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The Case for Infrastructure Investment

Officials in many U.S. locations are beginning to see the financial rewards of long-term investment in infrastructure - including attracting new business and potentially improving the national economy.

Dec/Jan 09
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The city of Mobile, Alabama, aggressively pursued the ThyssenKrupp Steel plant by building the infrastructure improvements the company required. "Infrastructure for steel mills and importation of raw material is crucial," says Canup. "Alabama had a state referendum to win approval to divert oil and gas revenues into improving the Mobile ports. The difference between winning and losing the project was the infrastructure." Among the improvements is the 380-acre Mobile Container Terminal, a $300 million facility that will have a 2,000-foot deepwater wharf, a container yard, an intermodal rail yard, and acreage designated for value-added distribution facilities. In 2010, when ThyssenKrupp starts operations, it will become Mobile County's largest manufacturing employer.

Orangeburg County in South Carolina has seriously reached out to the manufacturing and logistics industries with the giant Global Logistics Triangle - a $600 million, 1,322-acre project that is designed to relieve pressure on Charleston's ports. The Port of Charleston already handles nearly two million TEUs annually, and a new container terminal will increase that capacity by nearly 50 percent. "Advancement of the project is contingent upon delivery of the infrastructure," says Gregg Robinson, executive director for the Orangeburg County Development Commission. The first phase - a $150 million to $200 million light assembly and distribution industrial park - is under construction. Infrastructure includes water, sewer, gas, electric, road access, and a one-million gallon elevated storage water tank. "At the same time, we are enhancing the capacity of the interstate access, interchanges, secondary roads, and rail access points," says Robinson.

Jafza International, developer of Dubai's Jebel Ali Free Zone, acquired the Orangeburg County acreage with the goal of establishing a logistics and business park for light manufacturing, warehousing, and distribution facilities. Jafza hopes to leverage private investment of around twice that amount, as well as spur the creation of more than 8,000 jobs over the next decade. "The state has reliable power, sufficient labor, and quality infrastructure," says Chuck Heath, managing director for Jafza International. "It's actually quite close to the model we developed in Dubai. Chief criteria were global connectivity, market demand, land and development costs, and infrastructure/utility quality. We considered four sites in the Southeast U.S., and the final decision was based on the enthusiasm and cooperation of the authorities."

Rail on the Rise
According to the U.S. Department of Transportation and the American Association of State Highway and Transportation Officials, the freight industry is expected to grow 67 percent by 2020. Not only is rail a safer and more environmentally friendly mode of transportation, but rising truck fuel costs are also making rail the most cost-effective method of shipping, increasing the need for infrastructure upgrades and more distribution centers.

Norfolk-Southern Railroad recently opened its new intermodal terminal near Rickenbacker Global Logistics Park in Columbus, Ohio, the first of three new Norfolk Southern terminals to be built as part of its Heartland Corridor Project, which improves the routes between Norfolk ports and distribution centers and Columbus and Chicago. Additional terminals are planned for Roanoke, Virginia, and Prichard, West Virginia.

CSX Corporation, another Class-1 railroad, spent $1.7 billion, or 15 percent of its 2007 revenues, on capital expenditure to meet future transportation needs. Over the next three years CSX says it is planning to spend $5 billion in infrastructure enhancements as part of its ambitious National Gateway project. Part of this money will include a $724 million public-private infrastructure initiative to create more efficient freight railroad links between Mid-Atlantic ports and the Midwest. The improvements will permit the use of double-stack containers, which will be able to move more of the increased cargo entering Mid-Atlantic ports, while saving fuel and cutting down on pollution. Construction will start in 2010 and includes expanding and adding new terminals and distribution points, raising overpasses and bridges, and blasting new tunnels. CSX is investing $362 million of its own money and expecting to receive matching federal and state funds.

Keeping Up With Competition
In an August 26, 2008 New York Times column, Thomas Friedman wrote about the startling contrast between this country's infrastructure and what he saw when he attended the Olympics in Beijing: "When you see how much modern infrastructure has been built in China since 2001, under the banner of the Olympics, and you see how much infrastructure has been postponed in America since 2001, under the banner of the war on terrorism, it's clear that the next seven years need to be devoted to nation-building in America."

"There is a tremendous amount of substandard infrastructure in cities and towns across America," says Colson. "These places cannot attract new development without new infrastructure, but they simply can't afford to build it. This has led to the recent trend of cash-strapped communities turning to a growing number of private investment groups that pool investor money to fund infrastructure projects for better-than-market-rate returns."

With a fierce global recession looming, many experts believe an aggressive effort to build new infrastructure will provide a long-term solution for economically reviving the country, and the world - and it is something that President-elect Barack Obama has said he will include in his economic stimulus package. "Right now, China is doing something just like this, investing about $700 billion to improve its infrastructure and stimulate the economy," says Colson. "Like FDR's Civilian Conservation Corps back in the 1930s, building infrastructure will create jobs, boost the economy, and help us compete on a global scale."

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