April 17, 2002 11:00 pm

By Alice Perry Linker

Observer Staff Writer

Wallowa County soon could receive about $500,000 through a state loan to pursue negotiations to buy a railroad.

The county has set a public hearing for 8:30 a.m. Monday in the Wallowa County Circuit Court courtroom in Enterprise to discuss the loan, said Jim Zelenka, regional coordinator for the Oregon Economic and Community Development Department.

Zelenka said Wednesday that the state has sent the county an award notice and a contract. The county must pass a resolution accepting the contract, Zelenka said, and a public hearing is required before the resolution can be adopted.

Wallowa County announced Tuesday it will proceed with negotiations with the Idaho Northern and Pacific Railroad, headquartered in Fort Worth, Texas. The full cost of purchasing the line from Joseph to Elgin has not been announced, but at one time it was nearly $7 million.

Until recently, Union County had been working closely with Wallowa County and had hired a negotiator, but Union County Commissioner John Howard said Wednesday he did not know about the most recent negotiations until he read about them on Tuesday.

"It bothers me that I learned by reading in the papers that a deal was made," Howard said during a commissioners' meeting Wednesday.

Following an executive, or closed, session Wednesday, Commissioner Steve McClure said he believes the Union County commission should be willing "to be helpful."

"I know there will be $2 million from the state, but I don't know how much from the federal government, and that is the key," McClure said. "The federal government will not be hurried, and it may be next fall before we know anything."

Howard said that information coming from Eastern Oregon's representatives to the Congress indicates that the process of finding federal money "could be a three-year effort. It will take time."

The Union County commissioners said they recognize the need for Wallowa County to do what is necessary to improve the economic crisis

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there, but they said they will not encumber Union County's general fund monies to help pay for the railroad.

"I don't want to be in the position of having to choose between laying off a deputy — or any county employees — and a railroad," McClure said.

The commissioners agreed to keep communication open between Union and Wallowa counties regarding the railroad, and McClure was designated as the contact person.

"I expect we'll be the ones to call them," said Commissioner Colleen MacLeod.

Specifics about the negotiations between the two public municipalities and the privately-owned railroad have not been released,

and the railroad apparently has insisted on confidentiality in all negotiations.

The state's Zelenka said the release of the $2 million appropriated by the Legislature for the purchase depends on several conditions, including the successful completion of negotiations with the railroad.

When the legislation was approved, he said, both counties were considered to be involved, but an agreement between the counties made Wallowa County the lead applicant.

"Only one entity can apply, and Wallowa County was designated as that entity," he said.