 290 acres. He resigned from the board earlier this year.

According to the 69-page appraisal, the Farmers responded to the county’s request for possible property deals for the reload center. The Farmers proposed their Nyssa land “with the pending purchase price, which was accepted by the buyer,” the appraisal said.

The recent appraisal valued the property at $2,050,000 – about $1 million less than the county agreed to pay. The appraiser said the difference could be attributed to the “buyers motivation” to get land for the reload center.

The appraisal also disclosed that “the sellers are retaining a 5-acre parcel (not yet determined) of industrial zoned land.” The appraisal doesn’t explain that arrangement. Farmer and Joyce didn’t respond to written questions about the matter sent to them last week.

Smith said Friday that the appraisal didn’t capture the real value of the property. He said the value came in lower than “what professionals and state of Oregon and commercial lenders deem the value.”

But the appraisal has handed the county another money problem.

The state Transportation Department has agreed to pay for 65 acres of the Farmer land since that will be used for the rail depot. The agency set aside up to $700,000 and that’s what county officials have assumed they would get. The plan, according to their state loan application, was to use the state money from the Transportation Department to repay part of the loan it was getting from Business Oregon.

On Friday, state officials confirmed that the new appraisal means the Transportation Department is obligated to pay only $458,000 for the rail depot land.

That means Malheur County officials are short $241,000 they expected for repaying the loan.

Smith confirmed in a telephone interview that was the case and that in fact the county’s gap was even larger. He wouldn’t disclose the figure.

“Go figure that out,” he told a reporter.

(Enterprise graphic by Hayden Cox)

BUDGETING 101

County officials propose to take nearly $1 million from their general fund budget to buy land they had said the state would pay for. Let’s help untangle a bit about government finance.

Source of the money: General fund

Thinking of the general fund as a sort of “checking account” for the county. The county deposits money into the fund from several sources. Your county property taxes account for $4.8. million this year. The county also collects fees for services and gets checks from state and federal agencies to help. With programs. No matter the source, it is all public money. The county then uses this to pay for everything from the sheriff's operations to public health to salaries for the county commissioners.

Contingency

Prudent governments set up a “rainy day” account to guard against emergencies and unexpected expenses. Think of this as your savings account for when the washing machine quits or you need to travel unexpectedly. Malheur County put $1.787 million into this fund for this year. County officials now want to take nearly $1 million to buy land.

Can they do that?

Under Oregon law, the county can’t just move money from one pocket (the contingency fund) to another pocket (industrial development) without public involvement. Taxpayers won’t get to vote on this transfer. However, the county has to hold a public hearing to explain the transfer and then the county commissioners have to publicly vote to move the money. Any citizen could testify at a public hearing.

Why are they doing this?

The county is short the money it needs to pay for a land deal it struck more than a year ago. County commissioners so far haven’t publicly commented on how this happened.

TAXPAYER TOLL

Malheur County officials are digging deeper and deeper into the county budget to push ahead their industrial development in Nyssa. Here what is budgeted or proposed:

$969,000 – Paying for a share of the Nyssa land

$178,000 – Loan interest payments over three years

$72,000 – Paid annually to Gregory Smith & Co. to manage the rail project

$50,000 – Budget this year for other rail project costs

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

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County taxpayers to be tapped nearly $1 million to buy Nyssa property, state reports

Malheur County plans borrowing to buy up private industrial land for future projects