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The Toledo-Lucas County Port Authority is taking a $2.7 million risk to ensure the continuing viability of BAX Global's air-cargo hub at Toledo Express Airport.
The agency is coordinating applications for a $6.2 million package of state and federal grants to pay most of the cost to build a customs facility and truck terminal at the hub and relocate the hub's maintenance operations.
But if the state of Ohio approves the application for a $2.7 million Job Stimulus Program grant, BAX would be obligated to maintain current employment levels for at least three years or pay back the money - a commitment port staff said the air-cargo carrier and logistics company was unwilling to make.
The Ohio Department of Development instead has allowed the port authority "to guarantee the economic impact of the project," according to the staff recommendation. The port authority's board approved the recommendation yesterday by a 12-0 vote, with Nadeem Salem absent.
Board member Michael Frank said he was opposed to an initial version of the agreement because BAX, and by its involvement the port authority, was required to guarantee 40 new jobs at the hub, not just the current 817 positions.
But with retention now the standard, he said, the additional risk is justified by the port authority's $20 million exposure at the cargo hub.
"The state and the county have worked hard to come up with a creative solution to a difficult problem," said Lloyd Jacobs, the University of Toledo's president and port board member.
The port authority staff report noted that the new customs center and truck terminal are needed even if BAX were to leave. If that happened, the agency would face paying the whole bill itself.
BAX is expected to contribute $1 million of the construction program's total $7.2 million estimated cost.
Companies have been identified that are interested in shipping products through the BAX hub once the economy rebounds, but only if the planned improvements are made, the staff report added.
"While there have not been any guarantees made by these companies, they have clearly indicated that without the proposed improvements, there is no chance of their products moving through the facility," the report said.
When it opened in 1991, the Burlington Air Express cargo hub was designed primarily for sorting domestic freight, arriving or departing aboard planes.
But after a boom during the 1990s, air freight tailed off as cargo shippers shifted their focus from speed to schedule, and BAX also shipped more freight point-to-point in place of the hub model.
The facility's international business has continued to grow, but handling that growth requires enhanced customs and agricultural inspection capacity.
Accepting the Job Stimulus Program risk "positions us to have a cargo hub that is second to none in the United States," port authority President Michael Stolarczyk said. "There's always risk involved in these types of business relationships."
The port authority built the cargo hub for lease to Burlington. Burlington became BAX Global and now is a subsidiary of German transport and logistics giant DB-Schenker, which is owned by Deutsche Bahn, the German national railway company.
That lease expires in 2013 with an estimated $20 million in construction debt for the port authority to manage if it is not renewed and no new tenant is found.
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