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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
It can be seen everywhere as you drive across America - outdated or crumbling infrastructure. Not only is it an eyesore and sometimes dangerous to public welfare - about 75,000 bridges in the U.S. are structurally deficient, for example - it's a big negative to companies looking to relocate or expand.

The American Society of Civil Engineers estimates the United States needs to invest nearly $2 trillion over the next five years to maintain and expand its infrastructure. "We've inherited a great 20th-century infrastructure, but it is the 21st century and our competitors - including developed regions like Europe and Japan and rising countries like China - invest far more than we do," says Michael Lind, senior fellow at the New America Foundation and director of the American Infrastructure Initiative.

"From the site selection perspective, infrastructure is absolutely vital - it's a very tall pole in the tent," says Jim Colson, president of site selection for Angelou Economics in Austin, Texas. "To be competitive, cities must have modern infrastructure in place, or at least a very sound plan to deliver that infrastructure in a timely fashion, with all risk mitigated."

Regarding existing infrastructure, "the big question is does it have enough capacity to reliably service the client?" says Buzz Canup, managing principal for Fluor Global Location Strategies in Greenville, South Carolina. "This includes water, sewer, electrical, highway, rail, etc. These almost always come into play and the absence of any one of them could cause a community to be eliminated from consideration."

Committing to the Investment
Forward-thinking communities are being proactive in building modern infrastructure to bring in new companies. Cities that want to attract certain types of industry often put together an enticing package of infrastructure that is vital to that industry's operations.

"For example, the semiconductor industry, particularly wafer fabricators, must have a great deal of water and many megawatts of totally reliable electric power," says Bob Goforth, a partner with Leak-Goforth Company in Jacksonville, Florida. "On the other hand, a distribution center might not have strong requirements for water and sewer, but might need fiber optics and a good highway system."

Asheboro, North Carolina, has been enjoying solid economic growth, thanks to two new interstates converging just north of town that provide better connections between North Carolina and South Carolina ports and markets in the upper Midwest. "These highways will definitely enhance our economic development," says Bonnie Renfro, president of the Randolph County Economic Development Corporation. New businesses that have come to town include Malt-O-Meal and Rheem Manufacturing.

Asheboro and neighboring communities have joined forces to dam the Deep River and create a 6,000-acre reservoir to provide a larger water source for both public and industrial use. Related infrastructure improvements include new roads, bridges, dams, water transportation lines, and a water treatment plant. The total cost of about $60 million is shared by six local governments. "This new source of reliable water will be attractive to industries like food processing and data centers, that require large amounts of water," says Renfro. Norfolk Southern is also upgrading its rail lines to provide more capacity for the manufacturers in the area.

Other cities investing in infrastructure improvements include Lexington, Kentucky, and Clarksville, Tennessee. "The city of Lexington has agreed to construct a new electrical substation for one of our clients, who needs to have segregated power," says King White, president of the Site Selection Group in Dallas, Texas. Clarksville has a megasite that will soon be the home for a $1.1 billion industrial complex that will create 500 new jobs. Over six miles of gas, water, and sewer lines are being constructed with the help of grants from Tennessee's FastTrack Infrastructure Development Program. The city has also built a nearby business park with a complete infrastructure package, including fiber optics.

"Tier 2 cities like Lexington are getting more attention from companies because they can compete well in terms of quality labor, lower labor costs, and lower land costs," says White. "Adding quality infrastructure, usually funded through public-private partnerships, makes them highly competitive with bigger cities and even some overseas locations."

One of these markets is Temple, Texas, which has invested $21 million in four "themed" industrial parks. "Rail Park is designed for distribution/logistics companies and provides easy rail access," says Mary Poché, director of marketing for the Temple Economic Development Corporation. "Gulf States Toyota recently relocated here from Houston because the park provided everything they needed, including a rail spur we constructed to their site. We're also working out details for installing a gas line." Poché indicates Temple expects five major companies to break ground in 2009.

Strengthening Ports
Infrastructure upgrades are greatly needed at most U.S. ports, especially Los Angeles/Long Beach. "There are tremendous capacity constrictions at Los Angeles, including heavy congestion on the highways," says Jack Boyd, president of the Boyd Company in Princeton, New Jersey. "There is also the very real threat of losing shipping business to Mexico's Punta Colonet port, 115 miles south of Tijuana. This may be the largest infrastructure investment Mexico will ever make and could tip the center of gravity for distribution/logistics along the West Coast. L.A. ports must improve rail service, widen highways, and add more berths to stay competitive."

"Port cities such as Savannah, Charleston, Mobile, Houston, and Norfolk are moving ahead on their own to improve their infrastructure, and not waiting for federal help," says Ed McCallum, principal with McCallum Sweeney Consulting in Greenville, South Carolina. "With increased trade with Asia, bottlenecks on the West Coast, increased use of the Suez Canal and the expansion of the Panama Canal, they want to increase their capacity."

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