Money for nothing 

Should public dollars fund job creation in the Bitterroot?

At the north end of Hamilton stands a 150-foot abandoned smokestack. Built in 1917 by the Montana-Utah Sugar Company, it was to be part of a four-story sugar beet refinery. Seeking investors, the owner sold bonds with the enthusiastic endorsement of Montana’s then-governor, William Spry, who showed up in Hamilton to boost the project and promote the bond sales.

By June 1917, $100,000 in bonds had been sold to finance the project. Four months later, the project was declared a total failure.

The smokestack still stands to this day, topped with a giant letter “R,” for Riverside, the one-time name for that section of town. But as one local wag put it years later, it should stand for “Remember,” or as he put, “Remember not to get screwed again.”

Institutional memories can be short-lived. Grandiose job creation schemes have come and gone in the Bitterroot Valley since the days when sugar beets were supposed to save the valley’s economy.

Not all projects are financed with private money. These days tax money is what the entrepreneur with big plans looks to for help in getting a project off the ground. And government agencies are often all too willing to jump on the bandwagon if it means getting jobs in the Bitterroot Valley.

The latest plan on the table comes from Gary Callihan, a Libby entrepreneur who set up a fledgling company called Forest Tech, LLC on the site of the old Darby Lumber mill. Callihan is seeking the endorsement of local government agencies in an efforts to obtain a $500,000 grant from National Fire Plan money approved by Congress after last year’s fire season. Callihan’s plan is to reopen a portion of the mill and rehire some of the 100 mill workers laid off in the fall of 1998 when Darby Lumber went out of business.

But numerous problems plague the proposal. The mill site is contaminated with penta, a toxic chemical once used there to treat lumber, which the state Department of Environmental Quality is now investigating. The mill’s former owner was also charged with timber theft in a sale on the Beaverhead-Deerlodge National Forest, and the Forest Service has placed a suspension on the mill.

Despite these problems, Callihan’s project had the full support of Ravalli County Commissioners, who wrote an endorsement letter to the state Department of Commerce, the grant’s administrator.

Later, it was revealed that Callihan has several unsatisfied court judgments against him in Washington, “in the hundreds of thousands of dollars,” according to Missoula attorney Patrick HagEstad. HagEstad represents about 20 former Darby Lumber mill workers who are suing the mill’s owner, Bob Russell, charging Russell with grossly mismanaging their employee stock option plan, which eventually went bust.

Both HagEstad and his partner in the lawsuit, Mike Black hired a private investigator to investigate Callihan after he announced his intentions to reopen the Darby Lumber mill. “If somebody comes to you and says we want to do a business deal, you want to know who you’re doing business with,” HagEstad explains.

“We wanted to make sure he was on the up and up,” adds Black. “What we found out about Mr. Callihan made us leery.”

Both lawyers say the investigator learned that Callihan had sold property he didn’t own, and committed “timber trespass” by cutting timber on land not belonging to him.

Repeated and numerous attempts to reach Callihan for comment were unsuccessful.

These aren’t the only unanswered questions dogging Callihan’s proposal. Last week, the League of Women Voters peppered two Bitterroot National Forest employees with questions about Callihan’s plans, which include a larger proposal to start a $12 million heat and electricity co-generation plant on the site.

Why, they asked, should taxpayers help fund such job-creation projects, particularly in these fiscally lean times? And why should taxpayers support Callihan’s grant, especially when local and state governments have been exploited by would-be entrepreneurs before?

As early as 1905, a Chicago company was looking for investors to finance an irrigation canal through the Bitterroot Valley. That project was also built with bonds. By 1916 it was clear that the money raised was insufficient to cover its costs and the irrigation company went bankrupt. After years in receivership, Congress came up with nearly $1 million in loans to the Bitterroot Irrigation District.

Then in the late 1980s, Darby Lumber owner Russell received a similar loan approved by the state Board of Investments, which he used to purchase more than a dozen sections of timbered land that he logged. Though Russell paid back the loan, with interest, the mill eventually went bankrupt, throwing 100 people out of work.

In the late 1990s, Ravalli County endorsed government loans to Vaughn Paul and his business, Big Sky Mushrooms. Though county budget records are sketchy, one county official estimates those loans amounted to $645,000. Last week, commissioners learned that Big Sky Mushrooms is going out of business.

In fact, according to Bitterroot Valley Chamber of Commerce Director Diane Wolfe the only other business that was helped with tax money that is still in business is the Victor Mercantile.

Rick Laible, the Republican legislator representing Hamilton and Darby, says he would like to see those millworkers—his constituents—get back to work. While he supports any project that reopens the Darby Lumber mill, he doesn’t want it done with government funds alone. “I would like nothing better than to see jobs in that area,” Laible says. “But if the success of a project is only dependent on the amount of public money invested, then it’s not such a good deal. Government’s role is to assist, not to lead the whole thing.”

Though the county commission voted unanimously to endorse Callihan’s grant proposal, the letter was never mailed because the commission learned of the judgments against Callihan. The commissioners say it won’t be sent until they learn more about him.

“Our lawyers are saying ‘don’t touch it with a 10-foot pole,’” says Commissioner Jack Atthowe about the court judgments against Callahan. “We’ve got to look into it much more thoroughly.”

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