September 23, 2011

Sloat Scoop: Ohio Actively Pursuing Wilmington ‘Aerotropolis’ (‘China Hub’)

Filed under: Economy,MSM Biz/Other Ignorance,Taxes & Government — Tom @ 10:19 am

At his Daily Bellwether blog, retired Cleveland Plain Dealer reporter and Cincinnati-area resident Bill Sloat has scooped the Ohio media on a story which could have tremendous impact in Southwest Ohio, but which comes with a number of troubling questions and issues (some paragraph breaks added by me):

‘China Hub’ Airpark With 10,000 Jobs May Be Headed To SW Ohio: Cincinnati Gains From Missouri’s Turmoil?

Ohio Gov. John Kasich, a Republican conservative who once said he was “tea party before there was a tea party,” might be looking at landing the largest economic development project in recent state history. And it all seems to be happening because of fellow conservatives in Missouri.

They are balking at approving about $400 million in state tax credits for the “China Hub,” a Chinese-St. Louis air cargo corridor that is supposed to terminate at Lambert Airport. It is envisioned as opening a massive new international trade gateway with the giant Asian economy. St. Louis business interests and economic development officials were predicting up to 10,000 new jobs, along with warehouses and other spinoffs. In effect, it would be a port, and it has a grand name: “Aerotropolis.” Not quite the Panama Canal, but a huge trade deal..

Suddenly, the fallout in Missouri has given Ohio an opening to grab it. Economic development officials in Cincinnati are trying to offer the project a home in Ohio, and they are pointing to Wilmington, where DHL abandoned its giant air cargo airport two years ago. It is sitting there waiting. State officials are also in on the action. The word in Jefferson City, Missouri’s capital, is that SW Ohio and Denver have emerged as potential sites for the China Hub.

When The Daily Bellwether called a well-placed Cincinnati City Hall source Thursday, the source said:

“We’re going after this. The Kasich people, the Chamber, we’re all moving. Is anything going to happen? I think some doors are open to us that weren’t until a few days ago. We can give it a home in Wilmington at a place where people want jobs and an airport is empty and waiting. Will it happen? It seems to be up to the people in Missouri. All of a sudden, they seem to hate tax incentives. …”

It looks like the best recent work relating to Ohio’s competitive status is being done by a local television station — in Missouri.

On Wednesday, KPLR reported that “Projects in both Ohio and Colorado have been launched to land the cargo hub in those locations if work in the Missouri legislature stalls out.”

Before that, on September 14 (“China-Hub Could Bolt For Better Deals In Ohio And Colorado”), the station reported in print that “The cities of Cincinnati, Dayton, and Columbus have completed a study on using an airport in Wilmington, Ohio as an China cargo hub.” In the accompanying video at the link, a Missouri development representative told the station:

Last week saw a coalition of Cincinnati, Dayton, and Columbus announced the completion of a master plan which they began I believe after the legislation failed here in May.

How did this “announcement” not get into Ohio media news reports? Did the dog eat their press releases? Or is the “coalition” being secretive and pretending not to be?

A September 10 Associated Press story (“States rethinking tax credits as job creation tool”) laid out the nature of the Missouri situation:

Perhaps nowhere is the tax credit tension more evident than in Missouri, where lawmakers have convened a special session to consider scaling back several existing tax credits in order to finance new tax incentives targeting a variety of business interests – from Chinese cargo planes to computer data centers, high-tech companies and even the organizers of major sporting events.

Democratic Gov. Jay Nixon and Republican legislative leaders tout it as one of the most far-reaching job-creation packages being considered among states. But it faces opposition from some lawmakers who see it as the latest give-away of taxpayer dollars to big businesses at the expense of school children, the disabled and elderly.

“There is a tension between just about everybody,” said Sen. Chuck Purgason, a Republican who has wavered on whether to back the Missouri plan. “You’ve got core Republican principles that government doesn’t create jobs – the private sector creates meaningful jobs – and what you need is broad-based tax reform.”

One contributor to the “tension” would seem to be the air of mystery concerning China and others involved.

As is the case with virtually all major businesses in the Mainland, China Eastern Airlines is majority-owned by the Chinese government. Even if you ignore its communist nature, this control potentially allows political considerations to trump economic ones. The firm’s cargo subsidiary already ships to Chicago, which would seem to beg questions as to how much it really needs St. Louis, and how vulnerable St. Louis would be if China’s economy stumbles.

Yesterday, local TV station KMOV (“China Hub consultant reimbursed for $192,000 in expenses”) reported on the excessive spending habits of Stephen Perry, a representative of London Export Corporation (LEC). LEC’s web site describes itself as having “offices in London, Hong Kong and Beijing, and has a presence in St Louis, Missouri, USA.” The web site doesn’t identify members of the firm’s “Team,” and its “News and Information” page is moribund. Geez, who are these guys?

Additionally, a St. Louis station reported on September 13 that “Members of the citizens’ group K & N Patriots are opposed to the plan. They said they will be in Jefferson City to protest.” The station describes K & N as a “Tea Party group,” but K & N’s web site cautions that it “is not affiliated with any political Party or organization though some may view its policies to be in sympathy with ‘Tea Party’ views. … To assume that K & N Patriots as an organization has a formal affiliation of any kind with any political party or any other organization is incorrect.”

Nonetheless, the objection of involved citizen activists in Missouri is duly noted. Additionally, the state’s free market-oriented Show-Me Institute (here concerning job addition estimates ranging from 3,000 to 32,000; and here concerning the lack of an objective feasibility study) has serious problems with the deal.

Clearly, the retired Sloat has his ear closer to the ground than Ohio media reporters who are supposed to be earning their pay by surfacing news for a living. Yesterday, I searched for any indication of a story on the China hub at the Cincinnati Enquirer and the Columbus Dispatch, or for an Ohio-based story in Google News, and found nothing.

I’m certainly sympathetic to the plight of Clinton County and its economy since DHL left. But even before getting into possibly relevant additional issues like fair trade and national security, should Ohio really be so willing to cough up $360 million (that’s the amount, as of Wednesday, that Missouri’s proponents were pushing for) or more? Is this really worth it? How do they know?

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UPDATE: Speaking of Wilmington and predictions of success, I came across a revealing 2004 item on what Ohio did when DHL took over the old Airborne Express (“DHL Spending $1.2B to Bulk Up U.S. Presence”) –

This time around, Ohio offered DHL an incentive package that was valued at more than $422 million.

State subsidies include $300 million in tax-exempt bonds. Those state-backed bonds allow DHL to secure lower-than-normal interest rates. DHL’s assistance includes another $122 million in tax incentives and roadwork. One of those roads is a bypass around Wilmington that Clinton County was already planning. The Ohio Department of Transportation will now take over bypass design and construction. In exchange for the state’s aid, DHL committed to create 600 full-time and 300 part-time jobs while investing at least $295 million in the Wilmington hub.

Five years later, the Wilmington facility closed. Can anyone really say that the $422 mil was economically worth it? Was there any kind of monetary clawback from DHL?

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UPDATE, Sept. 24, 12:45 a.m.: The latest from the St. Louis business paper — “Lambert welcomes first Chinese cargo flight as Aerotropolis sputters”

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2 Comments

  1. Hi Tom: Your work on this was awesome!!! And thanks for the kudos. It seems odd that this is not being more widely reported in the Cincinnati Enquirer and other Ohio media. You have added a lot to what we know about the China hub. I am linking to you.

    Comment by Bill Sloat — September 23, 2011 @ 11:16 am

  2. Thx, Bill. I’m hoping that others in the SOB Alliance with closer state contacts might be able to build on this.

    Comment by TBlumer — September 23, 2011 @ 11:46 am

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