Monday, March 29, 2021

Port of Morrow Red Rock Circuit Court Petition Has Their Rationale for $65 M in Bonds for Red Rock Biofuels Project, 370 Miles Away.

I have posted previously about the Red Rock Biofuels Project in Lakeview; my most recent post is HERE.

In the latest development via a public records request I received from the Circuit Court in Heppner a copy of the Port of Morrow petition asking the Court to validate the issuance of $65 million in additional bonds for the Lakeview Red Rock Biofuels project. [ A public record shout out to the Court; I got the case record as a PDF file within a day, for $3]. 

I have attached the petition along with the Port Resolution and Notice of Publication in a bookmarked PDF file I created HERE

Justification, according to the petition: 
1. $10 Million would revert back to state. 
2. It's in the public interest and our commercial interest too.

1. The first justification is that if the Port doesn’t use $10 million in tax exempt bond authority for the wastewater facility for which it was authorized (and is no longer needed) the $10M will revert back to the state Private Activity Bond Committee. 

To my knowledge Oregon Private Activity Bond Committee rules do not contemplate that when it allocates tax exempt bond authority for a specific project that the recipient is free to decide to reassign that authority to another project 370 miles away. 

ORS 286A.615 (5) requires that unused allocations come back to the Committee for reallocation. "Unused allocations are not transferable among issuers but are available for reallocation."

The Private Activity Bond Committee administrative rules related to allocations are HERE

2. The petition says that enabling authority in state law allows ports to “take other actions that tend to promote the maritime shipping, aviation, and commercial interests of the Port.”

The petition also says that the Port of Morrow has determined that Red Rock Biofuel project “will promote the general welfare of the public and the commercial interests of the Port, and thus is in the best interests of the Port." 

It also states the bonds should be issued because of the " Port's vital commercial interest in sustaining the environment and overall ecosystem in which the Port conducts its business operations through the development of sustainable fuel products and the reduction of risks related to forest fires,"

It appears that the Port believes that it has the authority to issue bonds for any facility within Oregon which promotes the general interest of the public and the broad commercial interest of the port.

One of the unstated “commercial interests of the port" in the petition is that the Port would earn money from the bond issuance.

1st Year Revenue to the Port: >$400,000.
The resolution adopted by the Port, included as an attachment to the petition, fills in some details. It says that the Port will receive 1/2 of 1% of the bond issuance if the bonds are issued. For a $65 million issuance that’s $325,000 and they would also annually receive 1/8th of 1%, $81,250 . So, in the first year alone the Port would would receive $406,250. 

Plus Expenses (And There Could be a Lot of Expenses).
The resolution also says that Red Rock is responsible for reasonable and necessary expenses and expenses for the bond counsel, counsel to the Port, and to their financial advisor.  These are in addition to the above fees. 

In a prior proposal to the Oregon Private Activity Bond Committee in January of 2020, bond issuance costs for $95 million in bonds were given at nearly $3.2 million.  (See page 64 in the package of that meeting HERE). 

It’s not yet clear when the Circuit Court will act on the petition. 

Originally created and posted on the Oregon Housing Blog

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