A local business’s expansion plans could get the ball rolling on development of John Day’s Innovation Gateway project, but they’re also raising questions about how the city does business.

1188 Brewery owner Shannon Adair — who also sits on the City Council — has closed on her previously reported purchase of 2.8 acres in the Innovation Gateway, the large parcel of city-owned land centered around an abandoned lumber mill at the western entrance to John Day, and is set to begin developing the property.

It would be the first commercial development on the Innovation Gateway property, which the city acquired in hopes of revitalizing the local economy in the face of a shrinking timber industry and a declining residential tax base due to decreased population. Grant County was the only county in Oregon that saw a population reduction following the 2020 census.

The land sale is not without controversy, however. Because Adair is a member of the John Day City Council and the city did not put the parcel up for the public to bid on, some observers have suggested the transaction may have been unethical and perhaps even illegal.

Adair insists she’s done everything according to the law and that there’s nothing improper about the deal.

Expansion plans

1188 Brewing Co. has been looking for ways to expand since it started in 2012, Adair said. Those plans led to the creation of a new venture called 1188 Destinations.

The new company’s plans for developing the 2.8-acre Innovation Gateway parcel call for a distillery that is separate from the brewing operations 1188 currently has in downtown John Day, as well as a restaurant with a different menu from 1188’s pub fare.

Also proposed are a small number of cabins that would be rented as overnight lodging. Adair said plans for the cabins were inspired by conceptual drawings that an earlier would-be developer had produced for a motel with separate cabins.

“I saw the cabins and thought, I can do that. Definitely not something the scale of a hotel, but I can do cabins,” she said.

A small outdoor pavilion that can be used to host musical performances is also planned for the site. Adair said big name musical acts like AC/DC probably won’t be performing at the venue, but it will be a place that hosts live music. A number of walking paths and appealing landscaping will also be a part of the project, Adair said, adding that efforts would be made to segregate the area from nearby residences.

A matter of appearances

Adair’s position on the John Day City Council and the property not going out for bid are at the heart of ethical questions surrounding the deal that would make the plans outlined above a reality.

Adair signed a letter of intent to buy the property in December, with the approval of the City Council. That letter of intent was formalized during contentious discussions at the May 10 City Council session.

At one point, the council considered shelving the sale of the property and putting it up for the public to bid on. Adair said she was upset that the suggestion was brought up as she was under the assumption that she and the city had already come to an agreement.

Another concern was raised about the optics of withdrawing the letter of intent, with some in attendance questioning whether backing out of the deal with Adair would cause future developers to have second thoughts about the city’s honesty in making land sales.

The resolution to sell Adair the property passed 3-1, with Councilor Chris Labhart voting no. Labhart said he doesn’t think Adair got a “sweetheart deal” but argued that the land should’ve been put up for public bidding. He stressed the need for transparency in land sales by the city.

Adair did not vote on the resolution to approve the sale of the property.

Ethical questions

A representative of the Oregon Government Ethics Commission declined to offer an opinion on the propriety of the transaction, saying the panel can only issue findings in response to formal ethics complaints.

Section 244.040 of the Oregon Revised Statutes deals with prohibited uses of public office. It says, in part, that a public official may not use or attempt to use their office for financial gain or avoidance of debt for themselves, relatives, household members or businesses the official is associated with if the opportunity for the financial gain or avoidance of debt wouldn’t have been available were they not holding their position.

Adair points out that the city has tried to sell the land in the past and no one raised the issue of putting it up for public bidding. The land was the proposed site of a hotel at one point, but that deal fell through.

“Nobody argued with the city about that,” she said. “Nobody said, ‘Why are you selling this to that hotel without first offering it to other people?’”

She adds that nobody else approached the city to buy the property following the failure of the hotel deal.

Adair also cited other times the city has sold land to others without the property going public, saying those deals weren’t under the same level of scrutiny hers was due to her position on the City Council.

“During that same (May 10) meeting we had just signed a letter of intent for the greenhouse,” she said. “It’s happened all around us. Because it was me on City Council, it became different. It’s been handled just like every other piece of property the city has sold has been handled.”

Andrew Ellis of Team Birtola High Desert Realty in Bend said the deal has the appearance of being questionable but that deals of this sort do happen often.

“My thought initially is that this is a touch unethical. If somebody is aware of something because of their city service and it doesn’t hit the public, maybe that’s not the best way to do it. In other instances, that kind of happens all the time. As long as the seller is aware of what they may be leaving on the table, because you generally get more money if you hit the open market. That’s not always the case and money isn’t always the end goal of the seller. Everyone needs to go into it with their eyes wide open. In this specific situation, I probably wouldn’t have felt great about putting something together without the city and the area knowing what’s going on and having the opportunity to jump on it,” Ellis said.

If he had been involved in the transaction, Ellis said, he would have advised the city to use every means possible to make the public aware the property was for sale, including a listing with the Multiple Listing Service.

At the same time, he stressed, his role as a broker is to advise his clients, and as long as the sale isn’t illegal, he would defer to the client’s wishes.

Another criticism of the deal has been that the city might have been able to get more money for the property than Adair paid for it through competitive bidding on the property via a public listing. The city sold the property to Adair for $122,840, which works out to $43,871 per acre.

Adair repeated the consensus of the City Council that the city doesn’t want to simply sell land to the highest bidder: “Are they going to develop that land or are they just going to sit on it and bank it?”

Adair stressed that the city seeks to sell land to individuals who intend to develop the land into something that fits into the city’s overall plan and vision for growth.

To a large extent, that plan for growth is anchored in the Innovation Gateway property. The city’s vision for the area includes redeveloping the site of the old Oregon Pine mill, extending Seventh Street to Patterson Bridge Road, building a network of trails to connect the development with the west side of town, new community amenities and sustainable, complementary economic development.

The end goal, according to a 2019 plan outline, is to turn the former Oregon Pine site into a welcoming public space and create a positive impression of John Day. The plan’s creators are hopeful the project can help spur the city’s economy and draw new businesses and residents to John Day.

‘Everything above board’

Adair said she consulted with her own personal and business attorneys as well as the John Day city attorney regarding the legality and ethics of the deal. All three, she said, have assured her that the deal was both legal and ethical.

“I’ve talked to every legal person to make sure that everything is above board and done legally and ethically,” she said.

She also rejected the notion that John Day City Attorney Jeremy Green might be biased because of feelings of friendship he might have for city employees or members of the City Council.

“If they knew Jeremy Green, they would know that’s not the case,” Adair said. “Jeremy Green doesn’t just represent the city of John Day. He has more clients than just the city of John Day. He is very professional and has always told us that he does not work for (City Manager) Nick Green. He tells the City Council he works for John Day and he doesn’t personally represent the employees of the city.”

Adair’s plans are not set in stone and they still require approval by the John Day Planning Commission before she can break ground on the projects she has planned for her property in the Innovation Gateway development.

The commission is expected to vote on Adair’s plans sometime in late June or early July.