AROUND OREGON: Nyssa rail project short up to $5 million as work falls behind schedule

Construction crews are using four times as much rock as expected to make farmland outside Nyssa ready for the Treasure Valley Reload Center. (Malheur County Development Corp.)

NYSSA – The Treasure Valley Reload Center will need another infusion of public money, as much as $5 million, to cover cost overruns and finish construction that’s already underway, according to documents and interviews.

The Nyssa project, intended to give the agriculture industry less costly shipping to more places, continues to fall behind schedule.

That scuttles for this year projections showing 253 train car loads of onions moving out of Nyssa each year from July through September. One project official said he assumed the area’s onion shippers would learn of the delay through news reports.

Officials with the Malheur County Development Corp., the economic development company established by county commissioners to oversee the project, disclosed the financial shortfall on Friday.

They did so four weeks after the Malheur Enterprise requested documents about cost overruns, budgets and more. The newspaper recently sought a legal order to force release of those records.

At the time of the request, the project leader dismissed the questions.

“Over budget? I don’t know what you’re talking about,” wrote Greg Smith, Malheur County economic development director, in an email to the Enterprise.

But an April 5 project update that was publicly released Friday by his agency reported “we are about $2.6 million over budget.” 

That’s if project leaders drop one of three long-planned rail spurs, it explained. Keeping the third spur, considered key for rail shipments, would put the project “$5.3 million over budget,” the update said.

Directors of the Malheur County Development Corp. face two options – cut even more elements out of the project or get more public money. They are scheduled to meet in Nyssa at 10 a.m. Tuesday to consider the latest developments.

PUBLIC MEETING: The Malheur County Development Corp. board will hold a meeting open to the public at 10 a.m. Tuesday in Nyssa at the Waldo Conference Center, 218 Main St.

If they pursue more money, it would be the second time the project has needed financial rescue after its original $26 million grant from the state.

Last year, project officials had to obtain another $3 million through the legislature so they could get water service to the Treasure Valley Reload Center. That water line had been dropped from the plans to save money, but had to be reinstated to provide necessary fire protection for the complex.

Any new cash infusion would have to come soon. 

Earlier warnings hint at trouble ahead

Construction crews have been at work since December at the 290-acre site. Rail work and construction of the main building are supposed to start next month. Contractors are typically paid as they proceed with work.

The likelihood that the public works project would run out of money was raised more than a year ago, according to records obtained by the Enterprise.

Brad Baird is president of Anderson Perry & Associates, the La Grande company with the contract to engineer the reload center and manage construction. In January 2021, Baird provided a handwritten note to Smith, listing project costs that added up to more than the original $26 million. He warned: “need $3.6 million – wise to round up to $5 million.” 

But rather than share such alarming numbers, Smith’s team shaved their cost projections and reported to state officials that the Treasure Valley Reload Center would be built within the original $26 million.

Minutes of the development company board meetings for the following year reflect no indication that board members were alerted to Baird’s warning the project would be short of money.

And there is no record Smith and his team obtained any additional money as a safeguard against the engineer’s projected shortfall.

Instead, Smith put time through 2021 into more public relations for the young project. He arranged for golden shovels for last fall’s ground breaking ceremony. He ordered large signs promoting the county’s new industrial park, planned next to the Treasure Valley Reload Center. The signs, costing $1,900 in county funds, went up on bare farmland far from passing traffic, promoting an industrial project that has no funding.

And he made sure last November to trumpet the arrival of construction crews in November to get the shipping center started. Steve Lindley Contracting Inc. of Union won the $5 million job to get the site ready for buildings and rail lines, grading the former farm ground, filling in wetlands, and creating a solid base to hold up train cars.

The company had to act fast. 

It was required to finish initial work by Feb. 15 and a second set of tasks by Feb. 28. The flow of work was carefully timed to layer in other contractors so the rail center would be done by June 30 and onions could be shipped starting the following month.

But construction was hindered almost from the start in ways that boosted costs and threatened the promised finish date of June 30. 

Soft spots, unstable ground

Lee Ricker, owner of the contracting company, declined comment, but hints of trouble emerge in the monthly reports that Smith’s team must file with the state Transportation Department and in the minutes of the development company board.

“Despite recent weather conditions, the earthwork contractor continues to make progress at the site. The upcoming wet conditions may impose some challenges that need to be overcome,” said the Jan. 5 report to the state. 

On Jan. 26, Baird reported to the development company board that the contractor was “getting past the moisture issues. They are continuing on schedule,” according to meeting minutes.

Just days later, on Feb. 2, Smith reported to the state: “The Treasure Valley Reload Center remains on schedule.”

Baird soon after told the board that “additional rock may be needed at the site to provide needed fill,” according to the minutes. He said the project was “staying on schedule.”

But the Malheur County Development Corp. could produce no record that the contractor had hit the Feb. 15 deadline for initial construction work or the second Feb. 28 deadline. 

Despite that, Smith reported to the state in early March that “the contractor remains on schedule.”

Baird told the development company board just days later that “the site has been awfully wet,” the minutes show.

The records reflect no sign that Smith or Baird shared with the board members the extent of the trouble or that the completion date was falling back and costs were climbing.

They saved that news for their project update, produced last week.

The report makes clear that soil conditions at the Nyssa project were far worse than had been anticipated. Anderson Perry & Associates had been under contract since 2019 for the project engineering, including assessing wetlands and calculating how much rock and material would be needed to ready the farmland for rail tracks and roadways.

Among disclosures in the briefing report:

•“Several soft spot areas we didn’t see during test pit explorations.”

• “Areas below water are being filled with rip rap.”

•“The existing ground is unsuitable for subgrade preparation in many areas of the roadway and rail alignments.”

•“About twice the depth to solid base across the slough.”

•“There have been some areas of soft spots that we had to re-excavate.”

•Inspectors said that one area “was found to have very high moisture content. This area was excavated down approximately 7’ below subgrade and approximately 60’ wide.”

Trouble by the ton

The report indicated the particular challenge of a wetland that had to be filled substantially enough to support trains.

“To provide a suitable surface for the subgrade of the rail area of the wetland area, it was determined that the only viable method is to remove existing wetland soils down to a suitable solid surface,” according to the briefing report.

In plain words, construction crews needed to dig deeper and take out more material that then had to be replaced with large rock.

State records show the county’s development company has so far paid Anderson Perry $43,585 for “wetland delineation” and a “wetland mitigation plan.”  

Baird didn’t respond to written questions about his company’s responsibility for more costly wetland work, and Smith didn’t answer whether the development company would hold Anderson Perry to account.

But the scale of the wetlands and water-logged areas is clear when measured in tons of rock and millions of dollars.

The amount of material to be trucked in to fill wet areas “increased by about 4-fold from 40,000 tons to 156,000 tons,” according to the project update.

Project engineers originally called for 29,500 tons of a certain class of rip rap with rocks of about 200 pounds each. According to a contract change order dated April 7, the total needed was increased to 92,700 tons.

The change order also called for 63,250 tons of structural fill – material not in the original contract.

But the contract revision reduced other elements, including eliminating the need for another class of rip rap, rocks of about 15 pounds each. A cost summary showed that 9,700 tons originally destined for the project was being zeroed out.

But billings show the Lindley Contracting has already delivered 4,972 tons of that material at a cost of $217,537. Baird didn’t respond to questions about what is happening to that material.

The briefing report said that overall the contractor would be paid “an additional $5,731,102.33 to cover all of the additional fill material” – doubling the estimated cost to a total of $10,938,752.

The project report listed other changes to try to contain costs, such as a decision to “remove grading and subballast for future tracks.”

These were no minor adjustments. The changes, the project update said, “necessitate a significant change in construction methods and sequencing.”

Taken together, the changes have continued to delay the project. Bids for all the work, for example, were to have been out by the end of 2021. But the bids for installing the building didn’t come in until last week and project managers have yet to call for bids on final road and utility installation. That bid now won’t go out until next month and the work won’t start until June, according to a document called “Current Project Schedule Estimates.” 

Contract changes emerge

Other challenges have hit the project.

Americold, an international storage and shipping company, is under contract to run Treasure Valley Reload Center. Changes it wanted in the design for the main shipping center building added $1 million to the cost, the project update said. It’s unclear who agreed to the changes and who will pay the extra cost. But as the Enterprise reported previously, the terms of the lease say that if the company sticks around for 20 years, it can buy the publicly-funded rail center for $1.

Records also raise questions about the development company’s contract with Anderson Perry.

The 2019 contract limited payments to the firm to $250,000 unless there were amendments. The contract also set the hourly rate paid for the company workers handling the Treasure Valley Reload Center. Such amendments are routine and provide terms for additional compensation.

State records show that the engineering firm has been paid nearly three times the limit set by the original contract – $767,364 as of Feb. 11. And the hourly rate has increased. The charge for Baird’s time went from $200 an hour to $215 and he recently advised the Enterprise his rate is now $225.

Smith responded to a request from the Enterprise for contract amendments that the Malheur County Development Corp. had no such documents.

Meantime, Malheur County itself continues to pour money into the project, paying Smith’s company $6,000 a month to manage it and giving him a $50,000 allowance for other expenses. The county has been shouldering the interest due on a loan it took out to buy the land for the project – money coming out of its general fund.

Commissioner Ron Jacobs said on Saturday that Baird told him last week about a cost overrun, but that he hadn’t received the project update with the details. Commissioner Don Hodge said he hadn’t received the update either and that “I don’t know a thing” about cost overruns. Malheur County Judge Dan Joyce couldn’t be reached for comment over the weekend.

Jacobs and Hodge said it was unlikely the county would cover the cost overruns.

Legislators to the rescue?

State Sen. Lynn Findley, R-Vale, serves on the board of the development company. He said the state again will have to put more money into the project.

“The Legislature will have to fund it. That’s the only avenue,” he said. He said the state Emergency Board, which meets when legislators aren’t in session, could make such an appropriation.

Findley and Smith, who also is a state representative from Heppner, serve on the Emergency Board.

Grant Kitamura, president of Malheur County Development Corp. and an onion packer, said he learned only recently of the cost overruns.

“I think they are looking high and low for additional funding,” Kitamura said. “They are looking to see what they can cut. They can’t spend what they don’t have.”

He said the project will stay within budget and if new funds aren’t found, more changes will need to be made.

“It maybe means dirt roads out there and, frankly, we don’t need all of those roads,” Kitamura said. “When people get these plans going, everyone wants a Cadillac. All we need is a Chevrolet.”

Contact reporter Pat Caldwell by email at [email protected] or call 541-473-3377.


Smith touts new, $3 million infusion of cash from Legislature for rail center, but it’s not there

Cost for rail for Treasure Valley Reload Center comes in high; one key track line remains optional

‘NEED $3.6 MILLION’ – Records raise questions about Malheur County rail center finances

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