The company behind a proposed data center in the Airport Road industrial park is asking for the city’s help building a hotel at the airport itself.
At a council workshop Tuesday, City Manager Robb Corbett distributed a memo that detailed an airport hotel proposal from Horse Valley LLC, a subsidiary of the Vancouver, Washington company Makad Corp.
According to Corbett, Makad has financing through a U.S. Department of Agriculture loan to build a $11.5 million hotel with three-stories, 74 rooms, a restaurant, and a bar.
Instead of a standard land lease, which Corbett estimated would bring the city $2,100 per year, Makad is proposing it pay its rent through a percentage of gross revenue, maxing out at 2 percent per year starting in the seventh year of the lease.
In exchange for signing a 50-year lease, Makad wants an incentive package that includes in-kind site preparation and environmental engineering work, water and sewer connection fee waivers and a permit cost reduction based on the number of full-time employees up to 50 percent.
Corbett said the city has been discussing the proposed hotel with Makad since 2015, when the council agreed to a similar incentive package with the company to build a $45 million data center on the Airport Road extension, but Makad didn’t want the project to become public until financing was secured.
In the memo, Corbett wrote that Makad is “working to secure a franchise from a global hotel franchise provider who has visited Pendleton and met with City staff,” but he declined to name the franchise because a deal hadn’t been signed yet.
Makad wants to build the hotel in the airport’s parking lot, a factor that drew Mayor John Turner’s concern.
Among the counter-proposals discussed by the council included requiring Makad to build a new longterm parking lot for the airport, a minimum rental fee, and a provision that would protect the city if the company walked away from the project.
By the end of the meeting, Turner said he didn’t think any councilors were opposed to the deal and praised Corbett for bringing in “big wins” for the city.
Despite the lengthy discussion, the councilors’ discussion of Makad’s history of development in Eastern Oregon was minimal.
While city officials touted Makad’s involvement in developing the River Lodge and Grill in Boardman, the company’s experience in Eastern Oregon extends beyond the hotel.
In the early 2000s, Makad announced fertilizer and ethanol plants that would generate a combined full-time 150 jobs at Port of Morrow.
But the plants were never built, with Makad Executive Vice President Tawni Camarillo later saying that feasibility concerns and changes in the market led the company to scrap the projects.
Around the same time, Makad built a 31-megawatt power plant with the Port of Morrow with MECS Inc., a company that was owned by Monsanto at the time and has since been acquired by DuPont.
According to court documents, MECS agreed to cover the costs of building the plant while Makad operated the facility and paid MECS back.
After MECS extended the repayment timeline and loaned Makad hundreds of thousands of dollars, MECS sued Makad for failing to pay back its loans before settling out of court.
Although MECS’ lawsuit asserted the power plant never “operated the plant for any significant period of time,” Camarillo said in a previous interview that the power plant did run but was done in by its first customer: Enron.
When Enron declared bankruptcy in the wake of an accounting scandal, Camarillo said “the plant became difficult to operate on an economically sound basis.”
Makad’s first foray into Pendleton came in 2015, when the company proposed a data center at Airport Road, which was supposed to generate 45 jobs.
The council agreed to an incentive package of waived sewer connection fees, free electrical and fiber connections, a 5 percent reduction of permitting fees per job with a 50 percent reduction ceiling and assistance in qualifying for Pendleton’s enterprise zone, which would exempt the data center from paying property taxes for three to five years.
The city also completed a $300,000 sewer connection to the site.
Makad said it needed until Aug. 31, 2016, to start paying the $2,460-per-month rent so it could conduct some feasibility studies. The start date has since been pushed back to Dec. 31, 2017, and then again to Jan. 1, 2019.
Camarillo did not return a request for comment as of press time.
Mayor Turner said he would have liked to have seen the work on the data center started by now, but Makad’s success with the River Lodge is enough for him to feel comfortable moving forward with the deal.
“I’m giving them the benefit of the doubt,” he said.
Turner was also confident that the city could include enough language in the deal to protect the city in case the deal went south.
Contact Antonio Sierra at firstname.lastname@example.org or 541-966-0836.