Regional efforts to improve economic development through the capitalization of Toledo’s location at the intersection of freight between Chicago and the East Coast, and Canada and the South, led to rail infrastructure improvements that improved rail velocity and doubled lifts at an intermodal facility.
Planning Guide Strategies Discussed:
Over the past two decades, state and local officials in Ohio have noticed the growing importance to the state’s economy of the logistics and distribution industry. Several Toledo-area groups began to realize that, because of its strategic location and multimodal freight assets, the area had the potential to become the anchor of the larger economic engine of the Lake Erie West region. The intermodal concept began to be included in the region’s Transportation Legislative Agenda, a biennial statement of consensus on transportation policy priorities produced by a coalition of stakeholders and spearheaded by the Toledo Metropolitan Area Council of Governments.
In 2008, the Joint Intermodal Task Force for Transportation and Logistics (JITF) was formed. Like many freight quality partnerships, JITF’s members included public-sector and private-sector leaders. What made this group unique, however, was its extensive inclusion of former high-level public officials who had the deep understanding and the political roadmap to overcome bureaucratic challenges. The private-sector members’ focus balanced out this strong public-sector presence. JITF is “staffed” by the University of Toledo’s Intermodal Transportation Institute.
Shortly after its formation, the group developed a vision and a series of project recommendations for the region. The process began with an identification and analysis of the region’s key assets. JITF’s October 2008 report to the city of Toledo identified these assets as:
- Location at the junction of three major Interstate highways
- Location within a day’s drive of 60% of the U.S. population and manufacturing capacity
- Presence of three Class I railroads, each linking Toledo to larger metropolitan areas
- Access to the Saint Lawrence Seaway via the second-largest port on the Great Lakes
- Availability of an air cargo hub capable of handling the world’s largest aircraft (Intermodal Transportation Institute 2008, ii)
JITF evaluated five different locations in the Toledo region that had potential to expand or develop intermodal facilities (see Figure 44). The task force met with representatives of the three Class I railroads that serve the Toledo region: Canadian National and CSX both had intermodal facilities near Toledo that were meeting their needs. The Port of Toledo’s recently rehabilitated dockside facility was evaluated for a facility that would expedite ship/rail transfers. Two Norfolk Southern facility locations were evaluated. The first, creating a site near the airport, proved to be a long-term project. The second, an existing Norfolk Southern intermodal yard (Airline Junction), showed potential (Intermodal Transportation Institute, 2008, 1-5).
Airline Junction is located in a well-urbanized area within the city of Toledo. Unlike many intermodal terminals, its growth was inhibited by operational challenges outside of the yard. Its location on the Norfolk Southern Chicago mainline next to the wye with the Detroit mainline decreased its effective capacity from 60,000 container lifts to around 30,000. After analyzing projects for their viability, fundability, and private partner willingness to participate, the group made five specific project recommendations (see Table 62 and Figure 45).
JIFT Project Recommendations
In May 2009, the University of Toledo’s Intermodal Transportation Institute, in partnership with the University of Tennessee Center for Transportation Research, evaluated the economic impact of doubling the existing capacity of the Airline Junction Yard. The partners used IMPLAN (and its RIMS II multipliers) to calculate the overall regional impact. The Institute found that, over 5 years, the project would have a total regional benefit of more than $112.27 million. These benefits included the creation of nearly 900 direct and indirect jobs, which would create $25.6 million in salaries annually. Over 5 years, more than 1.5 million square feet would be developed, worth approximately $25 million. Overall, the state of Ohio would gain $1.49 million, and local governments would gain $1.29 million in additional tax revenues annually. Additionally, the study cited benefits to consumers due to increased competition between the (then) soon-to-be-opened CSX intermodal yard just 40 miles south of Toledo and Airline Junction. Numerous multi-state distribution centers have located in the Lake Erie West region (e.g., UPS, FedEx, Home Depot, Lowes, Walgreens).
Norfolk Southern ultimately described this project as a reverse public/private partnership. Normally, the railroad would identify an improvement as beneficial to the public but not meeting the return threshold that would justify the railroad’s complete capital investment. The railroad’s government affairs team would work with their public-sector partners to exhibit the benefits of the project to gain public support, and ultimately funding. In this case, however, the city of Toledo and JITF approached Norfolk Southern about the potential of expanding Airline Junction Yard with a firm business case detailing why the project would be a win-win for the railroad and the region.
The yard originally was developed as a Conrail trailer-on-flat-car (TOFC) facility. Over the past 30 years, however, the yard has grown into a modern intermodal yard that handles container-on-flat-car (COFC) and container-on-well-car traffic. Unlike many intermodal sites located within urban areas, Airline Junction Yard has had room to expand without creating neighborhood conflicts or requiring additional property. Instead, its expansion has been inhibited by its location along the wye between two heavily used mainlines. Essentially, trains accessing the yard tied up the mainline between Chicago and New York, a line that can see more than 100 trains daily (Intermodal Transportation Institute 2008). The true potential of the yard was limited because many trains could not stop at the yard.
To alleviate these geometric and operational challenges, Toledo and the JITF proposed a series of small improvements to upgrade rail network infrastructure and nearby highway grade crossings. The largest among them was the extension of the yard’s lead tracks to allow trains to pull into the yard without disrupting traffic on the mainline. The project cost $12.75 million to effectively double the yard capacity. While they were initially skeptical, Norfolk Southern analyzed the project’s viability and potential benefits, ultimately calculating that the improvements justified a $3.5 million investment from the railroad.
In 2008, while the local partners were working with Norfolk Southern, Ohio’s unemployment rate topped 10%. In reaction, the state of Ohio created several stimulus programs that focused on creating jobs in the state’s targeted industries. Among the projects was the Logistics and Distribution Forgivable Loan program. The program provided loans to governmental entities to build infrastructure that would support job creation in the industry. The program was administered by the Ohio Department of Development (ODOD), and once the agreed-upon number of jobs were created, the loans were forgiven.
Adequately positioned from JITF’s and Norfolk Southern’s analysis (and private-sector funding), the city of Toledo (assisted by JITF) approached ODOD to formally apply for the Distribution and Logistics stimulus program. Following an extensive application and interview process, the project was awarded a $2.75 million forgivable loan. This left a $6.5 million gap in the project that was quickly closed with $6.5 million from the Ohio Rail Development Commission (ORDC) as part of ARRA.
Norfolk Southern completed the project, because it is their privately owned railroad yard. However, ORDC served as the primary liaison between the local partners and Norfolk Southern, given their experience in working with the railroads and in administering public funding. There was one exception: the city of Toledo was contractually obligated to administer its portion of the funding, given that the city was legally liable for the loan. According to interviewees, this created some duplication and confusion between the Norfolk Southern, ORDC, and Toledo on overall project roles and responsibilities. These issues were quickly overcome given continued facilitation by JITF and ORDC. The project was completed in December 2010.
The Toledo region’s economy has historically been tied to the automotive industry. Although Toledo has fared better than most of its rust-belt neighbors, area stakeholders recognized the risk of having their economy tied to one industry. The region recognized the increasingly borderless nature of business, especially in the freight industry. As such, they realized that they functioned much more as a three-state, multijurisdictional region, than just the Toledo MSA. By taking a collaborative approach, stakeholders developed a successful initiative to transform a freight facility. In the process, they created redevelopment opportunities with the potential to benefit the entire region.
Initially, there were many independent freight-related partnerships. However, the region came together to support the JITF, which was formally organized by the Mayor of Toledo and facilitated by the University of Toledo. The group proactively approached Norfolk Southern about opportunities to expand intermodal operations in the region; however, they took a very different approach from many other communities that want a yard. The JITF approached Norfolk Southern with a solid business case for why improvements to Airline Junction Yard were good for both the railroad and the region. This approach took the railroad by surprise. Their reactions to the proposal were mixed (they did not see much of an intermodal market in Toledo), but they agreed to take a look.
After analyzing the proposal, the railroad decided that the operational improvements at the wye between their two mainlines (and as a consequence, at Airline Junction Yard) were worth investing more than $3.5 million. Since then, traffic has picked up at the intermodal yard so much that Norfolk Southern is now offering an origin/destination pair (direct service) between the West Coast and Toledo. Essentially, this means there is enough traffic to justify an entire train—or at least a large block of railcars—between the pair. The operational improvements also added fluidity on the Norfolk Southern system throughout the Toledo metropolitan area. This means decreased costs and increased opportunities to utilize rail in the region.