Comparative Analysis BinderCover.ppt

Regional Freight Assessment: Comparative Analysis

Presented to:

Mid-America Regional Council and Kansas City SmartPortMid America Regional Council and Kansas City SmartPort

Prepared by:

TranSystems

February 6, 2009

EXPERIENCE | Transportation

Kansas City Regional Freight Outlook

Overview The Kansas City Regional Freight Outlook (RFO) was prepared to sustain existing momentum and further expand the region’s presence in transportation and logistics. The overall vision for the Kansas City RFO is to positively impact and accommodate the growth of freight transportation and logistics in the 18-county study area. The Mid-America Regional Council and Kansas City SmartPort initiated the Kansas City Regional Freight Outlook. The Kansas City RFO was developed in collaboration with the Kansas and Missouri Departments of Transportations. The overall study included a series of deliverables focused on identifying freight infrastructure needs and assessing Kansas City’s regional transportation advantages, resulting in targeted strategies and messages for the region. The following list details each of the study deliverables:

• Freight Directory: Inventory of the region’s 40 freight zones including modes, volumes, existing industries and presence of foreign trade zones

• Business Survey: Summary of 427 survey responses of businesses on freight topics important to the region

• Focus Group Summary: Major findings from five focus groups conducted with the general public, business and elected officials

• Freight Infrastructure Investment Plan: Focuses upon transportation infrastructure by freight mode and provides a set of transportation priorities for the region.

• Regional Freight Assessment: A comparative of assessment of Kansas City against other cities in the U.S. in terms of freight activities and site selection characteristics.

• Freight Flow Analysis: A summary of the volume and value of freight flows in, out and through Kansas City by truck, rail, air and barge.

• Freight and the Environment in Kansas City: A brief white paper on environmental topics related to freight and the region.

Using the data and research from each element, a series of findings are outlined that help inform the Strategic Plan development. This Strategic Plan draws on the data and research completed as part of the overall Kansas City RFO elements related to infrastructure, freight flows and economics to create objectives, strategies, and tactics that support the regional vision. The freight Strategic Plan was created to help the region remain a vital national freight transportation hub attracting freight growth. Finally, the Kansas City RFO Summary is a culmination of all the work completed on each individual element. The summary provides an overview of the study effort, information on infrastructure and freight flows, as well as, a summary of the surveys and comparative cities analysis. Key recommendations and critical actions are provided to narrow the focus on the near term and help to initiate and maintain the regional vision to positively impact and accommodate the growth of freight transportation and logistics in the 18-county study area.

Regional Freight Outlook: Comparative Analysis August 11, 2008 Page 1

Phase I: National Comparative Cities


Table of Contents Introduction Cities and Descriptions Population Workforce and Right-to-Work Accessibility to Modes of Transportation Corporate State Tax Rates List of Tables Table 1: Population Table 2: Workforce and Right-to-Work Table 3: Highway Congestion and Interstate Access Table 4: Railroad Connectivity Table 5: Air Cargo Table 6: Waterborne Cargo Table 7: State Corporate Tax Rates

Regional Freight Outlook: Comparative Analysis February 6, 2009 Page 1

Phase I: National Comparative Cities The objective of this phase of the study is to perform an assessment on several cities throughout the United States to determine how Kansas City compares to major national markets as well as comparative markets and regional competitors in terms of freight activities. The results of the analyses will help identify cities that will be researched at a more comprehensive level in order to define how Kansas City can continue to be competitive in freight movement activities. Key evaluation criteria have been established towards the assessment of twenty-seven cities throughout the US. Each city was assessed against several criteria including demographics, transportation availability and business characteristics. These categories were chosen based on market research studies that outlined the importance of these aspects in determining factors that make cities more desirable for the location of freight-related development which are transportation-intensive like distribution centers, warehouses or manufacturing facilities. Cities and Descriptions The cities selected for this study include those that were part of the 1995 Intermodal Freight Strategies Study as well as several others that have emerged over the last decade. Some of the cities generally handle very large volumes of freight and have major port facilities. These cities are typically located on the major coasts with the exceptions of Philadelphia and Chicago. Other cities analyzed consist of metropolitan areas that are more similar to Kansas City as they are located within the inland regions of the United States. The cities reviewed are listed below.

• Atlanta • Baltimore • Chicago • Cincinnati • Cleveland • Columbus • Dallas/Fort Worth • Denver • Detroit • Houston • Indianapolis • Los Angeles • Louisville • Memphis

• Miami • Minneapolis/St. Paul • Nashville • New York • Oklahoma City • Philadelphia • Phoenix • Pittsburgh • St. Louis • New Orleans • San Antonio • Seattle • Tulsa

On the following pages a brief summary of each city is provided to set the context for selecting the cities that will undergo a more in depth comparative analysis in Part II.


Atlanta: Atlanta considers itself the transportation hub of the southeast due to its connections to international markets via air, rail and highway. The area ranks seventh in industrial market square footage. The passenger and air cargo capabilities at Hartsfield Jackson International Airport are a major reason for business relocation to Atlanta. Baltimore: Revitalization of Baltimore’s Inner Harbor serves as a catalyst for its economic growth. Located in the Mid-Atlantic region, the city of Baltimore’s maritime industry is balanced by industries in health care and life sciences. Chicago: Chicago is strategically located in the Midwest with rail and air connectivity to both the east and west coasts. Its infrastructure, primarily its transportation system, is one of the city’s most important assets. Chicago’s infrastructure investments have fostered it into one of the world’s most diversified economies. Major industries in Chicago include finance, manufacturing, publishing and food processing. Cincinnati: Cincinnati is located in the southwest corner of the state of Ohio along the Ohio River. Cincinnati’s river port is the 5th largest inland port in the United States with 52.3 million tons of freight passing through the city on the Ohio River every year. Nearly 45% of the nation’s population and 44% of US manufacturing facilities are located within a day’s drive. Cleveland: Cleveland is a city known for its strong presence in the manufacturing industry. The Port of Cleveland, located at the Cuyahoga River's mouth, serves as the city’s main port and is a major bulk freight terminal receiving much of the raw materials used by the region's manufacturing industries. The city is currently focusing its efforts on strengthening its presence in the technology sectors. Columbus: Columbus has a generally strong and diverse economy. Some of its major industries include several restaurant chain headquarters, clothing manufacturers, steel processing and banking. Its location along both the I-70 and I-71 corridors gives it regional access to many markets in the eastern and mid-western U.S. Columbus is ranked 41st in the nation in movement of air cargo tonnage. Dallas/Fort Worth: The Dallas/Fort Worth region ranks #4 in the world in the number of Fortune 500 companies it hosts. The region is home to 15 freight facilities and 4 intermodal rail yards. In the next several years, Dallas is anticipating adding a large amount of commercial space which should further stimulate the region’s economy. Denver: Metro Denver has a diversified economy with industries such as aerospace, bioscience, and energy. The Denver metro area has overcome many transportation challenges in order to grow its economy to where it is today. Denver International Airport is the tenth busiest airport in the world. A new transportation and cargo center located southeast of the airport was approved in 2006. This will improve the Metro Area’s capabilities for handling cargo by air, road and rail. Detroit: Detroit ranks third in the U.S. as a land, air and sea freight gateway. Pegged as the busiest border crossing in North America, every state in the U.S. is served by this international gateway. Worldwide, Detroit remains one of the biggest producers in the automobile industry. The metropolitan area features one of the largest foreign trade zones in North America.


Houston: Houston is well-known as the Energy Capital of the World with its specialization in providing services to the oil and gas industry. Its location makes it one of the nation’s major distribution centers. George Bush Intercontinental Airport ranks 11th in the U.S. as an international air cargo gateway, and the Port of Houston ranks second in the U.S. in total tonnage that it handles yearly. Indianapolis: Indianapolis considers automobile manufacturing to be one of its most important industries and continues to grow in this field. They balance that with their prominence in the field of life-sciences. The city is strategically located placing 75 percent of the U.S. and Canadian population within a one-day drive of the city. The second-largest Federal Express hub in the nation is here and it also has the 20th largest cargo airport in the U.S. Los Angeles: Los Angeles is the second largest city in the United State. The ports of LA and Long Beach combined form one of the most important ports in the nation contributing to L.A.’s presence as one of the leading manufacturing centers in the U.S. Louisville: Louisville, the nation's 16th largest city, is very competitive in markets such as logistics and health/biomedicines. The city also is strong in industries such as financial services and manufacturing, particularly automotive. The UPS international air operation is headquartered in Louisville. Memphis: Memphis is located on the Mississippi River and is home to the world’s busiest cargo airport. Known as America’s Distribution Center, Memphis is also home to FedEx’s Headquarters. The city balances its economy with the strong presence of several manufacturing and real estate firms. Miami: Miami is ranked as a global city for its importance in finance, commerce, media, entertainment, arts and international trade. With cargo arriving from South America and the Caribbean, Miami has become one of the busiest ports of entry in the United States. The Port of Miami is also known for accommodating the largest volume of cruise ships in the world. Minneapolis/St. Paul: The Minneapolis/St. Paul metro area is situated along the upper Mississippi River and is a major business center in the upper Midwest because of its location and connectivity to other metropolitan areas including cities in Wisconsin and the Dakotas and its proximity to Canada. Major industries include printing and publishing, biomedical technologies, and computer and software related manufacturing. Nashville: Nashville is the capital of Tennessee located in the center of the state. The economy in Nashville is diverse, with growing industries in areas such as retail, professional and business services, health care, transportation and construction.


New Orleans: One of the largest and busiest ports in the world is located in New Orleans making it an industrial and distribution center. Other industries popular in New Orleans are petroleum refining and tourism. Tourism alone supplies the city with 40% of its tax revenues. New York: New York City, the most populous metropolitan area in the United States, is also home to more Fortune 500 companies than any other city in the nation. Over 10,000 manufacturing and industrial facilities employ over 15% of the city’s workforce, contributing more than $1.7 billion annual to the local economy. They balance this with a strong background in financial services, fashion, media and entertainment and real estate. Oklahoma City: Oklahoma City is centrally located at two US highway arterials; the I-35 NAFTA corridor and I-40. It is the capital of Oklahoma and home to a wide-range of industries. It has a strong presence in aviation (38,000 people are employed in this industry) as well other industries such as energy producers and transportation logistics. Oklahoma City's central location at two of the nation's major highway arteries -- north-south I-35 (the NAFTA corridor) and east-west I-40 -- has made it a principal distribution center within the state and the Southwest region. Philadelphia: Philadelphia is strategically located between New York City and Washington D.C. It has a major shipping ports located along the Delaware River/Delaware Bay. Its leading employers include those in the healthcare, manufacturing and education services. Phoenix: Phoenix’s strategic location in the southwest makes it competitive by providing access to global and west coast markets. The region is developing a light rail system and is within a day’s drive from a number of markets including those in Albuquerque, San Diego, Los Angeles, San Francisco, Las Vegas, Salt Lake City and Mexico. Major industries in Phoenix include manufacturing and tourism with emerging industries related to technology and service sectors. Pittsburgh: Pittsburgh is situated at the confluence of the Allegheny, Monongahela and Ohio Rivers which makes it one of the busiest river port cities in the nation. Its primary industries are centered on technology, health care, nuclear engineering and finance. Pittsburgh is also home to seven Fortune 500 companies. St. Louis: Situated at the point where the Mississippi, Missouri, and Illinois rivers converge, St. Louis is known for its strength in transportation, distribution, and logistics. The city, the nation’s second-largest auto manufacturer, is also considered a leading center for aerospace development and defense production, and is also the home to the country’s largest brewer, Anheuser Busch. St. Louis is within 500 miles of one-third of the U.S. population and within 1,500 miles of 90 percent of the people in North America. San Antonio: San Antonio has a diverse economy with four primary focuses: financial services, health care, national defense, and tourism. Famous for attractions such as the River Walk, and the Alamo, the city is visited by 26 million tourists per year. The city also has one of the largest military concentrations in the United States.


Seattle: Seattle is located between the Pacific Ocean inlet of Puget Sound and Lake Washington making it the 29th largest water port in the nation in terms of tonnage movement. Its major industries include aviation manufacturing and technology. The city is home to Boeing manufacturing facilities as well as Microsoft, the software giant. Tulsa: Tulsa’s primary industries include those in aerospace manufacturing, air transportation and petroleum and natural gas exploration. Tulsa is served by the Port of Catoosa on the McClellan-Kerr Arkansas River Navigational System which provides economical and accessible shipping to and from coastal ports.


Population A positive indicator of a city’s ability to move freight is its population base because a larger population demands more goods. Table 1 below illustrates how Kansas City falls among the group of chosen cities based on the population of the metro areas. The cities are ranked from largest to smallest metropolitan areas. Kansas City falls just below the half-way point within the grouping of peer cities. The cities that rank closely in metro area population with Kansas City are Cincinnati, Cleveland and Columbus, Ohio and San Antonio, Texas.

Not surprisingly, New York, Los Angeles and Chicago top the list. Dallas/Ft. Worth ranks high on the list due to the combination of both cities contributing to the metropolitan area. Oklahoma City, New Orleans and Tulsa fall in the bottom four, but the populations of their principal cities do not differ greatly from Kansas City’s principal city. The Kansas City Metropolitan area encompasses two states, but only the city of Kansas City, Missouri is factored in as the principal city.

Table 1: Population

Cities – Ranked Largest to Smallest Metro Area Population of Principal City Population of Metro Area New York 8,085,742 18,815,988 Los Angeles 3,819,951 12,875,587 Chicago 2,869,121 9,524,673 Dallas/Fort Worth 1,793,440 6,145,037 Philadelphia 1,479,339 5,827,962 Houston 2,009,690 5,628,101 Miami 376,815 5,413,212 Atlanta 423,019 5,278,904 Detroit 911,402 4,467,592 Phoenix 1,388,416 4,179,427 Seattle 569,101 3,309,347 Minneapolis/St. Paul 653,592 3,208,212 St. Louis 332,223 2,803,707 Baltimore 628,670 2,668,056 Denver 557,478 2,464,866 Pittsburgh 325,337 2,355,712 Cincinnati 317,361 2,133,678 Cleveland 461,324 2,096,471 San Antonio 1,214,725 1,990,675 Kansas City 442,768 1,985,425 Columbus 728,432 1,754,337 Indianapolis 783,438 1,695,037 Nashville 544,765 1,521,437 Memphis 645,978 1,280,533 Louisville 248,762 1,233,735 Oklahoma City 523,303 1,192,989 New Orleans 469,032 1,030,363 Tulsa 387,807 905,755

Principal City Population - Source U.S. Census Bureau: State and County QuickFacts. Data derived from Population Estimates, 2000 Census of Population and Housing Metro Area Population - Source: U.S. Census Bureau Annual Estimates of the Population of Metropolitan and Micropolitan Statistical Areas: April 1, 2000 to July 1, 2007 (CBSA-EST2007-01)


Work Force and Right-to-Work

Much like population, a city’s workforce also has a positive role in determining its ability to attract and handle freight-related development. Availability of skilled and unskilled labor is considered one of the most important factors in manufacturing and logistics development. Table 2 indicates where Kansas City falls in the ranking of available workers. It appears that the cities with the most comparable available Labor Forces are Cincinnati, Cleveland and Columbus, Ohio and San Antonio, Texas. New York, Los Angeles, Chicago and Dallas/Ft. Worth rank at the top in terms of work force availability while Oklahoma City, New Orleans and Tulsa fall at the bottom of the list illustrating the direct relationship between overall population and available work force. Right-to-work laws are statutes enforced in twenty-two U.S. states, which prohibit agreements between trade unions and employers making membership or payment of union dues or "fees" a condition of employment, either before or after hiring. Research has indicated that states with Right-to-work laws have higher economic growth and greater job creation than do states with no laws in place. Therefore, whether or not a state is governed by these statutes might indicate its ability to draw new businesses to its cities; especially those in the manufacturing, distribution and logistics markets. Table 2 indicates whether or not a city is located within a right-to-work state. This is determined based on the state in which the principal city resides.

Table 2: Work Force and Right-to-Work City – Ranked from Largest to

Smallest Labor Force Labor Force Unemployed Unemployment Rate Right to Work State

New York 9,317,100 438,900 4.7% No Los Angeles 6,575,900 339,600 5.2% No Chicago 4,959,900 284,200 5.7% No Dallas/Fort Worth 3,101,000 132,900 4.3% Yes Philadelphia 2,945,900 151,700 5.2% No Miami 2,824,200 115,100 4.1% Yes Atlanta 2,756,500 139,400 5.1% Yes Houston 2,742,600 114,000 4.2% Yes Detroit 2,115,200 161,900 7.7% No Phoenix 2,078,800 73,800 2.5% Yes Seattle 1,851,900 78,000 4.2% No Minneapolis/St. Paul 1,836,900 83,900 4.6% No St. Louis 1,427,600 89,200 6.2% No Denver 1,392,600 66,600 4.8% No Baltimore 1,392,300 53,500 3.8% No Pittsburgh 1,186,800 66,600 5.6% No Cincinnati 1,105,000 57,100 5.2% No Cleveland 1,072,200 68,300 6.4% No Kansas City* 1,032,800 55,200 5.3% No Columbus 951,500 45,700 4.8% No San Antonio 925,400 37,300 4.0% Yes Indianapolis 889,900 39,900 4.5% No Nashville 786,200 37,300 4.7% Yes Louisville 622,900 35,000 5.6% No Memphis 613,200 37,000 6.0% Yes Oklahoma City 549,900 19,200 3.5% Yes New Orleans 502,600 15,600 3.1% No Tulsa 430,100 15,100 3.5% Yes

Source: Bureau of Labor Statistics - February 2008 data , Metropolitan Area Employment and Unemployment: March 2008 Report *The portion of the Kansas City Metro Area located in Kansas is governed by Right-to-Work laws.


Accessibility to Modes of Transportation

Highway accessibility is one of the single-most important factors when determining whether or not a city has the capability of handling freight. Being well linked to other major metropolitan areas determines how efficiently freight can be transported between markets. Furthermore, highway conditions including levels of congestion, access to interstate highway interchanges and access to ports can all play a part in the determination of how suitable a city can be at handling freight.

The cities in Table 3 below were evaluated based on their levels of congestion measured in hours of delay per traveler per year. Kansas City has a low reported level of delay; generally indicating a low level of congestion as compared to other cities. Cities within a close range of Kansas City include Cleveland, Ohio, Pittsburgh, Pennsylvania, New Orleans, Louisiana and Tulsa, Oklahoma.

Kansas City is well linked to three major interstate highway systems and has several interstate linkages throughout the metro area to provide free-flowing connections between the major interstate highways. This could explain its low rate of congestion. Also the cities with the lowest metropolitan area populations (Oklahoma City, New Orleans and Tulsa) are also comparable to Kansas City in terms of least delay.

Table 3: Highway Congestion and Interstate Access

City – Ranked by fewest hours of

delay

Hours of Delay (per Traveler

per Year)

Accessibility to Interstate Highways Linkages to Interstate Highways

Cleveland 13 3 (I-90, I-71, I-80) 3 (I-480, I-271, I-490) Pittsburgh 16 2 (I-79, I-76) 3 (I-376, I-279, I-579) Kansas City 17 3 (I-70, I-35, I-29) 4 (I-435, I-635, I-470, I-670) New Orleans 18 2 (I-10, I-55) 3 (I-310, I-510, I-610) Tulsa 19 1 (I-44) 1 (I-244) Oklahoma City 21 3 (I-40, I-35, I-44) 1 (I-240) Cincinnati 27 3 (I-75, I-71, I-74) 2 (I-275, I-471) Memphis 30 3 (I-40, I-55 and I-69) 1 (I-240) St. Louis 33 4 (I-44, (I-55, I-64, and I-70) 4 (I-255, I-170, I-270) Columbus 33 2 (I-71, I-70) 2 (I-670, I-270) Philadelphia 38 2 (I-95, I-76) 3 (I-295, I-476, I-276) San Antonio 39 3 (I-35, I-37, I-10) 1 (I-410) Nashville 40 3 (I-40, I-24, I-65) 1 (I-440) Indianapolis 41 4 (I-69, I-74, I-70, I-65) 2 (I-865, I-465) Minneapolis/St. Paul 43 2 (I-94, I-35) 2 (I-494, I-694) Baltimore 44 4 (I-95, I-70, I-83, I-97) 5 (I-195, I-695, I-795, I-895, I-395) Seattle 45 2 (I-90, I-5) 1 (I-405) Chicago 46 7 (I-55, I-88, I-57, I-80, I-90, I-94, I-65) 3 (I-294, I-290, (I-355) New York 46 2 (I-95, I-87) 9 (I-684, I-287, I-280, I-495, I-678, I-295, I-695, I-278, I-895) Phoenix 48 2 (I-10, I-17) N/A Miami 50 2 (I-75, I-95) 2 (I-195, I-395) Denver 50 3 (I-70, I-76, I-25) 2 (I-270, I-225) Houston 56 2 (I-45, I-10) 1(I-610) Dallas/Fort Worth 58 4 (I-20, I-30,I-35, I-45) 2 (I-820, I-635) Atlanta 60 3 (I-20, I-75, I-85) 4 (I-675, I-285, I-575, I-985) Los Angeles 72 4 (I-5, I-15, I-40, I-10) 7 (I-210, I-215, I- 405,I- 605,I- 710, I-110, I-105) Detroit N/A 3 (I-75, I-94, I-96) 2 (I-275, I-696)

Congestion Source: Sept 2007 Urban Mobility Report Information Sources: Google Earth, MapQuest and Rand McNally Road Atlas


Railroad accessibility was also assessed. Among the cities studied only Chicago, New Orleans, St. Louis and Memphis rank above Kansas City in terms of rail accessibility to major Class I Railroads. Kansas City has direct access to four Class I railroads. This access provides Kansas City with a connection to most metropolitan area markets, specifically Chicago, the largest major metro area closest to Kansas City and also one of two cities with direct access to six Class I Railroads. Kansas City sits at the crossroads of carriers serving the west coast as well as those serving the east coast. This connection point is valuable in moving freight across the United States. Kansas City also has a well defined north-south corridor which gives Kansas City the opportunity to play an important role in goods movement between Canada, the United States and Mexico. Overall, four markets have more direct accessibility to Class I Railroads than Kansas City. There are also four markets that are only serviced directly by one Class I Railroad and those cities include Indianapolis, Miami, Oklahoma City, and San Antonio. It should be noted that while many cities are not directly linked to certain Class I lines, they may have haulage or trackage rights with the Railroads directly serving them.

Table 4: Railroad Connectivity

City – Listed by number of railroads

Rail Line City – Listed by number of railroads

Rail Line

Chicago BNSF; CSX; NS; UP; CN; CP Cincinnati CSX; NS New Orleans BNSF; CSX; KCS; NS; UP; CN Columbus CSX; NS St. Louis BNSF; CSX; KCS; NS; UP; CN Denver BNSF; UP Memphis BNSF; CSX; NS; UP; CN Houston BNSF; UP Kansas City BNSF; KCS; NS; UP Los Angeles BNSF; UP Minneapolis/St. Paul BNSF; UP; CN; CP Phoenix BNSF; UP Cleveland CSX; NS; CN Pittsburgh CSX; NS Dallas/Fort Worth BNSF; KCS; UP Seattle BNSF; UP Detroit CSX; NS; CN Tulsa BNSF; UP Louisville CSX; NS; CP Indianapolis CSX New York CSX; NS; CP Miami CSX Philadelphia CSX; NS; CP Nashville CXS Atlanta CSX; NS Oklahoma City UP Baltimore CSX; NS San Antonio UP

Source: Class I Railroad Web sites The next mode of transportation that was evaluated was the amount of air cargo (inbound and outbound) traveling through each metro area. Table 5 below summarizes those totals and each city is ranked in order from highest to lowest in the amount of air cargo traveling through its most prominent airport. Once again, Kansas City falls in the middle among the comparative cities. Memphis far outranks all of the other comparative cities and major metro areas as well, but that is not surprising considering its relationship with FedEx. The cities within closest range to Kansas City include San Antonio, Texas; Baltimore, Maryland; and Columbus and Cleveland, Ohio.


Table 5: Air Cargo

City (Airport Code) – Ranked by Metric tons

Metric tons City (Airport Code) – Ranked by Metric tons

Metric tons

Memphis (MEM) 3,840,574 Minneapolis/St. Paul (MSP) 249,759 Louisville(SDF) 2,078,290 Detroit (DTW) 223,379 Miami (MIA) 1,922,982 San Antonio (SAT) 127,808 Los Angeles (LAX) 1,877,876 Kansas City (MCI) 127,620 New York (JFK) 1,595,577 Baltimore (BWI) 114,323 Chicago (ORD) 1,524,419 Columbus (LCK) 100,009 Indianapolis (IND) 1,056,517 Cleveland (CLE) 86,642 Dallas/Fort Worth (DFW) 724,957 Pittsburgh (PIT) 84,266 Atlanta (ATL) 720,209 St. Louis (STL) 83,356 Philadelphia (PHL) 543,450 Nashville (BNA) 67,918 Houston (IAH) 410,632 Tulsa (TUL) 54,513 Seattle (SEA) 319,582 New Orleans (MSY) 44,872 Denver (DEN) 260,287 Cincinnati (CVG) 39,546 Phoenix (PHX) 256,817 Oklahoma City (OKC) 32,706 Source: 2007 ACI - North America Preliminary Cargo Traffic Study Note: Total Cargo: loaded + unloaded freight + mail in metric tons. Data includes transit freight.

The amount of foreign and domestic waterborne cargo traveling in and out of each metropolitan area was assessed. This includes both ocean and river ports. Cities located on the major coasts far outranked cities located inland in overall quantities of waterborne cargo. The cities ranking closest to Kansas City in this category include Minneapolis/St. Paul, Minnesota; Nashville, Tennessee and Tulsa, Oklahoma. Several cities did not have data to report in this category because they are not located along a body of water. Table 6 below summarizes the data.

Table 6: Waterborne Cargo

City – Ranked by tonnage

Port Tonnage City – Ranked by tonnage

Port Tonnage

New Orleans 302,390,826 Miami 8,129,798 Houston 222,146,750 Louisville 7,373,428 New York 157,630,099 Minneapolis/St. Paul 5,748,265 Los Angeles 65,978,238 Nashville 4,503,663 Baltimore 42,439,383 Kansas City 3,580,000 Pittsburgh 41,982,227 Tulsa 2,073,088 Philadelphia 38,597,178 Columbus N/A St. Louis 31,317,323 Atlanta N/A Seattle 27,973,852 Oklahoma City N/A Chicago 25,706,302 Denver N/A Memphis 19,100,259 Dallas/Fort Worth N/A Detroit 17,352,767 San Antonio N/A Cleveland 15,186,819 Phoenix N/A Cincinnati 13,334,351 Indianapolis N/A

Source: USACE Army Corps of Engineers – CY 2006 Note: Total Domestic & Foreign - Imports + Exports


Corporate State Tax Rates The final category reviewed in this phase of study is how the states of Missouri and Kansas compare to other states with comparable tax rates. It will help determine the competitiveness of the various cities studied in order to help determine if this category is a strength or weakness for the Kansas City Metropolitan Area. Table 7 below summarizes the various states that were reviewed. Taxes at the county and city level also influence the competiveness of these cities. However, the variability of tax rate from one jurisdiction to another is too refined to report. Therefore, state levels are used as an initial comparative metric.

Table 7: State Corporate Tax Rates

State (Study Cities) Tax Rates Tax Brackets # of Brackets Arizona Phoenix 6.968 Flat Rate 1 California Los Angeles 8.84 Flat Rate 1 Colorado Denver 4.63 Flat Rate 1 Florida Miami 5.5 Flat Rate 1 Georgia Atlanta 6.0 Flat Rate 1 Illinois Chicago 7.3 Flat Rate 1 Indiana Indianapolis 8.5 Flat Rate 1 Kansas Kansas City 4.0 Flat Rate 1 Kentucky Louisville 4.0-7.0 50,000 – 100,000 3 Louisiana New Orleans 4.0-8.0 25,000 – 200,000 5 Maryland Baltimore 8.3 Flat Rate 1 Michigan Detroit 4.95 Flat Rate 1 Minnesota Minneapolis/St. Paul 9.8 Flat Rate 1 Missouri Kansas City, St. Louis 6.25 Flat Rate 1 New York New York 7.5 Flat Rate 1 Ohio Cincinnati, Columbus, Cleveland 5.1-8.5 50,000 2 Oklahoma Oklahoma City, Tulsa 6.0 Flat Rate 1 Pennsylvania Philadelphia, Pittsburgh 9.99 Flat Rate 1 Tennessee Memphis, Nashville 6.5 Flat Rate 1 Texas* Dallas/Ft. Worth, Houston, San Antonio N/A Washington* Seattle N/A

Source: Federation of Tax Administrators www.taxadmin.org *Note: Texas imposes a Franchise Tax known as the margin tax and the state of Washington does not have state corporate income taxes. Summary The results of this national comparison show that Kansas City is and will continue to be competitive in the transportation-intensive industries including those in warehousing and distribution centers. This comparison along with a more comprehensive evaluation of several key cities with characteristics much like Kansas City will help identify key areas where Kansas City can continue to excel and further gain a stronghold in the area of transportation-intensive, freight-related development. Cities that have emerged throughout this phase of the study as candidates for further study include Chicago, Memphis, Indianapolis, Cleveland, Columbus and Dallas/Fort Worth.


Phase II: Comprehensive and Competitive Analysis


Table of Contents Introduction Quantitative Evaluation Methodology Market Coverage Truckload Shipment Costs Access to Rail Service Labor Force Labor Cost Lease Rates Cost of Living Tax Environment Ranking of Locations Conclusion Qualitative Evaluation

Highways and Congestion Air Services

Summary List of Tables Table 1: Evaluation Criteria Table 2: Counties in the Metropolitan Statistical Area Table 3: Local Market Coverage Table 4: Next-Day Market Coverage Table 5: Representative Truckload Rates to Major

Markets Table 6: Highway Distances Table 7: Intermodal Terminals by MSA Table 8: Labor Force in 2007 and 2012 Table 9: Unemployment as of August 2008 Table 10: Labor Cost of Warehouse Employees as of

2007 Table 11: 2007 Union Profile Table 12: Cost of Living as of 2007 Table 13: Home Ownership and Median Household

Income Table 14: Tax Environment as of 2007 Table 15: Weighting of Evaluation Criteria Table 16: Example of Quintile Distribution for

Truckload Shipment Costs

Table 17: Travel Time Index Table 18: Annual Hours of Delay per Traveler Table 19: Air Cargo Traffic as of 2007 List of Figures Figure 1: Kansas City Local and Next-Day Markets Figure 2: Columbus Local and Next-Day Markets Figure 3: Dallas Local and Next-Day Markets Figure 4: Indianapolis Local and Next-Day Markets Figure 5: Nashville Local and Next-Day Markets Figure 6: Next-Day Market Coverage of All Study

Cities Figure 7: Rail Connectivity of Class I Railroads Figure 8: Average Lease Rates Figure 9: Results of Ranking Analysis Figure 10: Kansas City Highway Flowband Map Figure 11: Columbus Highway Flowband Map Figure 12: Dallas Highway Flowband Map Figure 13: Indianapolis Highway Flowband Map Figure 14: Nashville Highway Flowband Map


Phase II: Comprehensive and Competitive Analysis The goal of this phase of the Regional Freight Assessment is to perform a competitive assessment on four cities throughout the United States to determine how Kansas City matches up to them as a competitor in relation to freight activities. The results of the analyses will determine how Kansas City can further define itself and determine how to expand its growth in freight-related development. A variety of criteria are used to identify the most suitable locations for freight-related development. Key criteria are market coverage (population within a specified driving distance of the location), truckload shipment costs to major markets and rail connectivity. Labor availability and quality, building lease rates and availability of developed infrastructure are also important. Other considerations include tax rates and quality of life factors. Typically, when businesses choose to locate in Kansas City, several other cities are also considered in order to determine the best fit for each company. The four selected cities: Columbus, Dallas, Indianapolis and Nashville, are often considered along with Kansas City. A brief overview of each of the cities analyzed against Kansas City in this study follows. Columbus - Columbus has a generally strong and diverse economy. Some of its major industries include several restaurant chain headquarters, clothing manufacturers, steel processing and banking. Its location along both the I-70 and I-71 corridors gives it regional access to markets in the eastern and mid-western U.S. Columbus is ranked 41st in the nation in movement of air cargo tonnage. It is home to Rickenbacker Airport, an “inland port” with Customs facilities and a U.S. Foreign Trade Zone. It is served by two Class I Railroads; CSX and Norfolk Southern.

Dallas - The Dallas/Fort Worth region ranks fourth in the world in the number of Fortune 500 companies it hosts. The region is home to15 freight facilities and four intermodal rail yards. In the next several years, Dallas is anticipating adding a large amount of commercial space which should further stimulate the region’s economy. Dallas is home to the International Inland Port of Dallas (IIPOD), a public-private partnership designed to further develop southeast Dallas as a logistics and distribution center, and regional freight transportation hub. The metro area is served by three Class I Railroads; KCS, BNSF and UP. It is also connected to four interstate highway systems including I-30, I-20, I-35 and I-45.

Indianapolis - Indianapolis considers automobile manufacturing to be one of its most important industries and continues to grow in this field. They balance that with their prominence in the field of life-sciences. The city is strategically located placing 75 percent of the U.S. and Canadian populations within a one-day drive of the city. The second-largest Federal Express hub in the nation boosts Indianapolis to be being the 21st largest cargo airport in the world. Only one Class I Railroad, the CSX, has direct service to Indianapolis, but the city is served by four interstates including I-69, I-74, I-70 and I-65. Nashville - Nashville is the capital of Tennessee located in the center of the state. The economy in Nashville is diverse, with growing industries in areas such as retail, professional and business services, health care, transportation and construction. Nashville is within a 650-mile radius of 50 percent of the country’s population. This connectivity has helped fuel its emerging distribution and warehouse center growth. Nashville is connected to three interstate highways: I-24, I-40 and I-65 and is directly served by one Class I Railroad, CSX. Quantitative Evaluation


This competitive assessment uses major criteria that could be readily defined and measured using published data sources. A list of criteria used in this study is provided in Table 1. The data for each of the components listed was gathered on each of the study cities and at the end of this competitive assessment, a weighted analysis was performed to determine how each of the cities compared to one another. Companies seeking to locate their distribution, manufacturing and warehousing facilities may utilize some or all of these criteria when deciding their location choices. Other measures beyond the evaluation criteria listed are included in the overall assessment in order to provide more in-depth information, but not all of that data is used in the weighted evaluation component of this study, which ranks Kansas City against the four other cities.

Table 1 Evaluation Criteria

Criteria Definition Data Source

Local Market Coverage “Local Market” is defined as the population falling within a one-way driving time of four hours. Statistics for 2007 and 2012.

Based on U.S. Census Bureau population data.

Next-Day Market Coverage “Next-Day Market” (or overnight market) is as the population falling within a one-way driving time of eight hours. Statistics for 2007 and 2012.

Based on U.S. Census Bureau population data.

Truckload Shipment Costs Truckload shipment costs to major regional centers. Based on representative truckload rates.

Truckloadrate.com

Access to Rail Service Based on the number of Class I Railroads directly serving each city, number of Intermodal facilities in each city and access to transcontinental or major intermodal route.

Class I Railroads

Labor Availability Size of the labor force. Statistics for 2007 and 2012. U.S. Census Bureau

Labor Costs Mean wage per hour for warehouse employees in 2007 and union profile.

U.S. Department of Labor

Lease Rates Average lease rates for warehouse / distribution facilities.

Published reports on industrial property.

Tax Environment Sales, property and other taxes. Sperling.

Cost of Living Local and regional cost of living index. Sperling.

Methodology This comparison relies on data obtained from a variety of different sources – the U.S. Census Bureau, state and local government agencies, and commercial data sources. Some of the data is based on the Metropolitan Statistical Area (MSA). MSAs are geographic areas defined by the U.S. Office of Management and Budget (OMB) for use by federal statistical agencies in collecting, tabulating, and publishing federal statistics. An MSA consists of one or more counties and includes the counties containing the core urban area, as well as any adjacent counties that have a high degree of social and economic integration (as measured by commuting to work) with the urban core. The MSAs studied in this phase and the counties that comprise them are shown in Table 2. The counties designated by the OMB for the Kansas City MSA are slightly different than the counties used for the overall KC Regional Freight Outlook. To remain consistent with the other cities studied in this comparative assessment, only data for the MSA counties listed below is included for Kansas City.


Table 2 Counties in the Metropolitan Statistical Areas

Kansas City MSA Dallas MSA* Columbus MSA Indianapolis MSA Nashville MSA** Bates County MO Caldwell County MO Cass County MO Clay County MO Clinton County MO Jackson County MO Lafayette County MO Platte County MO Ray County MO Franklin County KS Johnson County KS Leavenworth County KS Linn County KS Miami County KS Wyandotte County KS

Collin County Dallas County Delta County Denton County Ellis County Hunt County Johnson County Kaufman County Parker County Rockwall County Tarrant County Wise County

Delaware County Fairfield County Franklin County Licking County Madison County Morrow County Pickaway County Union County

Boone County Brown County Hamilton County Hancock County Hendricks County Johnson County Marion County Morgan County Putnam County Shelby County

Cannon County Cheatham County Davidson County Dickson County Hickman County Macon County Robertson County Rutherford County Smith County Sumner County Trousdale County Williamson County Wilson County

Source: Office of Management and Budget *Includes counties for Dallas-Fort Worth-Arlington, TX. **Includes Nashville, Davidson, and Murfreesboro.

Market Coverage A key decision-making factor in identifying suitable locations for the movement of freight is the ability of a city to be connected to a large customer base within two trucking service levels. The “Local Market” is defined as the population within a one-way driving time of four hours and the “Next-Day” or overnight market is defined as the population within a driving time of eight hours. Hours of service regulations limit truck drivers to ten-hour shifts. The eight-hour drive time studied factors in waiting times as well as pick-up and drop-off times. The amount of mileage covered within these two driving times varies and depends largely on driving speed which is influenced by road type (i.e. Interstate Highway vs. local road), road conditions and traffic congestion. The analysis presented in this section is generally based on current conditions. The following figures depict both the local and next-day market coverage for each of the study cities. The red-line is representative of the local market base, and the blue line is representative of the next-day market. Figure 1. Kansas City Local and Next-Day Markets

Source: TranSystems


Figure 2. Columbus Local and Next-Day Markets Figure 3. Dallas Local and Next-Day Markets

Source: TranSystems Source: TranSystems Figure 4. Indianapolis Local and Next-Day Markets Figure 5. Nashville Local and Next-Day Markets

Source: TranSystems Source: TranSystems


Figure 6: Next-Day Market Coverage of All Study Cities

Source: TranSystems The defined local and next-day markets were combined with population statistics to determine the size and growth of each location’s potential customer base. The results of the local market coverage analysis are summarized in Table 3. Of the five locations reviewed, Columbus has the largest population within one-day service, providing access to 17.7 million people, but it is projected to have the smallest percentage increase in local market population through 2012. Indianapolis is a close second in the number of people served within a four-hour drive of the city. Both Columbus and Indianapolis are located centrally between the Midwest and east coast, which provides them with connectivity to larger population centers. Dallas will expand its market served by over 10% compared to Columbus’s projected1.6% growth. Kansas City ranks in the middle with a 4.6% expected growth rate. While Kansas City has a much lower population base within a four-hour drive than Columbus, it should be noted that through 2012, Columbus’s market is going to grow by a mere 40,000 more people than Kansas City’s market.

Table 3 Local Market Coverage (within one-way driving time of 4 hours)

Kansas City Columbus Dallas Indianapolis Nashville Population 2007 5,057,424 17,653,106 10,192,828 15,030,584 8,798,052 Population 2012 5,291,057 17,926,756 11,234,176 15,531,545 9,241,846 Population Change 233,633 273,650 1,041,348 500,961 443,794 Population Growth 4.6% 1.6% 10.2% 3.3% 5.0%

Source: TranSystems and U.S. Census Bureau The results of the next-day market coverage assessment are summarized in Table 4. Of the five locations reviewed, Indianapolis provides the largest current next-day market with an estimated population of 56.7 million, followed by Columbus with 48.0 million. Likewise, Indianapolis is projected to have the largest next-day market in the future, but it is anticipated to grow at a slightly slower rate than all of the study cities except Columbus.


Table 4 Next-Day Market Coverage (within one-way driving time of 8 hours)

Kansas City Columbus Dallas Indianapolis Nashville Population 2007 19,982,721 48,013,522 28,448,644 56,651,757 39,754,405 Population 2012 20,829,809 49,270,452 30,848,990 58,661,963 42,033,447 Population Change 847,088 1,256,930 2,400,346 2,010,206 2,279,042 Population Growth 4.2% 2.6% 8.4% 3.5% 5.7%

Source: TranSystems and U.S. Census Bureau Truckload Shipment Costs Transportation costs are one of the most critical aspects of determining where to locate freight-intensive businesses. Estimated transport costs to major regional destinations are shown in Table 5. The rates represent full truckload shipments from one destination to another and reflect current market conditions such as equipment availability, cargo flow balances and backhaul options. The destinations were chosen based on location to the various markets studied. It should be noted that shipping rates could be affected by volume of business, origin-destination requirements and unique service needs. Kansas City has the best overall truckload shipment cost profile. This is likely due to its central location within the United States and connectivity to major markets enhanced by its proximity to major interstate routes including I-70, a major east-west route and I-35, which spans from Canada to Mexico. Distance plays an integral role in determining shipping costs. Distances to the various markets are shown in Table 6. Not surprisingly, Kansas City has the lowest overall travel distances to the various markets which directly correlate to its low shipping costs. Even though Kansas City does not have market coverage comparable to the other four cities, it outranks all of the cities in shipping costs. This makes it an ideal location for companies who are looking to ship goods that aren’t particularly time-sensitive. It also makes Kansas City an ideal location for assembly markets where goods are shipped in from all over, assembled and the final product is shipped out of the city.

Table 5 Representative Truckload Rates to Major Markets

Kansas City Columbus Dallas Indianapolis Nashville Atlanta, GA $1667 $1155 $1384 $1099 $615 Charlotte, NC $2002 $1052 $1750 $1282 $841 Chicago, IL $1011 $731 $1575 $672 $948 Denver, CO $1705 $2879 $1790 $2613 $2557 Des Moines, IA $563 $1320 $1239 $934 $1708 Memphis, TN $957 $1202 $790 $954 $572 Minneapolis, MN $846 $1579 $1698 $1195 $1757 New Orleans, LA $1949 $1857 $933 $1744 $1137 Oklahoma City, OK $752 $1919 $556 $1682 $1451 St. Louis, MO $677 $800 $1096 $681 $685 Tulsa, OK $579 $1882 $258 $1600 $1251 Total: $12,708 $16,376 $13,069 $14,456 $13,522 Difference: -- +29% +3% +14% +6%

Source: TranSystems and Truckloadrate.com


Table 6 Highway Distances (Miles)

Kansas City Columbus Dallas Indianapolis Nashville Atlanta, GA 808 586 782 534 248 Charlotte, NC 980 429 1031 605 424 Chicago, IL 511 328 928 185 472 Denver, CO 596 1256 785 1079 1160 Des Moines, IA 194 670 746 479 680 Memphis, TN 522 589 453 466 213 Minneapolis, MN 437 770 943 592 896 New Orleans, LA 915 933 521 822 534 Oklahoma City, OK 353 925 207 748 680 St. Louis, MO 250 421 632 244 309 Tulsa, OK 245 821 258 639 614 Total: 5811 7728 7286 6393 6230 Difference: -- +33% +25% +10% +7%

Source: TranSystems and MSN Live Search Maps Access to Rail Service Kansas City has a strong intermodal infrastructure that makes it a leading cargo center with four Class I Railroads maintaining facilities in the metro area. Those facilities include single intermodal facilities operated by BNSF, KCS and NS and two facilities operated by UP as shown in Table 7. KCS has recently relocated its facility to the former Richards-Gebaur Memorial Airport site and BNSF will relocate its facility to a new logistics park near Gardner, Kansas southeast of the metropolitan area. Of the cities studied, Kansas City has the most connected rail network with direct service by BNSF, KCS, NS and UP. This access provides Kansas City with a connection to most metropolitan area markets as well as access to transcontinental routes. Kansas City sits at the crossroads of carriers serving the west coast as well as those serving the east coast. This connection point is valuable in moving freight across the United States. Kansas City also has a well defined north-south corridor which gives them the opportunity to play an important role in goods movement between Canada, the United States and Mexico. Dallas is served by three Class I railroads including KCS, BNSF and UP. There is a recently opened UP intermodal facility and a planned BNSF intermodal facility, both located at the IIPOD. In addition, Dallas has a number of other intermodal terminals including the BNSF Alliance facility north of Fort Worth, a KCS facility north of Dallas, and an older UP terminal. Columbus is served by two Class I railroads, CSX and NS. Columbus currently has two intermodal facilities operated separately by CSX and NS. Indianapolis and Nashville are only served by CSX with no intermodal facilities currently operating in their metro areas. Figure 7 illustrates the rail connectivity of the study cities.


Figure 7: Rail Connectivity of Class I Railroads

Source: TranSystems

Table 7 Intermodal Terminals by MSA

Kansas City Dallas Columbus Indianapolis Nashville BNSF 1 1 0 0 0 CSX 0 0 1 0 0 KCS 1 1 0 0 0 NS 1 0 1 0 0 UP 2 2 0 0 0

Source: Class I Railroad Web sites Labor Force Availability of skilled and unskilled labor is considered one of the most important factors in manufacturing and logistics development. Based on U.S. Census Bureau data, an analysis of labor availability is presented in Table 8. The Dallas MSA has the largest available workforce. This is likely because the Dallas MSA is comprised of the city of Dallas and the city of Fort Worth as well as the counties surrounding both cities. Kansas City is the only other city in this study with a current available civilian labor force topping one million workers. Though it is projected that Kansas


City will have a smaller labor force growth, they will still have the second highest number of available workers of all of the study cities in 2012. Additional information on unemployment is presented in Table 9 in support of the labor availability assessment.

Table 8 Labor Force in 2007 and 2012

Kansas City Columbus Dallas/Fort Worth Indianapolis Nashville Labor Force 2007 1,032,745 952,551 3,023,856 927,650 790,963 Labor Force 2012 1,104,476 1,037,231 3,413,375 1,010,014 870,191 Labor Force Change 71,731 84,680 389,519 82,364 79,228 Labor Force Growth 6.9% 8.9% 12.9% 8.9% 10.0%

Source: TranSystems and U.S. Census Bureau

Table 9 Unemployment as of August 2008

Kansas City Columbus Dallas/Fort Worth Indianapolis Nashville

Persons Unemployed 65,400 60,600 163,500 50,800 45,500 Unemployment Rate 6.3% 6.2% 5.1% 5.5% 5.7%

Source: Bureau of Labor Statistics Labor Cost Labor cost is the second largest cost component after transport costs in attracting freight-intensive businesses to a city. Table 10 shows the number of warehouse employees by location and the mean hourly wage. Dallas has the largest number of warehouse employees and one of the lowest labor costs when compared to the other study cities. Kansas, Texas and Tennessee are all right-to-work states as summarized in Table 11. Research has indicated that states with right-to-work laws have higher economic growth and greater job creation than do states with no laws in place. Therefore, whether or not a state is governed by these statutes might indicate its ability to draw new businesses to its cities; especially those in the manufacturing, distribution and logistics markets. Kansas City is uniquely positioned between Missouri and Kansas. Even though Missouri is not a right-to-work state, companies seeking to locate in Kansas City still have the opportunity to take advantage of Kansas’s right-to-work status.

Table 10 Labor Cost of Warehouse Employees as of 2007

Kansas City Columbus Dallas/Fort Worth Indianapolis Nashville Warehouse Employees 23,770 29,990 80,111 33,980 29,990 Mean Wage per Hour $13.39 $12.54 $11.74 $12.61 $11.68 Annual Wage $27,866 $26,088 $24,418 $26,220 $24,300 Difference (Annual Wage) -6.4% -12.4% -5.9% -12.8%

Source: Bureau of Labor Statistics and TranSystems


Table 11 2007 Union Profile

Kansas City Columbus Dallas Indianapolis Nashville Right to Work State No/Yes* No Yes No Yes Share of Workforce in Union 8.4% 12.3% 4.3% 8.1% 5.1% Private Sector Workforce in Union 6.7% 5.8% 2.4% 5.8% 2.9% Public Sector Workforce in Union 21.1% 39.9% 20.7% 22.6% 18.5%

Source: www.unionstats.com *Kansas City MSA falls in both Missouri and Kansas: Missouri is NOT a RTWS and Kansas is a RTWS

Lease Rates Another cost element that is reviewed by companies seeking freight-related space is the lease rate for industrial property, which generally falls into the following property types:

• Warehouse / Distribution and Manufacturing – these buildings are typically one-story and have low internal specifications with high ceiling clearance, heavy power, and various other building amenities including suitable storage and manufacturing activities.

• Flex / Service – higher end properties commonly distinguished from warehouse/distribution and manufacturing facilities by high build-out of office space (typically 50% or more). Tech space and multi-stories are also common features. They are typically used for more specialized activities, for example, technical sectors.

A location’s lease rates will be driven by factors that include supply and demand of properties, supply and demand of land, land costs, construction costs, transportation access (road and rail), age and condition of the property, and building characteristics (ceiling height, etc.). The rate paid by a company will also reflect building location and characteristics, and specific customization needs. Representative lease rates for Kansas City and the four other locations are shown in Figure 8. Columbus offers the most competitive lease rates for warehouse/distribution buildings. In addition, Dallas, Indianapolis and Nashville all have very similar lease rates. The lower average lease rates in the other cities reflect the availability of lower cost land and local building supply and demand factors. The high lease rates for Kansas City possibly reflect the fact that existing space continues to be leased and new construction remains at a lower level. Construction at the new intermodal facilities presents an opportunity for Kansas City to reduce its lease rates, but economic factors may force a decline in construction in the short term.


Figure 8: Average Lease Rates

Source: CBRE Market Reports for each MSA, Third Quarter reports

Cost of Living A cost of living comparison is provided in Table 12. Overall, Kansas City has the second lowest cost of living among the study cities spurred mostly by the low cost of housing. The higher cost of housing is reflected in the data on home ownership Table 13, which shows Dallas as having a lower rate of home ownership than the other four locations.

Table 12 Cost of Living as of 2007

Kansas City Columbus Dallas/Fort Worth Indianapolis Nashville US Index Overall Cost of Living Index 80 93 93 75 89 100

Food (30%) 103 103 101 95 99 100 Housing (30%) 43 56 79 40 81 100 Utilities (6%) 94 111 93 98 86 100

Transportation (10%) 104 104 107 94 95 100 Health (7%) 98 97 108 100 82 100

Miscellaneous (32%) 102 103 99 93 97 100 Source: Sperling


Table 13 Home Ownership and Median Household Income as of 2007

Kansas City Columbus Dallas Indianapolis Nashville US Average Owned 52.6% 45.3% 39.7% 54.03% 52.1% 64.1% Rented 38.7% 46.7% 54.4% 37.33% 42.22% 21.5% Vacant 9.0% 7.8% 6.6% 9.11% 6.15% 14.5% Median Household Income $42,331 $43,731 $42,086 $45,996 $45,996 $44,684

Source: Sperling Tax Environment Tax rates by location are shown in Table 14. Typically state and local tax are one of the top five site selection factors in determining location decisions. Various types of state and local taxes can have differing impacts on projects, but each can play a part in attracting a business to a certain metropolitan area. Therefore, when performing a specific inventory of locations where a freight-related business might locate, financial impacts with a more detailed approach should be taken. However, that approach is too refined and narrow for this overview, so only state level were reviewed. Both Columbus and Indianapolis have a lower sales tax rate than Kansas City, Dallas and Nashville. Kansas City has a very competitive property tax rate comparing to Dallas and Columbus while Nashville has the lowest property tax rate among the study cities.

Table 14 Tax Environment as of 2007

Kansas City Columbus Dallas Indianapolis Nashville US Average Sales Tax % 7.35% 6.75% 8.25% 6.0% 9.25% 6.0% Property Tax* $12.91 $15.51 $19.15 $11.50 $9.33 $13.28 Income Tax % 7.00% 6.99% 0% 4.10% 0% 5.0%

Source: Sperling *Per $1,000 of property value As reported by Principal City

Ranking of Locations A weighted scoring system is used to rank Kansas City and the other four locations. This approach assigns greater importance to the major evaluation criteria (market coverage, transportation costs, rail facilities and labor availability/costs) and lower importance to the others. The weights used in this analysis are shown in Table 15. They are broad based given the macro nature of the evaluation in this study and they are derived from the project team’s experience of the logistics industry and the interviews conducted with shippers. In practice, each shipper will create its own weighting system based on individual requirements. Furthermore, a shipper may only focus on the major criteria during the first phase of site selection; once it has determined a short list of candidates it will start evaluating the minor criteria, such as tax environment and quality of life factors, in more detail.


Table15: Weighting of Evaluation Criteria

Criteria Sub-Criteria Criteria Weight Sub-Category Weight

Market Coverage 25% Local Market Coverage Population 2007 15.00% Local Market Coverage Population 2012 35.00% Percent Local Market Coverage Growth 2007-2012 5.00% Next-Day Market Coverage Population 2007 15.00% Next-Day Market Coverage Population 2012 35.00% Percent Next-Day Market Coverage Growth 2007-2012 5.00% Truckload Shipment Costs 35% Access to Rail Service 10% Number of Class I Railroads 40.00% Number of Intermodal Facilities 40.00% Access to Transcontinental or Major Intermodal Route 20.00% Labor Availability 10% Civilian Labor Force 2007 30.00% Civilian Labor Force 2012 50.00% Percent Civilian Labor Force Growth 2007-2012 20.00% Labor Costs 10% Warehouse Employees - Mean Wage per Hour 80.00% Right to Work State (Y/N) 10.00% Percent of population represented by Unions (2007) 10.00% Lease Rates 6% Tax Environment 3% Cost of Living 1%

Source: TranSystems A numeric quintile distribution was developed for each criteria and sub-category, and each location was assigned to a quintile. For example, Table 16 shows the quintile distribution for transportation costs. Kansas City and Dallas are ranked highest based on their lowest transportation costs.

Table 16: Example of Quintile Distribution for Truckload Costs Criteria

Quintile Quintile Low

Quintile High Kansas City Columbus Dallas Indianapolis Nashville

5 $12,708 $13,439 5

5

4 $13,439 $14,107

2 3 $14107 $14,901

3

2 $14,901 $15,632

1 $15,632 $16,363

1

Source: TranSystems (5 = Highest Rank and 1 = Lowest Rank)


An evaluation of Kansas City under the location selection criteria used when cities compete for warehouse and distribution investments was performed. The significant strengths for Kansas City include low transportation costs, rail connectivity, a strong available labor force and a low cost of living. The most competitive transportation costs (as measured by representative truckload rates to major markets) make Kansas City an ideal location to locate freight-intensive businesses. As described above, a weighted scoring system was used to rank Kansas City along with the other four locations. The results of the ranking analysis are presented in Figure 9. Dallas is rated first based on its reasonable market coverage, competitive labor force availability and costs, and low transportation costs relative to the other four locations. While Indianapolis and Columbus cover large market areas, their transportation costs are relatively high. In fact, Columbus has the highest transportation costs of all of the study cities. Kansas City comes in second overall and this is largely due to low transportation costs and excellent rail facilities. A few categories where Kansas City could expand its competiveness could be in the areas of lease rates and labor cost. Kansas City has the highest lease rates of all of the study cities. According to CBRE’s 2008 Third Quarter Industrial Report for Kansas City, this could be due to the fact that space is continuously being rented and therefore, supply is diminishing. Furthermore, the city’s high unemployment rate suggests that worker compensation could be reduced due to the competitive nature of company’s hiring skilled labor in a market where there is an abundance of workers.

Figure 9: Results of Ranking Analysis

Conclusions to Comparative Evaluation The results of this competitive assessment comparing Kansas City to Columbus, Dallas, Indianapolis and Nashville reveal that Kansas City has strengths in several areas including transportation costs, rail facilities, availability of labor and a low cost of living. Companies seeking to locate their manufacturing, distribution and warehousing facilities will find that those attributes make the city very attractive. The most prominent area where Kansas City falls below the other four cities being assessed is in market coverage, both local and next day. Perhaps promoting Kansas City’s rail connectivity could compensate for its lower market coverage as compared to the other study cities.

64

50

82

62

60


Qualitative Evaluation Highways and Congestion Highway accessibility is also an important factor when determining whether or not a city has the capability of handling freight. Being well linked to other major metropolitan areas determines how efficiently freight can be transported between markets. Furthermore, highway conditions including levels of congestion, access to interstate highway interchanges and access to ports can all play a part in the determination of how suitable a city can be at handling freight. Kansas City and the four other locations benchmarked in this study are located on major interstate highway systems. In order to assess highway traffic volumes, issues that may impact freight movement information on traffic volumes and urban mobility was evaluated. Traffic flowband maps are provided in Figures 10-14 for Kansas City and the four comparative cities. The maps illustrate heavier traffic flows in the major urban centers and relatively lighter traffic flows outside the major urban centers. The colors on the maps below illustrate average daily traffic volumes on each of the major roads. Blue represents the lowest average daily volumes while red represents the largest amount of average daily traffic volumes. The Dallas Metropolitan Statistical area experiences heavier traffic volumes than the other cities.

Figure 10. Kansas City Highway Flowband Map

Source: TranSystems and ESRI Data Maps 2007 Figure 11. Columbus Highway Flowband Map

Source: TranSystems and ESRI Data Maps 2007


Figure 12. Dallas Highway Flowband Map


Figure 13. Indianapolis Highway Flowband Map

Source: TranSystems and ESRI Data Maps 2007 Figure 14. Nashville Highway Flowband Map



The Texas Transportation Institute conducts an annual study of urban mobility that measures travel times in major urban areas around the country. The latest report release was in 2007, containing data for 2005 and historical data. Two measures of mobility conditions are used in this analysis – the travel time index presented in Table 17 and the annual hours of delay per traveler shown in Table 18. Dallas ranked the highest nationwide in terms of deterioration of travel conditions between 1995 and 2005. This reflects the strong growth of the city, which has placed stress on highway infrastructure. Kansas City continues to enjoy low travel congestion and the information below shows that they have experienced very low deterioration of travel conditions between 1995 and 2005.

Table 17 Travel Time Index*

1995

2004

2005

Points Change 1995-2005

National Rank

Kansas City 1.07 1.08 1.08 0.01 62 Columbus 1.15 1.20 1.19 0.04 37

Dallas 1.16 1.31 1.35 0.19 1 Indianapolis 1.24 1.23 1.22 -0.02 80

Nashville 1.13 1.17 1.17 0.04 37 Source: 2007 Urban Mobility Report and TranSystems *Travel Time Index – The ratio of travel time in the peak period to the travel time at free-flow conditions. A value of 1.35 indicates a 35 percent increase in travel time, which would adjust a 20-minute free-flow trip upward to 27 minutes during peak conditions. Free-flow speeds (60 mph on freeways and 35 mph on principal arterials) are used as the comparison threshold.

Table 18 Annual Hours of Delay per Traveler

1995

2004

2005

Hours Change 1995-2005

National Rank

Kansas City 54 56 54 0 68 Columbus 27 34 33 6 33

Dallas 34 51 58 24 1 Indianapolis 53 46 43 -10 84

Nashville 35 40 40 5 39 Source: 2007 Urban Mobility Report and TranSystems Air Service Kansas City does not have direct international service; however, FedEx and UPS serve the area. Dallas has direct international air cargo service. Indianapolis’s FedEx hub makes it the 21st largest cargo airport in the world. Like Kansas City, both Columbus and Nashville do not have direct international air cargo service. Columbus falls just below Kansas City in terms of metric tons of air cargo shipped while Nashville falls far behind the study cities, ranking just 60th in North America. Kansas City is competitively placed among the Top 40 North American Shippers along with Indianapolis and Dallas as illustrated in Table 19 even without direct international service.


Table 19 Air Cargo Traffic as of 2007

Metric Tons North American Rank

Kansas City 127,620 37 Columbus 100,009 41 Dallas 724,957 10 Indianapolis 1,056,517 8 Nashville 97,918 60

Source: Airports Council International, airport reports Companies seeking to locate their distribution and warehousing operations will find that locating in Kansas City is as beneficial in terms of air cargo services as locating in any of the other study cities. Dallas may have a higher level of service, but all of the cities in this study have high quality domestic air service. Air express services such as Fed Ex and UPS are much more important for regions than are passenger airlines carrying air cargo, thus, the Kansas City region benefits by having air express services available. Kansas City, as well as the other four cities in this study, has superior capabilities in air cargo service when compared to other cities in the United States that weren’t reviewed as part of this comparative analysis. Summary Kansas City is 2nd among all of the cities in this comparative analysis. While it has, the smallest market coverage of all of the cities, its market base is still growing steadily. It outranks all of the cities with the lowest rate in truckload shipment costs, which makes it very ideal for shipping less time-sensitive products. Furthermore, the economical shipping costs make it very appealing for non-consumer and assembly goods. Kansas City’s strong rail connectivity is also a major strength in its ability to move goods across the country. This connectivity helps balance Kansas City’s smaller market coverage by truckload shipments. Kansas City currently has very high lease rates, but as more speculative buildings are built and the major intermodal initiative develops, lease rates would likely be lowered as a result of more supply. This would benefit Kansas City’s competitiveness in that area. Kansas City enjoys a low cost of living as compared to the other cities with only Indianapolis being a more inexpensive place to live. The highway connectivity and low levels of congestion are also very appealing factors as businesses consider locating their freight-intensive developments in the city. Overall, Kansas City is appealing and has a strong position in the country as an ideal location for attracting and developing freight-related businesses.

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