February 13, 2019
Tammy Baney, Chair
Oregon Transportation Commission
355 Capitol St. NE, MS #11
Salem, OR 97301
Dear Chair Baney:
As requested, Business Oregon reviewed Connect Oregon applications for three intermodal projects: Treasure
Valley Reload Center (TVRC), Mid-Willamette Valley Intermodal Center (MWVIC), and the Oregon Port of
Willamette’s Brooks Intermodal & Transload Facility (POW).
The scope of Business Oregon’s evaluation was limited to those items requested by Oregon Department of
Transportation (ODOT) under Oregon Administrative Rule 731-035-0065 (5)(b), and did not include additional
outside information or data. Consistent with our core work, Business Oregon considered the project’s financial
viability and broader economic feasibility. Business Oregon’s evaluation did not include and does not contemplate
the opportunity cost of the proposed investments. Thus, Business Oregon cannot state whether the benefits gained
from investing public resources in other projects would or would not outweigh the potential benefits of the three
intermodal projects.
Economic Impact Summary
Based on the information provided, Business Oregon believes that all three project proposals come with feasibility
risk, but each one also offers potential for significant economic impact resulting from the proposed investments in
the form of:
1.
2.

Direct, indirect, and induced economic output such as jobs created, follow-on investment, wages paid,
payroll and income taxes paid, supplies purchased, etc.
Public benefits such as reductions in traffic congestion, road maintenance, and reductions in greenhouse
gas.

It was beyond the scope of Business Oregon’s review to determine the accuracy of the information provided or the
assumptions used to project the outcomes. Therefore, the data and projected benefits outlined in each proposal
was taken at face value.
In summary, as reported separately in the three proposals, the projected benefits of the three intermodal projects
include:
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TVRC: $2,100,000 annually in economic output, $1,200,000 in labor income, and 16 jobs created;
MWVIC: $2,900,000 to $4,700,000 annually in public benefits; and
POW: 10-to-1 return on investment in public benefits over the next 30 years.

Assessments
Business Oregon assessed financial viability and project feasibility based on business models presented for the
projects as described in the application materials. The approach used to reach conclusions for the projects is
consistent with the practices of Business Oregon when reviewing project financing requests from counties,
municipalities, ports, special districts, and private businesses. In addition, the assessments were further refined

 Tammy Baney, Oregon Transportation Commission
RE: Connect Oregon applications for intermodal projects
February 13, 2019
Page 2 of 3

using the legislative framework and rules for these projects. Based on findings and conclusions of the viability and
feasibility assessments at this time, Business Oregon is unable to recommend final approval for any of the projects
reviewed.
Business Oregon believes all three projects require further development to address the deficiencies outlined below
prior to receiving further consideration for funding of long-term capital assets.
Business Oregon has identified and documented areas of concern common among all three applications. Chief
among the areas of concern, in approximate order of importance, are:
1.

Operational Liquidity: Ultimately, the financial viability of each of the projects depends heavily on the
volume of cargo shipped through the facilities. Volume equals revenue. In each case, the projected volumes
and the timing to scale operations seem overly optimistic. A primary concern is that each of the projects
will require continued subsidy (from railroads, ocean liners, jurisdictions such as the city and county in
which operations are occurring, the state, or private companies and/or individuals) for long-term, on-going
operations. While not required under the legislative framework established for these projects, none of the
applications presented compelling long-term, sustainable business models that do not include ongoing
subsidies to remain viable, including documented sources of operating capital as a liquidity backstop
should the projects not be financially successful.
2. Interim Funding: None of the applications document evidence of a commitment of funds to bridge the gap
between the start of construction and the reimbursement of eligible costs and expenses from the state.
3. Railroad Commitment: None of the applications document evidence of “Written concurrence from an
authorized agent from the relevant rail entity(s) indicating agreement with the Project Plan and
Proposal….”1
4. Land Commitment: The TVRC application did not document evidence that the required lands have been
secured. The MWVIC application did not document evidence that the option to purchase required lands
was current. The POW application reported ‘options’ to procure the needed lands but did not document
evidence to that fact.
5. Public Agency Support: None of the applications documented evidence of support from all of the agencies
that would need to approve the projects (e.g. Oregon Department of Environmental Quality).
Conditions of Award
In addition to the aforementioned deficiencies, Business Oregon suggests project development conditions for
consideration by the Oregon Transportation Commission should they decide to advance any of the three projects.
It is the opinion of Business Oregon that these conditions are necessary to increase the likelihood of project
success and protect the investments of the state. These points are not meant to be all-inclusive; they are intended
to highlight significant areas in need of risk mitigation and are applicable to all of the projects reviewed. These
recommendations should be considered along with suggestions from ODOT, the independent reviewer, and other
relevant parties.
•

1

Obtain financial commitment: Provide evidence of a financial commitment of operational liquidity for the
mid-term (five to seven years) to assure continuance of operations if the initial financial projections by the
project sponsors prove to be overly optimistic.

Information obtained after the application regarding POW’s proposal suggests agreement from Portland & Western Railroad, though did not
document service level commitments and pricing commitments needed for operational success.

 Tammy Baney, Oregon Transportation Commission
RE: Connect Oregon applications for intermodal projects
February 13, 2019
Page 3 of 3

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Provide interim funding: Provide evidence of available liquid funds to bridge the gap between the start of
construction and reimbursement of eligible expenses and costs from the state.
Establish operating agreements: Successfully conclude negotiations and provide executed operating
agreements with the railroad operator(s) and transload facility operator that enable financial viability of
the facility.
Provide documentation of land commitment: Provide evidence that the needed physical real land property
has been secured and evidence the land purchase price is within the project’s budget.
Perform Environmental Site Assessment(s): Perform a Phase I, and if necessary, Phase II, Environmental
Site Assessment and provide the results to ODOT documenting any required mitigation or remediation
steps and reflect these in an updated project plan, budget, and schedule.
Provide updated projections: After a successful land purchase, executed operating agreements are provided
and environmental assessments are complete, provide the state with updated financial projections and
assumptions.
Provide updated information on necessary local/regional transportation impacts and related infrastructure
improvements: Update, refine, and provide to ODOT and relevant governmental entities information
needed for a cost assessment for associated transportation and infrastructure investments necessary to
adequately support the proposed operations and future local economic growth and development.
Condition award: Condition award based on the project sponsor’s successful provisioning of operational
liquidity, interim funding, establishment of operating agreements, purchasing of land, environmental
assessment(s), providing updated financial information, and updated information to ODOT for any
anticipated, projected, and necessary transportation/infrastructure investments.

Conclusions
The potential benefits derived from the success of any of the three projects could result in significant benefit to the
state. A successful facility could provide both the local community and state considerable direct, indirect, and
induced economic benefits.
In closing, however, Business Oregon wishes to emphasize that financial success of these projects is not
guaranteed and Business Oregon has considerable concern about each project’s ability to succeed without longterm public investment or subsidy. This concern is based on Business Oregon’s significant experience working
with businesses development projects and financing public infrastructure projects. The aforementioned
Conditions of Award recommendations are intended to guide the projects toward success, if moved forward to
construction via this funding program. Business Oregon urges the Oregon Transportation Commission to also
carefully consider the recommendations from the Tioga Group, as they identified similar areas of concern and
offer many of the same caveats.
Thank you for your consideration. Please do not hesitate to call on me if Business Oregon can provide further
assistance.
Sincerely,

Chris Harder
Director