Construction is expected to start later this month on this farmland north of Nyssa to raise the Treasure Valley Reload Center. (AUSTIN JOHNSON/The Enterprise)

ONTARIO – The first phase of construction on the Treasure Valley Reload Center appears to cost nearly $3 million more than budgeted under a contract awarded on Friday, according to county records.

That could drain every dollar that Malheur County has held in reserve for cost overruns on the project.

The chief engineer has warned for months there would be “budget challenges” because of escalating costs of materials such as steel and a tight labor market for contractors.

Now, the challenge is here.

The Malheur County Development Corp. board, a public board set up by county commissioners, on Friday awarded an $8.5 million contract to Steve Lindley Contracting of Union.

The job is to level the Nyssa farmland being turned into the rail center, install culverts and get the property ready for construction of rail lines and the shipping dock. Work was scheduled to start in late September.

After its vote, Greg Smith, Malheur County economic development director and project manager, assured the board that the work was “under budget.”

Budget documents produced earlier by Smith’s team indicate otherwise.

The team shared with state officials in January a budget of $6.2 million for earthwork, including a reserve for cost overruns.

In April, the engineering firm overseeing construction released what was described as a “detailed cost estimate for the first construction project.” The document was provided to the Enterprise by Brad Baird, president of Anderson Perry & Associates, the project’s engineers.

 That listed “total estimated construction cost” for the first phase at $5,682,500.

Lindley Contracting’s bid of $8,563,325 was the lowest of four turned in for the Nyssa project.

Kerr Contractors of Woodburn bid $10.4 million, Imco General Construction Ferndale, Wash., bid $11 million and Knife River Corp. of Boise bid $13.4 million.

The winning bid was $2.9 million more than budgeted, according to county records.

County officials didn’t address questions about the figure or the source of money to cover such an overrun.

Smith said in an email on Monday that “with Labor Day weekend upon us, individuals within my team, as well as Brad (Baird) himself, are not currently available.”

Grant Kitamura, the Ontario onion executive who is president of the development company, said Monday he thought the project was over budget but “I don’t know by how much.”

Grant Kitamura, president of the Malheur County Development Corp., kicks off a meeting at the Four Rivers Cultural Center in Ontario to detail construction bids for the Treasure Valley Reload Center on Thursday, Aug. 26. (AUSTIN JOHNSON/The Enterprise)

Smith and Baird didn’t respond to emails seeking any correction to the budget figures used by the Enterprise or to verify their accuracy.

Kitamura said the rail facility nonetheless would be built.

“We know we can still get it done for $26 million to make a nice trans-load facility. We haven’t lost any sleep over this,” said Kitamura.

Kitamura said the development corporation may “have to cut and do some things differently.”

“We will probably have to adjust some line items that are within those big, general numbers on the budget. There are different ways we can do things,” said Kitamura.

Baird did respond to one set of questions Friday, answering before the board’s action.

“We are evaluating the situation to see what our strategy is moving forward,” Baird wrote.

He told the development company board recently that the project had $2.4 million reserved for overruns.

Paying for the earthwork could eat up that reserve.

“We will have to make budget decisions now to keep some of the contingency for the other phases. We are figuring it all out as we speak,” Baird wrote in an email Friday.

Even if reserves were applied to the first phase, Smith’s team would still have to find an additional $480,825 to pay for the earthwork. That could come by paring other elements of the project.

The state, funding the rail center with $26 million in public money, has said it will put no more money into the project.

The project’s finances were already under pressure before last week’s development.

Earlier this year, the development company agreed to pay up to $400,000 to build a road for a farmer family that otherwise would have its routes disrupted by the Nyssa-area project. That expense wasn’t budgeted.

“I do not have documentation to indicate what will be cut to get the $400,000,” Kitamura wrote in an email responding a request for budget documents from the Enterprise.

Baird last week raised the possibility the rail project could be cut back to stay under budget.

He said the team could drop one of the rail spurs being planned since it cuts across wetlands on the site. Bids submitted last week show the earthwork for that one spur would alone cost about $3 million.

But the county’s railroad consultants have told Smith’s team that the reload center couldn’t operate without that spur.

Baird confirmed that in a recent development board meeting.

“Track C is needed to properly operate the reload center,” said Baird. He said the railroad consultants on the project have said that it “really is not an option” to drop the rail spur.

The board appeared to settle the matter Friday, awarding the contract for all the earthwork work and Smith confirmed the rail spur preparation would move ahead.

The public board acted Friday to spend the additional money without any financial presentation from Smith about the impact.

No budget has been discussed by the board in its public meetings in months, and two board members confirmed they have not received a project budget since January.

News tip? Contact reporter Pat Caldwell at [email protected]

Previous coverage:

Rail reload documents outline the private benefit from public dollars for economic development project

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

PUBLIC MONEY, PRIVATE EMPIRE: Greg Smith serves many public masters - for a price

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