Metro area ripe for shift into global trade portal

5/18/2008

Local officials and developers have preached the same sermon for years: The Toledo area is ideally situated to become a major freight distribution center for the northeastern United States and southern Canada.

The metropolitan area straddles the junction of three major Interstate Highway System routes I-80 and I-90 on the Ohio Turnpike and I-75 putting it within a day s drive of 16 percent of the U.S. population and 30 percent of the country s industrial base. It also is a major railroad center, with direct lines to Cleveland, Columbus, Cincinnati, Chicago, and Detroit and links to countless more distant cities.

Combined with its access to the St. Lawrence Seaway through its Lake Erie port, and air-cargo capability offered by the 10,600-foot main runway at Toledo Express Airport, Toledo would seem to possess the three critical factors real estate people always cite as most vital to commercial development: location, location, location.

Toledo has all of the elements to emerge as an international transportation, logistics, and distribution center it s a matter of strategic geography, James Hartung, the Toledo-Lucas County Port Authority s president, told the Toledo Area Chamber of Commerce earlier this year.

We really are at the crossroads at the North American trading and economic regime, said John Austin, a research fellow at the Brookings Institution who has studied the economy of the Great Lakes region. There aren t many places on Earth that are at the center of this kind of economic flow.

Of $500 billion in annual trade between the United States and Canada, nearly two-thirds pass through the Great Lakes region, Mr. Austin said, mostly through the Detroit-Windsor border crossings.

Developer David Hall believes Toledo could be a portal for global trade as well, especially because of a connection to the Canadian railway network that other regional cities lack.

Not only is Toledo squarely in the middle of the biggest concentration of customers in the world, Mr. Hall said, but it could become a new center for manufacturers using advanced technologies but outsourcing their labor-intensive components to lower-cost producers overseas to build globally competitive products.

Mr. Hall tried to develop a rail-truck freight transfer center in Monroe County just north of Toledo two years ago, but vocal opposition from farmers and homeowners in the area scuttled the deal.

Other officials say northwest Ohio already is evolving into a transportation center.

The area has been moving toward this concept of a major distribution center for many, many years, said Warren Henry, the vice president for transportation for the Toledo Metropolitan Area Council of Governments, a regional planning agency. It s not just talk. UPS has been here for years. FedEx has been here for years. Menards has opened up a big distribution center here.

Yet Toledo is close enough to both the East Coast and Chicago that, historically, many shippers have preferred to truck freight in from coastal ports or Chicago rail terminals.

The Menards site in Williams County is convenient to the Ohio Turnpike but situated far from any railroad trailer or container terminal. And even though Walgreen s huge distribution warehouse in Perrysburg Township, completed five years ago, is right next to a CSX Transportation track, it doesn t have a rail siding.

Now, mounting congestion, driver shortages, and rising fuel prices are making trucks less attractive, and railroads, which in the past tried to avoid any shipment that didn t move at least 1,000 miles on their tracks, are showing increasing interest in snaring a bigger piece of the freight-transfer business.

Advocates of building an expansive freight-transfer complex pairing a rail yard with access to interstate highways claim such a center called an intermodal inland port could bring in thousands of indirect jobs at warehouses, distribution networks, and then spin-off jobs in the local economy.

In search of a boost

Intermodal is the jargon used by transportation wonks and economic development officials. To the public, an intermodal center would look like a large railroad yard surrounded by acres of pavement with trucks ferrying steel containers filled with goods in and out.

Intermodal centers also are built around airports, lakeports, and seaports. They are hubs that handle America s imported and exported manufactured goods and consumer products.

Brian McMahon, a local developer who long has advocated developing such a terminal near Toledo Express Airport, cited the example of Alliance, Texas, where a business park built next to an airport and rail terminal has created 100,000 jobs and injected $30 billion into the Fort Worth-area economy during its two decades of development.

Such a facility in the Toledo area could attract not only warehouse and distribution businesses but also value-added manufacturers or assembly plants that would improve imported goods or components before reselling them, Mr. McMahon said last week. He agreed with Mr. Hall that such a facility also would be a magnet for exporters, especially with a weak dollar, because container shipping is most efficient when the boxes are filled in both directions.

But as Rich Martinko, director of the Intermodal Transportation Institute at the University of Toledo, warned at a seminar earlier this year, Toledo s ideal location may lie fallow if rivals get going first. Mr. Austin agreed that Toledo has yet to fully capitalize on its location.

Sometimes just being good enough will win, Mr. Martinko said. Trying to be perfect slows you down, and somebody who s good enough gets going first.

Rivals in the region

Toledo already trails two regional rivals.

In March, Norfolk Southern Corp. opened its new Rickenbacker Intermodal Terminal a $68.5 million facility adjoining Rickenbacker International Airport near the Columbus suburb of Lockbourne, Ohio. The terminal adjoins a 1,300-acre logistics park belonging to a joint venture of the Columbus Regional Airport Authority and two private land development firms, several other industrial parks, and Rickenbacker International Airport, a former Air Force base that largely has been converted to civilian use.

Over the next 30 years, the Columbus airport authority estimates, Rickenbacker employment should reach 20,000.

Less than two weeks ago, CSX Transportation, Norfolk Southern s primary rail competitor in the eastern United States, formally announced its entry into the Ohio logistics market: an as-yet unnamed terminal just west of North Baltimore in southwestern Wood County.

While CSX officials described the $80 million facility during a May 7 local briefing as a hub bringing intermodal shipments in from mid-Atlantic ports and Chicago and sorting them into new trains bound for regional destinations, the railroad also expects it to attract warehousing and logistics businesses that would benefit from being next to such a terminal. A CSX consultant estimated the terminal could generate as many as 2,000 to 3,000 spin-off jobs, along with its own work force of about 100.

Seeking the right fit

Mr. McMahon blamed a lack of political leadership for retarding intermodal development in Lucas County.

In Wood County, they worked through the issues, and at the end of the day, they had economic development, Mr. McMahon said. I don t know of any of those meetings in Lucas County.

But Bob Sullivan, a CSX spokesman, said his company s selection of North Baltimore to build its new terminal had a lot more to do with how the site fit on its system network and nearby land s development potential than it did with local leaders sales pitches.

The North Baltimore location actually in Henry Township, along the north side of State Rt. 18 west of the village has rail access, good highway access, and open space to develop the terminal and for any associated development to go around it, Mr. Sullivan said.

And by rail access, Mr. Sullivan didn t mean just any track on the CSX system. North Baltimore is strategically located along a CSX line that was once the Baltimore & Ohio Railroad s main line between Chicago and the East Coast. Three vital north-south CSX tracks intersect that line within 15 miles to the east or west, positioning the new terminal to be a hub for sending trains to Detroit, Columbus, Cincinnati, Cleveland, Chicago, Indianapolis, and St. Louis without incurring significant unnecessary mileage.

CSX expects to break ground on its terminal late this year, with opening scheduled for 2010.

Rudy Husband, a Norfolk Southern spokesman, similarly said that Toledo wasn t in the running when Norfolk Southern chose several years ago to build a new terminal in the Columbus area, though for a different reason: Its old Columbus-area terminal was bursting at the seams.

We were going to have to do something at Columbus because Discovery Park couldn t handle all the business that wanted to come to Columbus, Mr. Husband said.

Norfolk Southern site

Norfolk Southern s Toledo intermodal yard on Hill Avenue, which Conrail built in 1994 to replace an undersized terminal along the Maumee River south of downtown, has plenty of capacity to accommodate traffic growth, Mr. Husband said.

As the rising price of fuel makes

trucking more expensive, we are seeing more freight migrating from truck to rail, including some new business at Norfolk Southern s Toledo terminal, the spokesman said. But while the local yard is capable of handling ocean containers, most of its business is domestic, he said.

Neither Norfolk Southern s Toledo terminal nor the one at Rickenbacker is used for sorting intermodal railcars into new trains the way CSX plans to do in North Baltimore, nor does Norfolk Southern plan to build such a terminal, Mr. Husband said.

But even as a local delivery terminal, the Norfolk Southern yard in Toledo is very short on what UT s Mr. Martinko said is vital to such facilities potential as economic drivers: nearby developable land. It s also inconvenient to Toledo s freeway system, with the closest, I-75, several miles away on city streets.

The real value of an intermodal site is to have a lot of acreage around the rail yard, where warehouses and their suppliers and maintenance firms can move in, Mr. Martinko said.

Erie Township

Available land near a rail yard was the driving force behind a proposal two years ago by Global Partners to explore the potential for a warehousing and distribution complex north of Toledo, just over the Ohio-Michigan line in Monroe County.

David Hall s firm and partner U.S. Rail identified land in northern Erie Township that had not only development potential and access to I-75 but a feature no comparable site in Lucas County offered: access to the Canadian National Railway, North America s only railroad with direct access to both Atlantic and Pacific ports.

The partnership collapsed in 2006 after the idea became public and U.S. Rail representatives stated during a meeting in Erie Township that they would build the rail-terminal portion even if they had to seize land by eminent domain to do it. That statement, perceived by local residents and officials as a threat against their property rights, galvanized community opposition to the project.

U.S. Rail would have connected with the Canadian National line to bring containers in from distant ports, and Mr. Hall said access to Canadian National favors a Monroe County site over anything south, east, or west of Toledo though he considers the property Global Partners sought to be out of the running.

Once CN is engaged fully and has a site, its time and cost-effectiveness will make it superior, he said. The way [the Global Partners project] was approached was totally wrong, but that s still the place to go.

Confronting obstacles

Critics in 2006 questioned why such a terminal couldn t be developed on vacant industrial land in Toledo, or at Canadian National s existing terminal, a traditional boxcar-sorting and train storage facility called Lang Yard, along I-75 between Alexis Road and I-280. The port authority s Mr. Hartung said Lang could be a candidate if its obstacles can be overcome notably, that it s boxed in on one side by I-75 and on the other by Toledo s Hoffman Road landfill.

The problem with Lang is that there s no contiguous developable property, Mr. Hartung said. There is land farther away, especially west of the landfill. Maybe we have to look at building a dedicated roadway to get to that land or even building a tram, if that s economical.

Wherever an intermodal terminal might go in the Toledo area, Mr. Hall agrees that such a facility is vital not only for distributing consumer goods but for the future of the region s economy. Modern manufacturers need fast, reliable transportation to deliver labor-intensive components made elsewhere into their supply chains while taking advantage of superior technology to build competitive products, he said. Without an inland port, that process is fragmented and frustrated, he said.

Contact David Patch at: dpatch@theblade.com or 419-724-6094.