U.S. Economic Development: The Great Divide

When it comes to economic development, there are two Americas — communities that invest in transportation infrastructure and those that don’t. Here are three that do.

Today, site selection is more about the what and why than the where.

Those selecting sites need a vision of not only what their businesses demand today, but also what they will require in the future. That means developing a full and clear understanding of labor requirements, optimal transportation modes, utility needs, and the potential benefits of free trade zones.

It also means sorting through intense competition among communities trying to attract you.

In the past, many economic development initiatives focused on incenting manufacturing. While that is still the case, forward-thinking locales are investing in transportation infrastructure to create jobs and grow the local economy through tax revenues.

Part of that investment also includes attracting carriers, warehouses, third-party logistics providers, and technology vendors to flesh out their transportation/logistics infrastructure.

Here’s a look at three areas that are leading the way.

EL PASO/JUAREZ: Offshore Savings in a Nearshore Environment

Increased global competition is driving many U.S.-based companies to pursue offshore locations looking for low-cost labor. What they are finding, however, is that the logistical advantages of operating on the U.S./Mexico border often outweigh the labor cost differential of offshore locations.

For manufacturers, the advantages of locating on the Mexican side of the border can include intellectual property protection, enhanced communications, tighter quality control, skilled labor, and the ability to more efficiently implement engineering changes—especially in locations such as the El Paso/Juarez “Borderplex.”

With more than 260,000 people employed in manufacturing, the El Paso/Juarez region ranks as one of the top five manufacturing centers in North America.

Centrally located on the U.S./Mexico border, the Borderplex (El Paso, Texas; Cd. Juarez, Chihuahua, Mexico; and two southern New Mexico counties) is one of the largest international metropolitan areas in the world.

More than $50 billion of goods and components cross through Borderplex ports of entry each year, largely driven by Mexico’s maquila (manufacturing) sector, and is solidified by the robust infrastructure for cross-border logistics.

Rail. Every day about 450 rail cars make the cross-border trek, facilitated through a partnership between Mexican rail company Ferromex and U.S. rail carriers Union Pacific (UP) and Burlington Northern Santa Fe (BNSF).

There are a number of rail-served sites in the city of Juarez and El Paso; both UP and BNSF serve many of the larger tracts of land through dual trackage rights.

Air. More than 140 non-stop daily flights serve the El Paso International Airport (EPIA), with six carriers connecting El Paso to 18 destinations. An additional 20 non-stop daily flights originate from Juarez, reaching 14 cities in Mexico.

EPIA has invested more than $60 million to create the largest and most modern air cargo facility on the U.S./Mexico border, providing more than 300,000 square feet of space for air cargo. EPIA has reserved enough land to double the size of air cargo facilities as the need arises.

Also servicing the metro area is New Mexico’s Santa Teresa Air Cargo facility, which offers proximity to highway and rail, as well as New Mexico’s only port of entry into Mexico.

EPIA is also launching a 3,000-acre, mixed-use development and plans to create areas for light to heavy industrial customers.

Truck Transportation. The region is well-connected to the North American interstate highway system, allowing the efficient distribution of finished product by more than 70 transportation and distribution companies providing service to all directions on the continent.

Emerging Industries. Many different industry segments are seeking the logistical advantages that Mexico provides.

2007 was a particularly noteworthy year for the automotive industry, reaching the long-sought two million light-vehicle unit mark in production—largely driven by Nissan, General Motors, Ford, and Volkswagen. The Borderplex alone employs more than 100,000 workers in more than 90 automotive supplier plants.

The aerospace industry is emerging to a level of prominence in Mexico; more than 150 plants currently employ 17,000 people nationwide. The state of Chihuahua is home to aerospace-related operations for companies such as Labinal, Honeywell, Cessna, Zodiac, and Hawker Beechcraft.

Bob Cook is president of the El Paso Regional Economic Development Corporation (REDCo). Luis Ruiz, REDCo marketing and research associate, contributed to the article.

INDIANA: The Hoosier State Goes Global

Indiana sits on the doorstep of a major port and the largest rail hub in North America: Chicago. The state has an enviable geographical position endowed with water, rail, road, and air access. It offers potential for immense regional economic benefits, job creation, an expanded tax base, and enhanced infrastructure systems.

The Hoosier state has joined the global trade model in which components are brought from all over the world and assembled near their destination of consumption. It’s part of a global economic shift in which production occurs overseas and goods arrive at U.S. ports and intermodal facilities.

Indiana plays a critical role in freight movement because more than one-third of all rail traffic in the country moves through Chicago, where eastern and western railroads converge. Four Class I railroads running through northwest Indiana into Chicago have brought more goods through the Hoosier state in recent years.

The volume of rail freight moving through Indiana was 113 million tons in 1998, but is predicted to jump to 148 million tons in 2010 and 169 million tons by 2020, according to the Federal Highway Administration. Container imports are expected to double during that same period.

To maximize transportation efficiencies, many intermodal facilities have been built in Chicago, from which 75 percent of the U.S. population is accessible within a day’s drive.

The volume of train traffic through Chicago, however, creates bottlenecks. It takes two to three days to move goods from Los Angeles to Chicago by rail, but takes the same amount of time for the rail traffic to get through Chicago.

The city lacks space for more rail intermodal development so intermodal sites have been constructed in suburbs west of Chicago to receive rail freight coming from the West Coast.

It’s an economic development scenario that many Hoosier business leaders want to duplicate in Indiana.

“Indiana’s location puts it in the pathway of progress,” says Leigh Morris, chairman of the Northwest Indiana Regional Development Authority.

Local and state leaders have been stepping up efforts to promote Indiana, particularly northwest Indiana, as a center for transportation, distribution, and logistics. Currently, more than 600 transportation, distribution, and logistics companies employ 90,000 Hoosiers.

“Intermodal facilities help connect Indiana’s transportation assets and create more opportunities for businesses to move their goods to markets around the globe,” says Mitch Frazier, director of media relations, Indiana Economic Development Corporation.

It seems certain that Indiana will open more intermodal facilities. With the Los Angeles/Long Beach port at capacity, shipments will re-route to the East Coast. That means goods move across the country from east to west.

“East Coast container volume growth is a positive development for inland logistics centers in Indiana,” says transportation expert Libby Ogard.

“Northwest Indiana is becoming part of a global crossroads,” notes Michael Gallis, a national urban strategist. “Communities are focusing on securing a high-value future and quality of life. An intermodal facility could bring a lot of jobs in a way that’s compatible with the environment.”

—Daniel Przybyla follows business and economic development trends in northern Indiana.

KANSAS CITY: Inland Solution to West Coast Port Congestion

Recent census reports show more than $200 billion in goods and services entering the United States through clogged and congested ports.

The increased demand for imports over the past 50 years has caused a traffic jam in coastal ports and raised questions as to how we will continue to maneuver products throughout the country.

The United States’ top-five trading partners are Asian countries that account for 25 million containers or TEUs (20-foot equivalent units) of the total 27.5 million TEUs imported or exported in 2006.

Importers are looking inland to find alternatives to the West Coast’s busy ports. Located in the heart of the Midwest, Kansas City, Mo., provides a logistically viable and financially feasible option.

Opened in March 2008, the CenterPoint-KCS Intermodal Center in Kansas City delivers a 1,340-acre intermodal center and logistics park with direct connection to the Port of Lazaro Cardenas in Mexico via the Kansas City Southern Railway (KCS).

The park features a 370-acre intermodal facility operated by KCS and a 970-acre industrial park, built to accommodate as much as five million square feet of warehouse and distribution center space.

The intermodal center is connected to world markets via the Lazaro Cardenas Port, which connects Asian ports to Kansas City by KCS’s north-south rail line through Mexico. Lazaro Cardenas is a deep-water port capable of handling the world’s largest shipping vessels.

In addition to offering an alternative port that bypasses the overly congested ports in Los Angeles and other cities along the West Coast, the intermodal center’s location within a Foreign Trade Zone provides companies with tax advantages and financial savings.

KCS has 11,340 feet of main line track with the capacity to be one of the largest intermodal freight gateways in the Midwest.

Mazda North America currently operates an automotive distribution facility on the property and moves 60,000 automobiles through KCS’s International Freight Gateway each year. The immediate proximity to the logistics park allows shippers to store goods without paying high drayage fees.

Ranked second and third respectively in national rail and trucking, Kansas City is ideally positioned to become a significant distribution hub for international trade.

At the geographic center of the country, the CenterPoint-KCS Intermodal Center provides single-day truck access to nearly every major Midwest city including Denver, Minneapolis, Chicago, Indianapolis, Little Rock, and Dallas.

Kansas City also boasts more freeway-lane miles per capita than any other U.S. city. The park is strategically located adjacent to U.S. Highway 71 with close proximity to Interstates 29, 35, 70, 435, 470 and 635, and U.S. Highway 69.

Importers no longer have to worry about West Coast congestion. Outstanding access to international markets via Lazaro Cardenas, coupled with time and financial savings provided by the intermodal center and first-rate distribution center space offered by the industrial park, the CenterPoint-KCS Intermodal Center is quickly becoming the solution to congested coastal ports.

—Mark C. Long, SIOR, CCIM serves as senior vice president and director of sales and leasing for Zimmer Real Estate Services, L.C.

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