Greg Smith, Malheur County's economic development director and project manager for the Nyssa rail shipping project.

The state has suspended funding for the Treasure Valley Reload Center, warning that more delay by Malheur County’s development team imperils construction of the Nyssa project.

The Oregon Department of Transportation put the county’s development company on notice in an April 9 letter recently obtained by the Enterprise.

In that letter, the state questions past representations from the Malheur County Development Corp., the development company deputized by Malheur County commissioners to run the project. The agency is insisting that key agreements that the development company has been promising for months now get finished by mid-June. Otherwise, there could be no more state money, letter said.

Cooper Brown, the Transportation Department assistant director of operations who signed the letter, said the state could cancel its role in the project and take away $26 million. That is virtually the entire budget for the reload center.

“This is an option available to us,” Brown said in an interview with the Enterprise. “It is a risk and that’s what was explained in the letter.”

The collapse of the project would be a blow to the area’s onion industry, which is counting on the reload center for more dependable rail shipping and less reliance on costly trucking. The center could save onion shippers millions every year in shipping costs.

County leaders agree the reload center now is in danger.

“It could be over,” said Grant Kitamura, president of Malheur County Development Corp.

County Judge Dan Joyce said Friday the state’s letter puts the project at risk.

“I would say they have a bunch of homework to do,” Joyce said, referring to the county’s project team.

Greg Smith, the project manager and the county’s economic development director, declined an interview and provided no material responses to written questions. Smith, a state legislator from Heppner, is under contract through his company to run county development projects.

As of Friday, Smith hadn’t responded to or contested the state’s letter.

READ IT: Oregon Transportation Department letter

In January, Smith ballyhooed a decision by the Oregon Transportation Commission that set the stage for construction to start.

“Now is the time to break some dirt!” Smith said in a statement then.

But the Transportation Commission had a warning for Smith and his team after the favorable January vote. In a special statement, the commission said if Malheur County’s development company didn’t fulfill conditions to get the $26 million in state funding, “we direct ODOT to vigorously pursue recovery of all state funds invested in the project.”

At the time, Smith anticipated construction would start in mid-March. When key deals didn’t materialize, though, construction was postponed. The development company now will be at least a half year late in starting work on new rail lines, a warehouse and new streets on what is now county-owned farmland along Union Pacific Railroad tracks north of Nyssa.

Kitamura thinks the reload center could still be ready to ship the 2022 harvest.

But the failure to finalize deals ahead of construction triggered the Transportation Department to stop the flow of money, establish tight new deadlines and put new requirements on the development company being managed by Smith.

The key stumbling point is an essential document – the contract between Malheur County Development Corp. and Americold, a multinational company in Atlanta. This contract is to spell out Americold’s duties for day-to-day operation of the facility and what money would flow from the reload operation to the development company. County officials in turn expected the development company would send some of the profits into the county treasury.

For months, Smith had reported steady progress on the state’s requirement for a “fully executed agreement” between the county development company and Americold.

By early December, Smith reported to the state that such an agreement was 80% done and would be finished by the end of the month.

State officials relied on that in part to encourage the Transportation Commission the following month to release millions for construction.

“Based upon discussions with both the project sponsors and Americold there are still a few details to work through in this agreement,” said a Jan. 12 staff report to the Transportation Commission.

But in February, the county’s in-house attorney, Stephanie Williams, said there wasn’t even a draft of such an agreement.

Brown said in his April 9 letter to Smith that the agency had been expecting since January to get that agreement and one with Union Pacific for rail service to the Nyssa project.

“Your failure to submit these documents, as well as subsequent discussions, has led the department to question MCDC’s previous assertions and assurances,” Brown wrote.

Smith didn’t respond to a question about restoring the integrity of Malheur County’s project, deflecting the question to development company board members.

 “I am certain that ODOT is not questioning the integrity of our team,” Kitamura said last week.

Board member Kay Riley, president of Snake River Produce in Nyssa, said in an email he had nothing to add to Kitamura’s statement. 

Board members Jason Pearson, director of onion sales at Eagle Eye Produce in Nyssa, and Corey Maag, owner of Jamieson Produce, didn’t respond to questions referred to them by Smith. 

 In an interview last week, Brown said the agency questioned the accuracy of claims about the agreements and about timelines.

The Transportation Department is turning to the power of the purse to get Smith and his team to comply with state contract.

Until it does, Brown wrote, “we will withhold any future project reimbursements” except for bills on services needed to get the agreements done, such as legal fees.

To operate, the development company borrows money to pay bills, such as engineering costs. It then submits the bills and payment receipts to the state, which dips into the $26 million to reimburse the costs. The company also gets up to $50,000 a year from Malheur County for some expenses. The county also covers the $6,000 monthly fee from Smith’s company for managing the rail project.

For now, the flow of that state money has largely been cut off.

The development company’s major contractors didn’t seem aware of that.

“It’s my understanding ODOT hasn’t stopped reimbursements,” said Brad Baird, president of the engineering firm Anderson Perry Associates. “They just want a few key items done before the project can go out to bid.”

Terry Tate, an executive with RailPros Field Services that is providing rail advice on the project, said that there is “really nothing to this” and that “the project is moving forward.”

Board members, including Smith, haven’t said a word about the state’s April 9 letter in three public meetings after that date. The board was scheduled to meet again on Tuesday, May 11, too late for press time.

Smith didn’t respond to a question about the letter wasn’t a topic at meetings where the board is gathered to act on project business.

Kitamura said he didn’t know why it hadn’t been discussed.

Smith instead has proceeded through those recent meetings as if nothing were amiss. An April 13 board meeting lasted just 24 minutes. Two weeks later, the board met for 25 minutes.

In recent meetings, Smith has focused on a “four-party agreement” he said would get construction finally going. He said at one point this was a “non-legally binding” letter.

He has variously called the document an “affidavit” and a “letter of commitment.” Whatever the legal term, Smith has described a single document involving Americold, a company formed by the onion shippers, the county’s development company and the county itself.

That would go to the Transportation Department and the project could then go out for bid, Smith told the board.

Asked during a recent board meeting about an earlier “letter of commitment” issued in the names of those entities, Smith said, “It was never formally submitted to ODOT. I held it back.”

That wasn’t true.

Smith in fact sent such a letter to the agency by email on Jan. 8, 2021, hoping it would help persuade state officials to provide the construction money, according to emails obtained by the Enterprise under the public records law.

He didn’t respond to an email from the Enterprise about the discrepancy.

Smith’s statements at the board meetings don’t address what the state contract requires.

“ODOT is looking for an agreement signed by all four parties that we mutually agree to work in the long term to make the project a success,” Smith said at the April 27 meeting.

But the contract with the state and the Transportation Department’s recent letter don’t mention such an agreement.

Instead, Brown’s letter said his agency needed three documents for the money to flow again:

*The agreement between the county’s development company and Americold.

*The agreement with Union Pacific for rail service to the Nyssa site.

*Proof the development company owned the land for reload center, property that now belongs to the county.

Brown noted that these steps – termed “milestones” - were all required in the contract to get the $26 million.

“Further delays to any of the milestones will jeopardize future funding of the project by ODOT, and thus the project’s success,” Brown’s letter concluded.

If the state stops the project, the county’s development company would be liable to repay $903,000 advanced so far by the Transportation Department. Brown said the state “likely” would insist on getting that money back.

But if the project goes forward, the financial risk doesn’t disappear.

The state funding has been based on the rail center operating for 20 years to ship onions and other commodities.

Under a new contract provision, the state could recover $1.25 million for every year the shipping center fails to operate as envisioned.

Kitamura, asked last week about the odds the project would get done, responded, “I don’t know. It needs to get done.”

Contact reporter Pat Caldwell by email at [email protected] or call 541-235-1003.

PREVIOUS COVERAGE:

Malheur County board to farm operation: You will stay silent

WATCHDOG: Farmland picked for rail center needs $6 million in soil, gravel, rock and work to make buildable

Malheur County Court approves commitment letter for rail reload center

Nyssa rail center gets two thumbs up as construction start looms

Tracking the Treasure Valley Reload Center: Key data eludes county, stalls rail project

Malheur County needs $15 million for its industrial park. A two-year effort to get it flopped.

SAFEGUARD YOUR LOCAL NEWS: Take one action today to help the Enterprise grow and do more for the community through accurate, fair reporting.

SUBSCRIBE: A monthly digital subscription is $5 a month.

GIFT: Give someone you know a subscription.

ONE-TIME PAYMENTContribute, knowing your support goes towards more local journalism you can trust.