China Hub group to regroup, revive bid to make Lambert cargo hub
This article first appeared in the St. Louis Beacon, March 27, 2012 - By the end of this week, leaders of the stymied effort to transform Lambert St. Louis International Airport into an international cargo hub hope to have their mission back on track.
A panel headed by Dan Mehan, chief executive of the Missouri Chamber of Commerce and Industry, is expected on Friday to present a report detailing how to reorganize the longstanding Midwest China Hub Commission and kick-start the campaign to woo the Chinese and other international shippers to use Lambert as a trade gateway.
That report will include recommendations on a new commission chief. Mike Jones, a top adviser to St. Louis County Executive Charlie Dooley, expects to step down after four years as the commission's chairman, with the aim of reshaping the group “to transition into a more permanent operating structure.”
The commission also will have fewer financial resources since no additional state aid is expected.
Still, Mehan says, one element of the reorganization will be a heightened role for state officials, in an apparent attempt to make the hub effort less of a regional issue and more of a Missouri trade effort.
State House Speaker Steve Tilley, R-Perryville, says he expects his chamber’s soon-to-be-unveiled economic development bill to resurrect proposed state tax breaks for freight-forwarders, to encourage them to direct more cargo shipments in and out of Lambert.
The other legislative portion of the trade pitch – tax credits to encourage more warehouse construction around Lambert – is less likely to find support in the General Assembly, Tilley acknowledged.
And even the freight-forwarder portion may face obstacles in the state Senate, where Sen. Jason Crowell, R-Cape Girardeau, has promised to continue his fight against state tax credit programs.
Crowell helped kill proposed breaks for the China hub proposal – also known as Aerotropolis – during legislative efforts last year.
He got some help from legislators wary of what they viewed as an ill-conceived quest to encourage more trade with China, seen by some as taking away manufacturing jobs that used to be in the United States -- and Missouri.
Effort focused on world trade, just not China
Mehan says that too much has been made of the Chinese angle and not enough of the trade from other countries that St. Louis and Missouri business leaders hope to attract to Lambert.
“It’s not just the Chinese; it’s the whole effort to land international flights at Lambert,’’ said Mehan. “Just because the legislature could not agree on the tax credit package, that hasn’t changed the business objective. The business case is still there, and we’re going to pursue it.”
Last fall, for example, legislators heard from farmers who already ship live animals and grain to China and believe they’d save money if they could ship from St. Louis instead of transporting the animals and farm products to Chicago. But rural lawmakers, in particular, also heard privately from small businesses that feared they would be hurt if more overseas goods were shipped into the Midwest through St. Louis because the land transportation costs would likely be cheaper.
In any case, soon after the General Assembly killed off the last tax-credit package last fall, a Chinese cargo airline ended what had been hoped to be weekly cargo flights into Lambert. The last flight was in late October.
Airport director Rhonda Hamm-Niebruegge sees a possible link between the lack of legislative action and the lack of Chinese flights. “In our opinion, ‘yes,’ it had an impact,” said the director in a recent interview.
Hamm-Niebruegge acknowledges that she’s “very disheartened” by the lull in Chinese cargo flights although she notes that the contract remains in place.
The director added that she remained convinced that, from the Chinese perspective, “when they looked at Lambert, there were a lot of good reasons why this made sense to them. They saw a plan that worked into their long-term strategy.”
Lambert has been touting its location in the heart of the Midwest -- as well as its excess capacity ever since Trans World Airlines, which had a hub at Lambert, was bought out by American Airlines in 2001.
Authority for state tax credits has been sought to encourage the construction of more warehouses next to the airport. Critics have cited some nearby warehouse vacancies, but Hamm-Niebruegge says the shortage is of the type of warehouses – especially refrigerated facilities – that shippers need.
Of the six warehouses owned by the airport, the director says five are leased to various airlines, while the sixth is leased to China Cargo, the airline that briefly flew planes into Lambert.
China Cargo told Lambert officials that it cancelled weekly flights because of “a lack of demand” in the United States for Asian goods.
But Jones says it’s his understanding that Chinese cargo flights into Chicago have increased, which “if true, validates the point we were trying to make” that Lambert could be a viable alternative.
Aside from the lack of Chinese flights, Hamm-Niebruegge is concerned that St. Louis’ efforts may get nosed out by those elsewhere, where state governments appear to be more supportive. “A lot of other states out there understand the benefit of doing these things,” she said.
Her examples include neighboring Illinois. “Here’s a state that believes,” the director said. “They’re putting their money forward, which validates our point.”
MidAmerica making its move
Such a competitor, although both sides avoid using that word, is MidAmerica St. Louis Airport in Mascoutah, Ill., where officials say they've been wooing China and other countries far longer than Lambert.
A few weeks ago, the St. Clair County Board approved $550 million in tax-exempt revenue bonds for a Chesterfield-based company, Strategic Air Cargo Inc., to sell to finance the construction of a hangar, warehouse and office building. Strategic Air is seeking to entice international cargo traffic.
County board chairman Mark Kern emphasized that the county isn’t on the hook for the bonds’ repayment. It will be up to Strategic Air to find bond buyers and to repay them.
St. Clair County also has provided incentives for the construction of a new refrigerated warehouse adjacent to MidAmerica’s runway. After 23 years, the facility will be wholly owned by the airport.
MidAmerica also set up a system where it acquires aircraft fuel at a wholesale cost, which Kern says allows the airport to sell the fuel at a lower cost.
The political backdrop in Illinois also is friendly,. “We find the legislature and the governor’s office to be supportive of our effort,” Kern said.
Kern emphasizes that he sees the campaign to promote MidAmerica as one that helps the entire St. Louis region and plays down any rivalry between Illinois and Missouri.
And there are differences in the approach being taken by boosters of MidAmerica and Lambert, he said. “We’re building a trade route, as opposed to this hub strategy.”
“Our goal is to put tires on the runway, fuel in the airplanes and create jobs for the region in partnership with private business,” Kern said.
Back in Missouri, Mehan dismisses any negative talk by critics. He also praises the years that the commission, area businesspeople and political leaders, including the Regional Chamber and Growth Association and St. Louis Mayor Francis Slay, have spent hosting Chinese trade and business executives, saying such work provided a platform for the next stage.
“The next phase of that is to put meat on the bone,” said Mehan.
But Jones warns state officials and the General Assembly can play a decisive role. “If you’re on a bus with flat tires,” he said, “You’re not going anywhere.”