Freight Transportation Framework Study

Transcription

1 Freight Transportation Framework Study A study by the JOINT PLANNING ADVISORY COUNCIL A planning partnership for the Arizona Sun Corridor Technical Memorandum II Sun Corridor Supply Chain Opportunities MARICOPA ASSOCIATION OF GOVERNMENTS CENTRAL ARIZONA ASSOCIATION OF GOVERNMENTS PIMA ASSOCIATION OF GOVERNMENTS Prepared by: PARSONS BRINCKERHOFF In cooperation with: KDA Creative RCLCo Freight Transportation Framework Study i Final Report

2 TABLE OF CONTENTS 1.0 Introduction and Background Overview of Nearshoring and Development in the Sun Corridor Trends to Nearshoring Sun Corridor Implications Sun Corridor Opportunity Volumes in the Current Market Nearshoring Summary Regional Commodity Flow Analysis Methodology Freight Commodity Types by County Domestically Sourced Goods Terminating in the Sun Corridor Domestic Bound Goods Originating in the Sun Corridor Internationally Sourced Goods Terminating in the Sun Corridor Mexican Sourced Goods Terminating in the Sun Corridor Internationally Bound Goods Originating in the Sun Corridor Mexico Bound Goods Originating in the Sun Corridor Value and Tonnage by Zip Domestic Bound Goods by Value Originating in Sun Corridor Zip Codes Domestic Sourced Goods by Value Terminating in Sun Corridor Zip Codes Domestic Bound Goods by Tonnage Originating in Sun Corridor Zip Codes Domestic Sourced Goods by Tonnage Terminating in Sun Corridor Zip Codes International Bound Goods by Value Originating in Sun Corridor Zip Codes International Sourced Goods by Value Terminating in Sun Corridor Zip Codes International Bound Goods by Tonnage Originating in Sun Corridor Zip Codes International Sourced Goods by Tonnage Terminating in Sun Corridor Zip Codes Mexican Bound Goods by Value Originating in Sun Corridor Zip Codes Mexican Sourced Goods by Value Terminating in Sun Corridor Zip Codes Mexican Bound Goods by Tonnage Originating in Sun Corridor Zip Codes Mexican Sourced Goods by Tonnage Terminating in Sun Corridor Zip Codes Freight Transportation Framework Study ii Final Report

3 Sun Corridor Bound Goods by Value Originating in Mexican States Sun Corridor Sourced Goods by Value Terminating in Mexican States Sun Corridor Bound Goods by Tonnage Originating in Mexican States Sun Corridor Sourced Goods by Tonnage Terminating in Mexican States Recommended Focus Areas Focus Area Screening Initial Screening Screening Criteria Screening Methodology Screening Results Freight Related Land Use Opportunities Land Use Context Facility Typologies and Location Principles Relationship to Sun Corridor Market Opportunities Location of Facility Typologies Conceptual Location of Facility Types Selected Analysis Zones Tucson International Airport Labor Force Transportation Characteristics Land Use Incentive Areas Plans and Policies Key Opportunities Phoenix-Mesa Gateway Labor Force Transportation Characteristics Land Use Plans and Policies Key Opportunities Eloy (I-8 & I-10) Labor Force Transportation Characteristics Land Use Plans and Policies Key Opportunities West Valley Labor Force Transportation Characteristics Land Use Plans and Policies Key Opportunities Freight Transportation Framework Study iii Final Report

4 6.5 Industrial Market Outlook Methodology Discussion of Selected Focus Areas Economic and Fiscal Impact Evaluation Methodology Economic Impacts Fiscal Impacts Regional Recommendations Regional Coordination to Position and Market the Area Compete Globally, Nationally and Regionally Cooperate Locally General Recommendations Infrastructure Support Land Use Planning Labor Force Policy Available Funding Implementation Steps Coordinate Economic Development Programs Assist Municipalities with Public Policy Amendments Conduct Detailed Analysis for Other Study Areas Prepare Conceptual Business Plans for Specific Opportunities Priority and Phasing for Transportation Infrastructure Funding Program for Improvements and Strategic Incentives Education, Marketing and Branding List of Tables Table 2-1 Sun Corridor is a Top 20 Metropolitan Market... 3 Table 2-2 Top 10 US Commodity Flows from Mexico To/Through Arizona by Value (2009 Annual) Table 2-3 Top 8 Mexican Origin States for U.S. Imports To/Through Arizona by Value (2009 Annual) Table 2-4 Top 10 Commodities Moving Westbound To California Through Arizona by Value (2009 Annual) Table 4-1 Focus Area Screening Criteria Table 4-2 Focus Area Screening Performance Thresholds Table 4-3 Initial Screening Rating Scale Table 4-4 Focus Area Screening Results Table 5-1 Study Area Majority Facility Types Table 6-1 TIA Population Table 6-2 TIA Educational Attainment Table 6-3 TIA Household Income Table 6-4 TIA Travel Time to Work Table 6-5 TIA Proximity to Markets Table 6-6 TIA Roadways Table 6-7 TIA Rail & Airport Freight Transportation Framework Study iv Final Report

5 Table 6-8 TIA Existing Land Use Table 6-9 Phoenix-Mesa Gateway Population Table 6-10 Phoenix-Mesa Gateway Educational Attainment Table 6-11 Phoenix-Mesa Gateway Household Income Table 6-12 Phoenix-Mesa Gateway Travel Time to Work Table 6-13 Phoenix-Mesa Gateway Proximity to Markets Table 6-14 Phoenix-Mesa Gateway Roadway Table 6-15 Phoenix-Mesa Gateway Rail & Airport Table 6-16 Phoenix-Mesa Gateway Existing Land Use Table 6-17 Phoenix-Mesa Gateway Future Land Use Table 6-18 Eloy Population Table 6-19 Eloy Educational Attainment Table 6-20 Eloy Household Income Table 6-21 Eloy Travel Time to Work Table 6-22 Eloy Proximity to Markets Table 6-23 Eloy Roadway Table 6-24 Eloy Rail & Airport Table 6-25 Eloy Existing Land Use Table 6-26 Eloy Future Land Use Table 6-27 West Valley Population Table 6-28 West Valley Educational Attainment Table 6-29 West Valley Household Income Table 6-30 West Valley Travel Time to Work Table 6-31 West Valley Proximity to Markets Table 6-32 West Valley Roadway Table 6-33 West Valley Rail & Airport Table 6-34 Existing Land Use Table 6-35 Future Land Use Table 6-36 Focus Area Industrial Market Analysis Summary ( ) Table 6-37 Comparison of Focus Area Economic and Fiscal Impacts Table 6-38 Focus Area Fiscal Impacts (2012) List of Figures Figure 1-1 Arizona Sun Corridor Megaregion Location... 1 Figure 2-1 Diesel Price Trends (Weekly U.S. No 2 Diesel Retail Prices)... 5 Figure 2-2 Breakeven Curves for Offshoring, China vs. North America... 6 Figure 2-3 Total Landed Cost Components and Example Savings/Loss... 7 Figure 2-4 Rapid Rise in Chinese Wage Rates... 8 Figure 2-5 Low Landed Cost Country is Mexico... 9 Figure 2-6 Nearshoring is Well Underway Figure 2-7 Supply Chain Staging Serves Multiple Purposes Figure 2-8 Sun Corridor Big Picture Supply Chain Opportunity Figure 3-1 Domestic Bound Goods by Value Originating in Sun Corridor Zip Codes Figure 3-2 Domestic Sourced Goods by Value Terminating in Sun Corridor Zip Codes Freight Transportation Framework Study v Final Report

6 Figure 3-3 Domestic Bound Goods by Tonnage Originating in Sun Corridor Zip Codes Figure 3-4 Domestic Sourced Goods by Tonnage Terminating in Sun Corridor Zip Codes Figure 3-5 International Bound Goods by Value Originating in Sun Corridor Zip Codes Figure 3-6 International Sourced Goods by Value Terminating in Sun Corridor Zip Codes Figure 3-7 International Bound Goods by Tonnage Originating in Sun Corridor Zip Codes Figure 3-8 International Sourced Goods by Tonnage Terminating in Sun Corridor Zip Codes Figure 3-9 Mexican Bound Goods by Value Originating in Sun Corridor Zip Codes Figure 3-10 Mexican Sourced Goods by Value Terminating in Sun Corridor Zip Codes Figure 3-11 Mexican Bound Goods by Tonnage Originating in Sun Corridor Zip Codes Figure 3-12 Mexican Sourced Goods by Tonnage Terminating in Sun Corridor Zip Codes Figure 3-13 Sun Corridor Bound Goods by Value Originating in Mexican States Figure 3-14 Sun Corridor Sourced Goods by Value Terminating in Mexican States Figure 3-15 Sun Corridor Bound Goods by Tonnage Originating in Mexican States Figure 3-16 Sun Corridor Sourced Goods by Tonnage Terminating in Mexican States Figure 3-17 Regional Freight Focus Areas Figure 5-1 Supply Chain Process Figure 5-2 Study Area Majority Facility Types Figure 6-1 Four Selected Analysis Zones Figure 6-2 TIA Existing Land Use Map Figure 6-3 TIA Key Opportunity Map Figure 6-4 Phoenix Mesa Gateway Existing Land Use Map Figure 6-5 Phoenix Mesa Gateway Future Land Use Map Figure 6-6 Phoenix Mesa Gateway Key Opportunity Map Figure 6-7 Eloy Existing Land Use Map Figure 6-8 Eloy Future Land Use Map Figure 6-9 Eloy Key Opportunity Map Figure 6-10 West Valley Existing Land Use Map Figure 6-11 West Valley Future Land Use Map Figure 6-12 West Valley Key Opportunity Map Freight Transportation Framework Study vi Final Report

7 1.0 INTRODUCTION AND BACKGROUND The Arizona Sun Corridor megaregion has outpaced population growth among the eleven U.S. megaregions. As urban growth in central and southern Arizona continues, the metropolitan boundaries are increasingly blurred as the population centers share economic systems, natural resources, ecosystems and transportation facilities. Although as a megaregion, the Sun Corridor is generally defined from Prescott to Nogales, for purposes of this study, the Sun Corridor is considered to encompass the Phoenix and Tucson metropolitan areas, and includes the Maricopa Association of Governments (MAG), the Central Arizona Association of Governments (CAAG) and the Pima Association of Governments (PAG) Metropolitan Planning Organization (MPO) jurisdictional areas, as illustrated in Figure 1-1. Figure 1-1 Arizona Sun Corridor Megaregion Location Approximately 85% of the population in Arizona resides within the Sun Corridor. The Sun Corridor's population is projected to reach approximately 12 million people by 2050, which would place a significant strain on the transportation network that connects Maricopa, Pinal, and Pima counties not only from a commuter perspective, but also from a freight operations and safety perspective. Several recent studies on freight and the economic drivers of the movement of goods within the State of Arizona have been accomplished by ADOT and others. This study builds upon the State Rail Plan and the Arizona Freight Study of 2008 by dialoguing with shippers and carriers, and completing an updated commodity flow data analysis to Freight Transportation Framework Study 1 Final Report

8 provide the Joint Planning Advisory Committee of the Maricopa Association of Governments (MAG), the Pima County Association of Governments (PAG) and the Central Arizona Association of Governments (CAAG) with a framework for strengthening the position of the region in the global supply chain. This report builds upon previous technical memoranda that presented a regional freight shipper and carrier profile based on the results of various market research activities and the high level operational freight profile of regional freight activities, to complete a detailed evaluation of freight opportunities leading to specific recommendations for actions as part of a coordinated and rational regional freight framework. The Arizona Multimodal Freight Study identified several keys points that indicate increased opportunities for Arizona due to the increased movement of freight into, out of and through the State. These points related primarily to the potential of moving freight based upon increased planning (transportation, land use and environmental), infrastructure improvements and coordination of economic development activities targeted at the existing predominately west to east flow of goods from points of origin in Asia, through the Ports of Los Angeles and Long Beach to the ultimate markets across North America. This report recognizes the limitations of this approach and reorients the focus based on an overview of recent trends in nearshoring, and rate of development in the Sun Corridor during the past few decades. Having established a big picture vision for freight related development in the Sun Corridor, the report presents the results of a detailed evaluation of commodity flows affecting the Sun Corridor, with a particular focus on goods movements between Mexico, sources in the southeast United States and markets along the West Coast. A screening of potential freight focus areas leads to the determination of freight related opportunities within the region, including the designation and evaluation of area typologies representing differing relevant majority use types that would support an enhance role for the Sun Corridor in the global supply chain. The report presents a detailed evaluation for four selected analysis zones, or focus areas, representing one focus area for each of the four typologies defined. The findings of the report are consolidated into regional recommendations addressing infrastructure, land use planning, labor force, public policy and funding, and lead to an outline of implementation steps for regional partners to pursue freight related development activities. Freight Transportation Framework Study 2 Final Report

9 2.0 OVERVIEW OF NEARSHORING AND DEVELOPMENT IN THE SUN CORRIDOR The Arizona Sun Corridor would stand 10 th among the largest U.S. metropolitan markets by population when considered as a whole of Maricopa, Pima, and Pinal Counties, according to the US Census. 1 As indicated in Table 2-1, the Phoenix-Mesa-Glendale Metropolitan Statistical Area (MSA) alone ranks as the 14 th most populous metropolitan area in the U.S. according to the 2010 Census. Table 2-1 Sun Corridor is a Top 20 Metropolitan Market 2010 Rank Metropolitan statistical area Population Change, 2000 to 2010 April 1, 2000 April 1, 2010 Number Percent 2000 Rank 1 New York Northern New Jersey Long Island, NY NJ PA 18,323,002 18,897, , Los Angeles Long Beach Santa Ana, CA 12,365,627 12,828, , Chicago Joliet Naperville, IL IN WI 9,098,316 9,461, , Dallas Fort Worth Arlington, TX 5,161,544 6,371,773 1,210, Philadelphia Camden Wilmington, PA NJ DE MD 5,687,147 5,965, , Houston Sugar Land Baytown, TX 4,715,407 5,946,800 1,231, Washington Arlington Alexandria, DC VA MD WV 4,796,183 5,582, , Miami Fort Lauderdale Pompano Beach, FL 5,007,564 5,564, , Atlanta Sandy Springs Marietta, GA 4,247,981 5,268,860 1,020, Boston Cambridge Quincy, MA NH 4,391,344 4,552, , San Francisco Oakland Fremont, CA 4,123,740 4,335, , Detroit Warren Livonia, MI 4,452,557 4,296, , Riverside San Bernardino Ontario, CA 3,254,821 4,224, , Phoenix Mesa Glendale, AZ 3,251,876 4,192, , Seattle Tacoma Bellevue, WA 3,043,878 3,439, , Minneapolis St. Paul Bloomington, MN WI 2,968,806 3,279, , San Diego Carls bad San Marcos, CA 2,813,833 3,095, , St. Louis, MO IL 2,698,687 2,812, , Tampa St. Petersburg Clearwater, FL 2,395,997 2,783, , Baltimore Towson, MD 2,552,994 2,710, , Arizona Sun Corridor Counties Population Change, 2000 to 2010 April 1, 2000 April 1, 2010 Number Percent Maricopa County 3,072,149 3,817, , Pima County 843, , , Pinal County 179, , , Subtotal 4,095,167 5,173,150 1,077, Source: Source: U.S. Census Bureau, 2010 Census and Census Based on populations reported by the U.S. Census Bureau for Metropolitan Statistical Areas (MSAs), considering Maricopa, Pima, and Pinal Counties. Freight Transportation Framework Study 3 Final Report

10 In the last decade, the Sun Corridor has risen in national prominence, increasing in population by over 1 million people and growing by 26.3%; a rate greater than any other top twenty market other than the Inland Empire (Riverside-San Bernardino-Ontario MSA). Total population growth of the combined counties of the Arizona Sun Corridor is the third highest in the country, behind only Houston and Dallas in Texas. Furthermore, the Sun Corridor is the only top twenty market in the 1,500 miles between Houston, Texas, and Southern California, each of which provide major maritime ports, manufacturing and distribution facilities associated with the global supply chain. These factors establish the Sun Corridor as a substantial market in its own right, and place it as a strategic bridge between major markets and the global supply chain. The Sun Corridor s rise in standing is an important foundation for attracting economic development opportunities associated with gathering changes in supply chain sourcing. Many of these opportunities focus on product distribution for manufacturing transferred or nearshored to Mexico. Distribution facilities (DC) benefit from being located in close proximity to a large population center or anchor markets. DC s that are located by an anchor market are able to serve large quantities of product to the local market but also have the opportunity due to the anchor markets precise geographic location to serve a regional market like the Sun Corridor or Southwest United States. The Sun Corridor fills an anchor function today far better than it could in the past, and for 1,500 miles it is the only location along the Mexican border that does serve this function. As a top market, supply chains need a Sun Corridor presence and should enter the calculations of supply chains reconfiguring their networks for nearshoring. By reinforcing the logistical advantages that help make nearshoring attractive, the Sun Corridor can position itself to turn new market dynamics into new economic development. This section explores the dynamics behind nearshoring and the opportunity it presents to the Sun Corridor. It begins with the relevant trends and drivers, gleans the implications for the Sun Corridor, and considers how the region s opportunity can be developed. Lastly, it presents current market volumes and patterns that show the magnitude of the opportunity as it stands today, while nearshoring is still maturing and before development has taken place. 2.1 Trends to Nearshoring A McKinsey & Company study 2 published in 2008, when oil prices had reached $100 a barrel, pointed out that fuel costs embedded in shipping equated to an 11% tariff on imported goods, triple what it had been in Today in 2012, oil is again trading at around $100 a barrel and diesel fuel costs three times what it did ten years ago. Even allowing for the volatility of fuel prices, the long term trend evident in Figure 2-1 below is of higher costs sustained through recent years. For supply chains distributed across the globe and designed for more affordable transportation, this is a cause for reconsideration. Companies also concerned with their carbon footprint perceive a 2 Time to rethink offshoring?, The McKinsey Quarterly, September Freight Transportation Framework Study 4 Final Report

11 further burden from transportation intensity, because greenhouse gas emissions accompany fuel usage. Figure 2-1 Diesel Price Trends (Weekly U.S. No 2 Diesel Retail Prices) Source: U.S. Energy Information Administration Companies placing production overseas and sourcing goods from overseas producers do so primarily to take advantage of favorable wage differentials, which transportation costs only partially offset. The McKinsey study went on to note that average wage inflation in China currently the greatest beneficiary of overseas sourcing was 19% in the period from 2003 to 2008, compared to 5% in Mexico and 3% in the U.S. In other words, the Chinese wage advantage was narrowing, such that its gap versus Mexico was only 1.15 times, compared to 2 times just five years before. To put that significant fact into fuller context, McKinsey calculated total landed costs for some typical US imported products, which takes into account labor, transport, inventory, exchange rates, and other elements affecting the complete expense of sourcing from one country against another. Their findings, reproduced below in Figure 2-2, compare production offshored to China versus the U.S. and Mexico, and indicate that breakeven points had shifted just in the three years from 2005 to 2008, favoring both the North American countries. Component analysis of total landed cost presented in Figure 2-3 was especially telling, because it showed three things: First, that labor savings had been markedly reduced because of comparative wage inflation; Second, that freight transportation costs had markedly grown (chiefly from fuel), and were magnified as a percentage offset to labor savings because those savings were now smaller; Third, that transportation cost increases also affect product return expenses and create a further offset to labor savings in that component. Freight Transportation Framework Study 5 Final Report

12 Figure 2-2 Breakeven Curves for Offshoring, China vs. North America Freight Transportation Framework Study 6 Final Report

13 Figure 2-3 Total Landed Cost Components and Example Savings/Loss Source: McKinsey & Company The result in McKinsey s example was that a compelling Chinese cost advantage was completely reversed just by the combined effect of smaller wage differentials and higher transport costs. For a supply chain to follow this cost logic and make the shift back to North America isn t automatic; it is influenced by labor skills, manufacturing productivity, embedded capital and infrastructure, and other factors that make changes slow or undesirable. Standing against this is the less quantified but meaningful risk of loss of intellectual property and brand protection, due to Chinese practices that do not conform to typical western standards. 3 More recent studies show the cost trends continuing. A 2011 Boston Consulting Group (BCG) report 4 compares the rise in Chinese wages to that in the U.S. In Figure 2-4 below, BCG projects a torrid compound annual growth rate for pay of 17% in China through With the expected U.S rate at just 3%, the gap between the two is shrinking, and BCG does not anticipate productivity gains will alter this profile. Foxconn Technology (the trade name of Hon Hai Precision Industry Company, Ltd.), is a case in point for wages. The company is a giant contract manufacturer for many U.S. electronics firms. Based in Taiwan, it is the largest private sector employer in China, and with over 900,000 3 Entrepreneurs Rival in China: the State New York Times 12/7/11 and Inflaming Trademark Dispute, Second City in China Halts Sales of the ipad New York Times 2/14/12 are just two recent references. 4 Made in America, Again, The Boston Consulting Group, August 2011 Freight Transportation Framework Study 7 Final Report

14 employees it has been a leading beneficiary of U.S. offshoring. Foxconn in 2012 announced immediate pay raises for many workers at Chinese factories of 16 to 25%. 5 Figure 2-4 Rapid Rise in Chinese Wage Rates The effect of these trends on total landed costs was examined in a 2011 study by AlixPartners, LLP, 6 which found that the principal consequence for sourcing locations would be greater nearshoring to Mexico. The company first estimated U.S. landed costs for an array of competing source countries. The results illustrated in Figure 2-5 for an example of a moderate complexity machine part, which represents a variety of actual products, placed Mexico as the lowest cost country, below China or anywhere else. The reasons included a competitive wage differential, transportation costs kept down by proximity to the U.S., and the absence of trade tariffs under NAFTA. 5 Foxconn Plans to List Pay Sharply at Factories in China New York Times 2/18/12. Company facts from Wikipedia, 6 Reported in Mexico The New Low Cost Location for Off-shored Manufacturing?, Stifel, Nicolaus & Company, Inc., 7/13/11 Freight Transportation Framework Study 8 Final Report

15 Figure 2-5 Low Landed Cost Country is Mexico AlixPartners then conducted a survey in the first quarter of 2011, reaching 80 senior executives at manufacturing oriented firms selling to the U.S. market from 15 different industries. As indicated in Figure 2-6, 42% of respondents reported that their firms were either nearshoring Asian/Indian operations to the Americas now, or would be within 1-3 years. The first choice nearshoring location was Mexico for 63% of those respondents, followed by 19% favoring the U.S. Freight Transportation Framework Study 9 Final Report

16 Figure 2-6 Nearshoring is Well Underway Source: AlixPartners The top three drivers deciding location were lower freight transportation costs, improved speed-to-market, and lower inventory costs in transit. All of these factors are a function of proximity to U.S. markets, with freight costs amplified by fuel expense. Not cited by the respondents but substantially important in the landed cost calculation is the smaller disparity in wage rates, which effectively allows the other elements to come to the fore. Working against Mexico is the risk of supply chain disruption from security problems, which one out of five respondents had experienced. Half (at that time) expected security to improve, but the other half expected no change or even deterioration. 2.2 Sun Corridor Implications There are two main conclusions to be drawn from the findings related to recent trends for nearshoring: Nearshoring is a real phenomenon, driven by narrowing wage differentials and the escalation of fuel costs, with other factors (such as intellectual property risk, exchange rates, and carbon footprints) contributing; Mexico will be the leading nearshore location, because of favorable wage rates supported by proximity to U.S. markets, but with security risk a mitigating factor. None of the published sources say much systematically about what products will be most affected, or what regions of Mexico will figure most prominently. The McKinsey study does point toward consumer and business electronics as examples, as AlixPartners Freight Transportation Framework Study 10 Final Report

17 does to machinery. BCG in a follow-on report 7 mentions seven sectors that could return to lower wage areas of the United States, among them similar electronic goods and machinery plus transportation products, fabricated metals, plastics and furniture. Presumably the factors that put those sectors in play for the U.S. affect Mexico as well, but that is not stated in the BCG report. Geography is not addressed; it is reasonable to conclude that locations closer to the border offer the greatest proximity benefits, and states with the highest maquiladora concentrations 8 could be poised to benefit further. Conversely, some of these states, especially along the border with Texas 9, have been prominent scenes of violence in the ongoing Mexican drug war. Sonora has been quieter, and offers a modern manufacturing center for transportation equipment and other products in Hermosillo, 175 miles south of Nogales. To provide further light on these issues, supply chain consultants Tompkins Associates, as part of the Freight Framework Study effort, conducted an informal inquiry with a number of its clients. The findings are anecdotal but sensible. Tompkins reports: Nearshoring companies could be from a variety of industries, but products will have a lower labor content; They will value time to market, lower delivered cost, and risk minimization, and will seek optimization of their networks generally; Availability of manufacturing facilities can have some influence, because North America has a surplus (which presumably could be had at a discount); Locations near the border should offer lower transportation costs and typically cheaper labor, but they are not necessarily safe; Locations toward the Mexican interior offer lower safety risk, and it is believed that the more skilled labor has migrated there; however, overall labor costs are higher and the distance is greater. The emphasis on lower labor content is consistent with industrial trends already occurring in Mexico because of Chinese incursions: the sectors that relied most on cheap labor were hurt the most. Mexican industry generally has been moving upscale in response 10, and thus should be able to exploit new opportunity. In addition, the points on location are favorable to the Sun Corridor. Border production typically will enter the U.S. at local gateways. Production in the interior has more of a choice especially toward Jalisco and the dense center of the country - and ought to favor western gateways for western destinations. Supply chains wanting to be close to the U.S. can find relatively safe locations in Sonora, while those seeking the advantages of the interior can reach western U.S. markets via the Mexico 15D corridor through 7 Summarized very briefly on the company website ( and dated 10/7/11, but otherwise not made public. 8 Baja California, Coahuila, Chihuahua and Tamaulipas according to International Competition and Industrial Evolution: Evidence from the Impact of Chinese Competition on Maquiladoras, paper by Utar and Torres Ruiz, December Violence Levels Off in Some Parts of Mexico, But Spreads to Others, Dallas Morning News, 2/4/12 10 Utar and Torres Ruiz, ibid. Freight Transportation Framework Study 11 Final Report

18 Nogales. Meanwhile, Sonoran supply lines were recently improved with announcement by Mediterranean Shipping Company (MSC) of feeder ship container service, operating weekly between the major Pacific container port of Manzanillo and the Port of Guaymas, 85 miles south of Hermosillo along 15D Sun Corridor Opportunity The strongest opportunity for the Sun Corridor is to serve as a hub first for import distribution centers (IDCs) staging nearshored products from Mexico. The IDCs would be anchored by the huge local market offered by the population of the Sun Corridor and act as the logistical control and jumping-off point for products bound primarily for the western U.S. and beyond. As Figure 2-7 illustrates, such supply chain staging serves multiple purposes, from value-adding functions like product modification and packaging, to market response functions like acceleration and change of ultimate destination. Furthermore, these IDCs could be expanded into larger roles as mixing centers. These centers would pool Mexican imports with products moving westward to Pacific Coast markets on the I-8, I-10 and I-40/I-15 corridors, and emanating from domestic manufacture and the Gulf Coast and Atlantic Coast ports. The pooled goods would benefit from the full range of staging functions, and ultimately would be consolidated for local and west coast delivery by truck, rail, or air. IDCs combined with or converted into mixing centers would begin to develop the Sun Corridor into the local and Pacific Coast distribution hub for westbound products, a position it has not held in the past. Figure 2-7 Supply Chain Staging Serves Multiple Purposes The way to capitalize on this opportunity is to heighten the advantages that will motivate nearshoring in the first place: rapid time to market, low delivered costs, and minimization of risk. In addition to development of modern distribution properties wellsituated for access to local and long-distance markets, these requirements suggest several elements to start with: 11 Guaymas entra al trafico de contenedores, T21.com.mx, 2/23/12 Freight Transportation Framework Study 12 Final Report

19 Reduction in border-crossing delay, so that Nogales offers one of the most productive logistical operations on the border; Efficient connection straight through from Nogales to Sun Corridor IDCs, both for physical freight and for supply chain and customs tracking information. This could include utilization of Mexican fleets for the short 66 miles from the international border through to Tucson, under the otherwise slow-moving US DOT pilot program; Security strengthened by the same tracking information, so that risk to the public and to supply chains is minimized; High quality access to multimodal connections: to air freight, because it is the fail-safe for low inventory, high speed logistics; to more rail, because it provides low cost transportation over long distances; and to reliable truck capacity, enhanced because the region can begin to offer a greater volume of outbound freight compared capitalizing on the current imbalance toward inbound shipments; Ample capacity on multimodal corridors, potentially including the proposed Interstate 11, whose conceptual configuration effectively supports the Sun Corridor s development as a hub for westbound distribution. The Tompkins respondents did not view the Sun Corridor as a major distribution hub today, but agreed there was an opportunity to capture westbound products and mix them with nearshored Mexican goods, provided the region invested in infrastructure to realize this opportunity. Such development also strengthens, joins with and builds upon the region s recent success in attracting internet fulfillment centers. According to Tompkins, that success is derived from the lack of an internet sales tax, plus low U.S. labor costs for a labor-intensive form of distribution, tax abatement in foreign trade zones, and lower facility costs than the competing location of Southern California. The distribution hub is not the only development opportunity for the Sun Corridor, as this study has described elsewhere, but it looks to be the leading one. The next section explores the market volumes available from today s transportation patterns, before further growth in Mexico and actions in the Sun Corridor to capitalize on it. 2.4 Volumes in the Current Market US-bound Mexican shipping volume to or through Arizona totaled $13.8 billion in 2009 commodity value, and 5 million tons: equivalent roughly to 1,100 truckloads per day. As indicated in Table 2-2, the top five commodity groups accounted for nearly threequarters of the dollar volume. Of these, three are forms or machinery, electronics, and transportation equipment all of them commodity types that are expected to benefit from nearshoring. The remaining two are forms of food, a sector that is one of the more resistant to overseas competition. 12 This suggests that all of the top five products are able to grow, and nearshoring will spur growth in three. Goods shipped through Arizona to other U.S. destinations dominate this profile, accounting for 74% of the value 12 Utar and Torres Ruiz, ibid. Freight Transportation Framework Study 13 Final Report

20 (although only about half the tonnage). Of this through traffic, two-thirds of it both by value and by tons is headed to California markets. The smaller dollar volume destined to Arizona has a greater concentration in farm products and a lesser concentration in transportation equipment, but its general commodity composition is not very different. Table 2-2 Top 10 US Commodity Flows from Mexico To/Through Arizona by Value (2009 Annual) Rank STCC Commodity Description Tons Value (USD) % USD to AZ Top 5 to AZ Cum. % of Total USD 1 36 Electrical machinery, equipment, or supplies 246,963 $3,306,530,905 16% 2 24% 2 35 Machinery, excluding electrical 179,904 $2,209,847,159 24% 3 40% 3 1 Farm products 2,223,632 $2,011,135,685 70% 1 55% 4 37 Transportation equipment 211,812 $1,669,046,259 8% 67% 5 20 Food and kindred products 1,041,993 $961,263,258 19% 4 74% 6 33 Primary metal products 141,274 $840,412,997 18% 80% 7 23 Apparel or other finished textile products or knit apparel 50,716 $597,915,498 29% 5 84% 8 38 Instruments, photographic goods, optical goods, watches, clocks 42,940 $548,390,220 28% 88% 9 9 Fresh fish 33,637 $241,085,180 16% 90% Clay, concrete, glass, or stone products 396,770 $225,144,588 12% 91% Subtotal of Top Ten Commodities 4,569,641 $12,610,771,748 26% 91% Total All US Commodities From Mexico To AZ 2,433,402 $3,596,535,607 % of Total USD: 26% Total All US Commodities From Mexico Through AZ 2,734,844 $10,193,581,678 % of Total USD: 74% Portion of US Commodities From Mexico Through AZ Destined to California 1,791,673 $6,982,311,493 % of USD Through AZ: 68% Grand Total for All US Commodities from Mexico To/Through AZ 5,168,247 $13,790,117,286 Table 2-3 indicates that eight Mexican states are the origins for 80% of the traffic to and through Arizona by value. Two have border crossings to the west and east of Arizona: Baja California Norte (crossing at San Diego and elsewhere) and Chihuahua (crossing at El Paso and elsewhere). The rest are clustered in the center of the Mexican interior, in and around Mexico City (Distrito Federal, Queretaro and Mexico) and Guadalajara (Jalisco). Sonora ranks fourth overall and second for Arizona destinations. It figures prominently in all of the top five commodities, and is the second biggest origin for transportation equipment and agriculture. 13 The largest origins for the machinery, electronics and transportation equipment commodity groups break almost at 60/40 between origins on the border (59%) and in central Mexico (41%). Food products come more heavily from the interior, but Baja California Norte ranks third, Sonora fifth, and Sinaloa eighth. These patterns suggest that Mexican locations favorable to shipping through the Sun Corridor also are home to forms of production capable of growth. 13 Agricultural origins on the whole are poorly defined. The vast majority appear in the data under Mexico Other, indicating a lack of information. Similarly, farm products are almost all of the traffic attributed to Mexico Other. Freight Transportation Framework Study 14 Final Report

21 Table 2-3 Top 8 Mexican Origin States for U.S. Imports To/Through Arizona by Value (2009 Annual) Rank Origin State Tons Value (USD) Top 5 to AZ Cum. % of Total USD 1 Baja California Norte 499,860 $2,185,378,338 16% 2 Mexico 550,885 $1,884,137, % 3 Mexico Other 2,107,384 $1,842,778, % 4 Sonora 370,578 $1,526,399, % 5 Distrito Federal 315,862 $1,074,249, % 6 Chihuahua 112,798 $1,059,930,500 69% 7 Jalisco 243,577 $1,009,777, % 8 Queretaro 61,004 $485,369,091 80% Subtotal of Top 8 Origin States 4,261,950 $11,068,022,080 80% Grand Total for All Mexican Origins To/Through AZ 5,168,247 $13,790,117,286 Sun Corridor distribution opportunities can be greatly augmented by adding products moving westward through Arizona destined for the California market, to the volumes from Mexico. This could occur commercially in several ways: A manufacturer or distributor for a given industry could pool commodities brought north from Mexico with westbound commodities from southeastern U.S. origins, including the Gulf Coast ports, establishing consolidated distribution for the California market; A retailer trafficking in consumer products could pool a variety of goods brought from Mexico with a variety of westbound goods, establishing consolidated distribution for the California market; A warehouse facility could be subdivided between tenants, some of them distributing Mexican goods and others westbound goods; Any company drawn to the Sun Corridor as a top ten market could also distribute westbound product from a modern DC situated there. Large volumes move westbound through the Sun Corridor today on the I-10/I-8 corridor, but the relevant business is greater than that. On the westbound route to Los Angeles over I-40, it adds only 50 miles to re-route south through Phoenix as to continue west through Kingman. This means for distribution purposes that products moving on I-40 are just as likely in play as those on I-10/I-8. Table 2-4 presents the top commodity groups by product value combined for the two corridors. The total volume of traffic for all commodities is worth $66 billion and equates to around 10,000 truckloads per day, with approximately two-thirds on I-40 and onethird on I-10/I-8. Ten groups account for almost 85% of the dollar value and over 75% of the tonnage. They include general categories like mail and secondary traffic (which denotes goods moved from distribution centers), but they are mostly manufactured and agricultural products, and most of them come from domestic sources. The leading origins for domestic goods by value are Texas, North Carolina, and Louisiana, all of which have prominent maritime port facilities. These three states figure in both corridors Freight Transportation Framework Study 15 Final Report

22 but I-10/I-8 is more concentrated: the three plus Mississippi and Florida makes five states accounting for 73% of I-10/I-8 activity, whereas I-40 s top five origins account for just 46% of its dollar volume. Table 2-4 Top 10 Commodities Moving Westbound To California Through Arizona by Value (2009 Annual) Rank STCC Commodity Description Tons Value (USD) % USD Int'l Top 5 Int'l Cum. % of Total USD 1 20 Food and kindred products 14,368,606 $14,030,497, % 21% 2 28 Chemicals or allied products 8,820,812 $8,549,944, % 2 34% 3 33 Primary metal products 1,591,527 $8,457,839, % 1 47% 4 21 Tobacco products, excluding insecticides 336,121 $5,075,095, % 55% 5 43 Mail or Contract Traffic 1,967,559 $5,069,716, % 62% 6 35 Machinery, excluding electrical 483,045 $4,013,932, % 3 69% 7 1 Farm products 6,078,510 $3,496,453, % 4 74% 8 37 Transportation equipment 572,601 $2,819,479, % 78% 9 50 Secondary traffic 2,255,953 $2,409,071, % 82% Electrical machinery, equipment, or supplies 256,469 $1,707,063, % 5 84% Subtotal of Top Commodities 36,731,201 $55,629,093,375 18% 84% Domestic Commodities on I 10 and I 8 14,285,942 $16,970,356,745 % of Total USD: 26% Imported Commodities on I 10 and I 8 1,161,657 $6,239,863,059 % of Total USD: 9% Total Commodities on I 10 and I 8 15,447,599 $23,210,219,804 % of Total USD: 35% Domestic Commodities on I 40 31,575,013 $38,288,128,502 % of Total USD: 58% Imported Commodities on I 40 1,068,873 $4,436,385,977 % of Total USD: 7% Total Commodities on I 40 32,643,886 $42,724,514,479 % of Total USD: 65% Grand Total of Westbound US & Import Commodities to CA Thru AZ 48,091,485 $65,894,870,288 Commodity Groups Matching Top 5 for Mexico To/Through AZ 21,759,230 $26,067,426,576 % of Total USD: 40% International products imported and traveling overland from seaports represent 18% of the westbound value. 14 Five commodity groups account for almost all of this traffic whether on I-40 or I-10/I-8, and are identified by rank order of value in the table: chemicals, metals, non-electrical and electrical machinery, and farm products. Gulf Coast ports predominate on both corridors Louisiana, Alabama, and Texas are the top three gateway states aided by the breakbulk and bulk capabilities in locations like New Orleans, Mobile, and Houston/Galveston. Finally, the top five commodity groups for Mexican traffic to and through Arizona all appear in the westbound traffic mix: machinery and electronics, transportation equipment, and food and farm products. Together, these common commodity groups represent 40% of the westbound business in dollar terms and 45% in tonnage. This is not definitive for the capacity to pool products between Mexican, other international, and domestic sources for consolidated westbound distribution, but it is certainly promising. 14 The sources for this detailed westbound traffic analysis include no rail as of this writing, due to data availability issues. This will understate the quantities, notably but not only for import and domestic container traffic. The Mexico-US data used above does include rail and is not subject to this limitation. Freight Transportation Framework Study 16 Final Report

23 2.5 Nearshoring Summary This section began by suggesting that the Sun Corridor could position itself to turn new market dynamics into new economic development. The following points summarize this opportunity: The Sun Corridor has become a top ten consumer market, which it was not in the past; Distribution is an underdeveloped capability in the Sun Corridor, but if developed would support the region s changed ability to function as a local anchor market; Growth in nearshoring is just underway, and reflects supply chains systematically rethinking their networks; The Sun Corridor is well situated as a distribution gateway for nearshored products, and can pool such volumes with westbound shipping from southeastern U.S. origins destined for the California market. Both aspects can be framed and marketed as beneficial to supply chain restructuring; The Sun Corridor s current Mexican and westbound traffic offers a base of $80 billion in annual product value and 11,000 truckloads of daily volume. Its commodity and geographic composition is favorable for growth, before the added effects of nearshore maturation, purposeful facility development, and full recovery of the North American economy from recession. The bottom line can be found in the comments of Tompkins Associates supply chain clientele: the Sun Corridor is not a major distribution hub today. There is an opportunity to alter that position by capturing westbound products and mixing them with nearshored Mexican goods provided the region invests in infrastructure to realize this opportunity. Figure 2-8 illustrates the Big Picture for supply chain opportunities in the Sun Corridor. As depicted in Figure 2-8, the Sun Corridor is strategically located to serve as an import distribution gateway for nearshored products being imported from Mexico, and as a mixing center pooling international goods with products from points of origin in the southeastern U.S., including the maritime ports along the Gulf Coast. The Sun Corridor represents the only major anchor market in the 1,500 miles between Southern California and Houston providing opportunity to serve as a local warehouse and distribution center. Furthermore, existing and proposed transportation connectivity to Southern California and other West Coast, Mountain West and North West Markets makes the Sun Corridor convenient to serve as a major forward distribution hub. Freight Transportation Framework Study 17 Final Report

24 Figure 2-8 Sun Corridor Big Picture Supply Chain Opportunity Freight Transportation Framework Study 18 Final Report

25 3.0 REGIONAL COMMODITY FLOW ANALYSIS Commodity flows were profiled in the Task 3 and Task 4.2 Technical Memorandum I. In the memorandum commodity flows were detailed by U.S. domestic, overseas international, and cross border components. The analysis yielded a high level overview of commodity flows that involve the Sun Corridor. The flows characterized the initial set of economic development opportunities for adding value to the supply chain in the Sun Corridor and supported the consideration of opportunities for the Sun Corridor to turn recent market dynamics into new economic development, as discussed in Section 2.0 of this Technical Memorandum. The regional commodity flow analysis contained in this section dissects the movement of goods in further detail to differentiate economic development opportunities among the sub regions of the Sun Corridor with a focus on activities consistent with the hypothesis of future opportunities from nearshoring and westbound goods movement. Specifically, the regional commodity flow analysis reveals freight traffic, details of the commodity type, and origins of goods between Mexico and Arizona. 3.1 Methodology The study utilizes IHS Global Insight Transearch data to track the movement of goods in, through and out of the region. The dataset provides an industry recognized tracking model to understand the movement of commodities. The tracked shipments have the capability to be analyzed by geographic units, tonnage, value and transport mode. The data is described as a current year, or base condition, and forecasts of freight volumes in the next five years. The analysis used counties and zip codes as the geographic unit. Additional variables analyzed tonnage and value for domestic goods. Goods originating in Mexico or bound for Mexico used varied geographic pairs. Counties and zip codes were used in Arizona and the Mexican State was used in Mexico. The existing year for baseline freight traffic is The five-year forecasted freight traffic is It is important to note that forecasts assume a business as usual approach to local freight policy and practices, and do not reflect the potential growth in goods movement associated with initiatives like this freight framework study. The forecasts rely upon the insights of the regarded economic, trade and industry models utilized by IHS Global Insight. The intensity of freight activity was displayed using Geographic Information Systems (GIS) which normalized the selected variables on a per square mile basis. Normalizing the selected variables displays the analysis unit irrespective of the underlying dimensions of the geography. This approach best shows the level of variability within the Sun Corridor. 3.2 Freight Commodity Types by County Nearly eighty percent of goods by value imported into the Sun Corridor are composed of less than ten commodity types. Between 70% and 80% of goods originate or Freight Transportation Framework Study 19 Final Report

26 terminate in Maricopa County. Pima County accounts for 15% to 25% of the Sun Corridor goods and Pinal county accounts for 3% to 9%. This section will document the top goods by value at a county level, top goods by tonnage at a county level, and compare the county profile relative to the whole Sun Corridor. Comparisons of one county relative to the performance of another county is made in several ways. The overall ranked value of goods is compared, the percentage of the commodity as a portion of all goods in the given directional flow, and finally by applying elements of economic base theory. The economic base theory posits that the economy can be divided into two very general sectors, basic or non-basic. Commodities that exceed the baseline share serve an export function or value added function, and are considered basic. The economic activity associated with these goods contributes to the unique role of the region in the West, National, and Global supply chain. Secondary traffic describes movement by trucks between warehouse and/or retail locations. This classification is consistently high among all regions and origin/destination pairs and is typical of any region. Details on the types of items being moved are not available Domestically Sourced Goods Terminating in the Sun Corridor Over $74 billion of goods are imported into the Sun Corridor annually from domestic origins outside of the region. The value of trade equates to nearly $50 per capita per day on average for the entire region. Secondary traffic is the highest value commodity flow, which is to be expected in any major metropolitan area. Secondary traffic primarily represents the movement of wholesale goods from distribution centers to the ultimate supply chain customer, including retailers and service providers. Following secondary traffic, transportation equipment is the highest value commodity entering the region. Transportation equipment is a basic commodity in Pima County, which imports over 35% of transportation equipment to the region. Maricopa County imports 76% of the value of all goods, Pima County 20%, and Pinal County 4%, respectively. The sixth most imported commodity is electrical equipment. Maricopa County imports 8% more petroleum or coal products, electrical equipment, farm products, and machinery by value than the average percent (76%) of all imports by value, reflecting the highly urbanized nature of the county. Pima County imports 7% less petroleum or coal products, 11% less farm products, and 5% less machinery by value than the average percent of all imports by value. Pinal County imports 4% more secondary traffic by value than the average percent of all imports by value. Secondary traffic is over 50% of all commodities by value imported into the county Domestic Bound Goods Originating in the Sun Corridor Over $58 billion of goods are exported from the Sun Corridor annually to domestic destinations. The value of trade equates to just under $40 per capita per day on average for the entire region. The value of domestic exports from the Sun Corridor are approximately $16 billion less than the value of domestic imports, reflecting the strong existing consumer oriented nature of the regional economy. Freight Transportation Framework Study 20 Final Report

27 Following secondary traffic, electrical equipment and transportation equipment are the highest value commodities exported from the region. Transportation equipment is a basic commodity in Pima County, exporting over 40% of transportation equipment from the region. Farm products are a basic commodity in Pinal County, exporting nearly 45% of farm products from the region. Maricopa County exports 78% of the value of all goods, Pima County 17%, and Pinal County 5%, respectively. Maricopa County exports 10% more electrical equipment, 7% more printed material, and 9% more rubber or miscellaneous plastics by value than the average percent of all exports by value. Maricopa County exports 18% less transportation equipment and 30% less farm products by value than the average percent of all exports by value. Pima County exports 7% less electrical equipment, 11% less farm products, and 9% less rubber or miscellaneous plastics by value than the average percent of all exports by value. Pinal County exports 40% more farm products by value than the average percent of all exports by value. Farm products are nearly 50% of all commodities by value exported from Pinal County, which is consistent with the significant level of agricultural activity occurring within the county Internationally Sourced Goods Terminating in the Sun Corridor Over $3.5 billion of goods are imported into the Sun Corridor annually from international origins. It should be noted that a substantial additional amount of goods of international origins are also represented in the domestic imports to the Sun Corridor due to the assembly, repackaging and redistribution of internationally imported goods, especially finished consumer goods with Asian origins, that occurs near the ports of entry to the U.S., including the Ports of Los Angeles and Long Beach in Southern California. The value of trade equates to about $2.50 per capita per day on average for the entire region. Farm products, electrical equipment, and machinery account for nearly 60% of the total value of all goods with an international origin Mexican Sourced Goods Terminating in the Sun Corridor Over $3 billion of goods are imported into the Sun Corridor annually from Mexico. Mexican imports are a subset of internationally sourced goods. Nearly 85% of international goods bound for the Sun Corridor originate from Mexico, reflecting the significance of Mexico to the Sun Corridor economy and the potential for further growth in this market. The value of trade equates to about $2 per capita per day on average for the entire region. Farm products, electrical equipment, machinery, and food products account for nearly 75% of the total value of all goods with a Mexican origin. Maricopa County imports 80% of the value of all goods, Pima County, 16%, and Pinal County 4% respectively. Maricopa County imports 10% more food products than the average percent of all imports by value, reflecting the highly urbanized, consumer oriented nature of the economy in the county. Pima County imports 7% less food products than the average percent of all imports by value. Apparel or related products account for 10% of all commodities imported to the county. Farm products account for nearly 50% of all imports into Pinal County. Primary metal products account for over 25% of all commodities imported to the county. Freight Transportation Framework Study 21 Final Report

28 3.2.5 Internationally Bound Goods Originating in the Sun Corridor Over $4.5 billion of goods are exported from the Sun Corridor annually to international destinations. The value of trade equates to about $3 per capita per day on average for the entire region. Electrical equipment and machinery account for over 45% of the total value of all goods with an international destination. Transportation equipment, primary metal products, chemical products, or fabricated metal products account for 30% of the total value of all goods with an international destination Mexico Bound Goods Originating in the Sun Corridor Over $2.7 billion of goods are exported from the Sun Corridor annually to Mexican destinations. Mexican exports are a subset of internationally exported goods. Nearly 60% of international goods bound for international destinations are bound for Mexico. The value of trade equates to about $1.70 per capita per day on average for the entire region. Machinery, fabricated metal products, and electrical equipment are the highest value commodities exported from the region to Mexico. These products are typically components for finished products being assembled in Mexico. Primary metal products are a basic commodity in Pima County, exporting nearly 50% of primary metal products from the region. Petroleum or coal products are a basic commodity in Maricopa County, exporting nearly 95% of petroleum or coal products from the region. Maricopa County exports 76% of the value of all goods, Pima County 17%, and Pinal County 7% respectively. Maricopa County exports 8% more clay, concrete, glass or stone by value than the average percent of all exports by value. Pima County exports 15% less clay, concrete, glass or stone by value, and 13% less petroleum or coal products than the average percent of all exports by value. Pinal County exports 40% more farm products by value than the average percent of all exports by value. Machinery accounts for nearly 50% of all commodities by value exported from Pinal County. 3.3 Value and Tonnage by Zip The following section displays maps of the region in intensity of freight activity on a per square mile basis. The intensity of high value goods is greatest in proximity to major transportation connections and population and employment centers. Intensity of high weight goods varies by origin/destination but is more commonly associated with areas of low population and employment density. This reflects trends of mining and aggregate operations which locate in the periphery of the region. Freight Transportation Framework Study 22 Final Report

29 3.3.1 Domestic Bound Goods by Value Originating in Sun Corridor Zip Codes As illustrated in Figure 3-1, the highest intensity of domestic bound goods by value originate in proximity to the I-10 Corridor between the Loop 101 West to the Loop 202 Red Mountain Freeway, reflecting the significance of I-10 as a transportation corridor and the agglomeration of transportation related manufacturing and distribution businesses occurring along the corridor. The area near the junction of I-17 and the Loop 101 in North Phoenix has a high average value per square mile reflecting the influence of several prominent electronics and aviation component manufacturing facilities in this area. In Pima County, the area south of I-10 and east of I-19 has the highest intensity of activity. In Pinal County, the junction of I-10 and I-8 has a higher than average concentration of activity. Figure 3-1 Domestic Bound Goods by Value Originating in Sun Corridor Zip Codes Freight Transportation Framework Study 23 Final Report

30 3.3.2 Domestic Sourced Goods by Value Terminating in Sun Corridor Zip Codes The highest intensity of domestic sourced goods by value terminate in proximity to the I- 10 Corridor between the Loop 101 West to the Loop 202 Red Mountain Freeway, as illustrated in Figure 3-2. The area south of the junction of I-17 and the Loop 101 in Phoenix has a high average value per square mile. In Pima County, the area south of I- 10 and east of I-19 has a high intensity. The Marana area north of Tucson has a higher average intensity of activity. In Pinal County, the junction of I-10 and I-8 has a higher than average concentration of activity. Figure 3-2 Domestic Sourced Goods by Value Terminating in Sun Corridor Zip Codes Freight Transportation Framework Study 24 Final Report

31 3.3.3 Domestic Bound Goods by Tonnage Originating in Sun Corridor Zip Codes The highest intensity of domestic bound goods by tonnage originate in the outlying low population areas of the region, as shown in Figure 3-3. This is reflective of the mining and aggregate operations that exist in these subareas. Figure 3-3 Domestic Bound Goods by Tonnage Originating in Sun Corridor Zip Codes Freight Transportation Framework Study 25 Final Report

32 3.3.4 Domestic Sourced Goods by Tonnage Terminating in Sun Corridor Zip Codes Heavy bulk domestic sourced goods generally terminate in the outlying low population areas of the region, as illustrated in Figure3-4. However, the highest concentrations of activity by tonnage are found in the two locations south of central Phoenix. Figure 3-4 Domestic Sourced Goods by Tonnage Terminating in Sun Corridor Zip Codes Freight Transportation Framework Study 26 Final Report

33 3.3.5 International Bound Goods by Value Originating in Sun Corridor Zip Codes The highest intensity of international bound goods by value originate in proximity to the areas of high concentrations of domestically bound goods, as shown in Figure 3-5. The overall variability among subareas is similar, but the intensity is much smaller. The domestic bound goods are displayed in classifications of hundreds of millions while international bound goods are displayed in fractions of less than ten million. Central Phoenix in the I-10 Corridor is one area of high activity. In Pima County, the area nearest downtown Tucson has the highest intensity. In Pinal County, minimal goods are bound for international destinations. Figure 3-5 International Bound Goods by Value Originating in Sun Corridor Zip Codes Freight Transportation Framework Study 27 Final Report

34 3.3.6 International Sourced Goods by Value Terminating in Sun Corridor Zip Codes Like international exports, Figure 3-6 indicates the highest intensity of international sourced import goods by value terminate in proximity to the areas of high concentrations of domestically sourced goods. Similar to international exports, the overall variability for imports among sub areas is similar, but the intensity is much smaller. Central Phoenix south of I-10 and the North Tempe area are two areas of high activity in Maricopa County. The area nearest downtown Tucson has the highest intensity in Pima County. In Pinal County, minimal goods are sourced from international destinations. Figure 3-6 International Sourced Goods by Value Terminating in Sun Corridor Zip Codes Freight Transportation Framework Study 28 Final Report

35 3.3.7 International Bound Goods by Tonnage Originating in Sun Corridor Zip Codes The highest intensity of international bound goods by tonnage originate in the outlying low population subareas of the region, as shown in Figure 3-7, which is consistent with the level of mining and quarrying operations that exist in these areas. The highest activity area is west of the junction of I-17 and I-10. Figure 3-7 International Bound Goods by Tonnage Originating in Sun Corridor Zip Codes Freight Transportation Framework Study 29 Final Report

36 3.3.8 International Sourced Goods by Tonnage Terminating in Sun Corridor Zip Codes As indicated in Figure 3-8, the highest intensity of international sourced goods by tonnage terminate in the outlying low population subareas of the region. This is reflective of the mining and aggregate operations that exist in these areas. The highest activity area is near the junction of I-10 and MC-85 in Maricopa County, and the Avondale and Tolleson areas south of I-10. There are various locations of activity in Pinal and Pima Counties characterized by relatively homogenized distribution with minimal variation among subareas. Figure 3-8 International Sourced Goods by Tonnage Terminating in Sun Corridor Zip Codes Freight Transportation Framework Study 30 Final Report

37 3.3.9 Mexican Bound Goods by Value Originating in Sun Corridor Zip Codes Mexican bound goods are a subset of all international bound goods. Figure 3-9 shows the highest intensity of international bound goods by value originate in proximity to the areas of high concentrations of domestically bound good. Mexican bounds goods are a large percentage share of all international bound goods originating in the Sun Corridor. Central Phoenix in the I-10 Corridor is one area of high activity. In Pima County, the area nearest downtown Tucson has a high intensity of activity. In Pinal County, goods originate in areas closest to the I-10 and I-8 corridors. Figure 3-9 Mexican Bound Goods by Value Originating in Sun Corridor Zip Codes Freight Transportation Framework Study 31 Final Report

38 Mexican Sourced Goods by Value Terminating in Sun Corridor Zip Codes As stated previously, Mexican sourced goods are a subset of all international sourced goods and are a significant share of all international sourced goods imported to the Sun Corridor region. Figure 3-10 indicates large population and employment centers are the most active areas of freight activity sourced from Mexico. Central Phoenix in the I-10 Corridor is one area of high activity. In Pima County, the area nearest downtown Tucson and north of the city has a high intensity of activity. In Pinal County, goods terminate in areas closest to the population centers of Casa Grande, Eloy, and Maricopa. Figure 3-10 Mexican Sourced Goods by Value Terminating in Sun Corridor Zip Codes Freight Transportation Framework Study 32 Final Report

39 Mexican Bound Goods by Tonnage Originating in Sun Corridor Zip Codes Pinal County has the greatest concentrations of activity bound for Mexico, as illustrated in Figure This reflects a substantial percentage of the mining and quarrying operations that exist in this subarea being bound for Mexico. Figure 3-11 Mexican Bound Goods by Tonnage Originating in Sun Corridor Zip Codes Freight Transportation Framework Study 33 Final Report

40 Mexican Sourced Goods by Tonnage Terminating in Sun Corridor Zip Codes Figure 3-12 indicates that a high activity area for import of Mexican Goods by Tonnage is in proximity to the interchange of I-10 and MC-85. The area south of I-10 between Loop 101 West and I-17 also has a high level of activity. There are various locations of activity in Pinal and Pima County characterized by a homogenized distribution with minimal variation among subareas. Figure 3-12 Mexican Sourced Goods by Tonnage Terminating in Sun Corridor Zip Codes Freight Transportation Framework Study 34 Final Report

41 Sun Corridor Bound Goods by Value Originating in Mexican States Figure 3-13 demonstrates that Sun Corridor bound goods by value originate most from the bordering state of Sonora extending south from Mazatlan. The second area of greatest freight activity is received from areas surrounding Mexico City. High concentrations of activity originate from greater Guadalajara in the State of Jalisco. It should be noted that a portion of Sun Corridor bound goods originating in this area are likely to enter the US through Laredo. Figure 3-13 Sun Corridor Bound Goods by Value Originating in Mexican States Freight Transportation Framework Study 35 Final Report

42 Sun Corridor Sourced Goods by Value Terminating in Mexican States The highest value of goods originating in the Sun Corridor is bound for the bordering state of Sonora extending south to Mazatlan, as shown in Figure The second area of greatest freight activity is destined for the areas surrounding Mexico City. High concentrations of activity terminate in greater Guadalajara in the State of Jalisco. Figure 3-14 Sun Corridor Sourced Goods by Value Terminating in Mexican States Freight Transportation Framework Study 36 Final Report

43 Sun Corridor Bound Goods by Tonnage Originating in Mexican States The highest tonnage of Sun Corridor bound goods originating in Mexico are sourced for the bordering state of Sonora, as depicted in Figure The corridor between Guadalajara and Monterrey originates a high tonnage of goods bound for the Sun Corridor. Mexico City and the surrounding areas also export a high weight of goods bound for the Sun Corridor. Figure 3-15 Sun Corridor Bound Goods by Tonnage Originating in Mexican States Freight Transportation Framework Study 37 Final Report

44 Sun Corridor Sourced Goods by Tonnage Terminating in Mexican States Figure 3-16 shows the highest tonnage of Sun Corridor sourced goods terminating in Mexico are exported to the bordering state of Sonora. There are various locations of activity in Mexico and this reflects a relatively homogenized distribution with minimal variation among other Mexican States. Figure 3-16 Sun Corridor Sourced Goods by Tonnage Terminating in Mexican States Freight Transportation Framework Study 38 Final Report

45 3.4 Recommended Focus Areas Focus areas for further analysis are generally identified by the intensity of activity that composes a catchment area nominally five miles in diameter. The five mile catchment area is appropriate to capture the various clusters of freight activity and characterizes the magnitude of freight activity for purposes of comparison across the region. Extensive detailing of the commodity types within the catchment area exceeds the precision of information available from the Transearch data. In conjunction with input from regional planning partners, sixteen regional focus areas were identified by the magnitude of freight activity and the potential to influence and increase in freight activity based on the understanding of local development trends and planning activities. The 16 regional freight focus areas represent the greatest opportunities to develop infrastructure that supports the Sun Corridor strengthening position in the global supply chain by capitalizing on recent changes in market conditions and resultant trends toward nearshoring and westbound goods movement. The focus area locations are shown in Figure Freight Transportation Framework Study 39 Final Report

46 Figure 3-17 Regional Freight Focus Areas Freight Transportation Framework Study 40 Final Report

47 4.0 FOCUS AREA SCREENING As discussed in the Section Regional Commodity Flow Analysis, 16 initial areas were identified throughout the Sun Corridor as possible locations to concentrate supportive freight-related projects and initiatives as a means to better position the region to capture the benefits of recent market changes affecting the supply chain. The candidate focus areas were identified using a combination of commodity flow analysis to identify freight activity concentrations, as well as input from regional planning partners. Each focus area contains unique assets and limitations which could greatly support or hinder its potential as a center of freight activity. In addition, existing policy and infrastructure resources to support substantial freight related growth are limited, and should be concentrated in focus areas that show the greatest potential for freight related growth. To begin focusing the direction in policy and transportation investments amongst candidate focus areas, each of the 16 zones were evaluated using an initial feasibility screening, as well as an industrial market study, and identification of freight facility typology types consistent with the desire to enhance the role of the Sun Corridor in the global supply chain. 4.1 Initial Screening The initial screening evaluation involved assessing measurable attributes of each focus area to gauge overall potential as a freight activity center. The intent of this screening is to determine which areas contain the most freight related assets and favorable conditions, which contain major limitations to freight development, and how each area compares to others. The screening sought to quantify comparable factors in a manner that would allow an objective evaluation process. The screening analysis was completed for all 16 focus areas within the Sun Corridor based on a nominal 5 mile radius zone centered on either concentrations of previously identified commodity flows, or specific sites identified by the planning partners Screening Criteria Screening criteria that focuses on the potential of the specific areas as freight activity centers was defined to support the initial screening process. Screening criteria and the subsequent assessment addressed both quantitative and qualitative factors. Criteria were developed to be both technically sound and functional for the purposes of screening candidate focus areas, and were intended to be both easily understood and able to clearly differentiate the effectiveness of each focus area as a freight activity center. Quantitative criteria used in the screening included general considerations such as the proximity and density of transportation connections, existing and projected freight activity, the amount of complimentary and prohibitive freight land uses, and the size of the nearby labor pool. Qualitative measures included in the screening gauged the presence and concentration of trade incentive areas, the level of freight supportive public policies, and the overall potential for freight related development. Specific criteria and individual performance measures are described in Table 4-1. Freight Transportation Framework Study 41 Final Report

48 Table 4-1 Focus Area Screening Criteria Criterion Performance Measure Description Quantitative Miles to Airport Measures the distance from center of focus area to nearest major cargo airport Miles of Rail Access Miles of Highway/Interstate Measures linear mileage of rail lines contained within focus area to gauge proximity and density of rail facilities Measures linear mileage of major trucking capable roads contained within focus area Value of Existing Freight Activity Determines the total value of existing inbound and outbound freight activity within focus area Value of Future Freight Activity Determines the total value of projected inbound and outbound freight activity within focus area Percent Increase of Freight Activity Percent of Existing/Entitled Residential Percent of Existing Commercial and Industrial Land Percent of Developable Land Existing Labor Force Determines the percent change between total values of existing and projected freight activity Determines the percentage of either existing of entitled residential land within focus area Determines the percentage of existing commercial and Industrial land within focus area Determines the percentage of vacant land within focus area where development is considered possible Measures the working age population within the focus area Qualitative Foreign Trade Zone Determines whether the focus area falls within an FTZ service area or if FTZ sites exist within the focus area Public Policies Gauges the level of land use regulations and economic policies within focus area that encourage freight related activity Opportunity Value Gauges potential of existing and future assets that can be leveraged for freight-related development Freight Transportation Framework Study 42 Final Report

49 There are a wide range of specific performance measures which make up the components of the initial screening criteria. The combined effect of these individual measures is assessed to determine the overall potential of the focus area. Miles to Airport: For air cargo purposes, the distance required to travel to an airport can affect freight-related growth in that area. Mileage was determined by measuring the distance from the center of the circular focus area to the nearest cargo airport. Miles of Rail Access: The proximity and density of existing rail lines can also affect freight-related growth in an area. The greater the number of rail miles, the greater the potential for businesses to have direct access to the rail system through the construction of new sidings or rail spurs. Mileage was determined by measuring the total length of existing rail mainlines or spurs within the circular focus area. Miles of Highway/Interstate: For trucking purposes, the density of the adjacent major road network containing many available routes and connections to rail, cargo, and warehouse locations can have a significant impact on freight related growth in an area. Mileage was determined by measuring the total length of existing and planned interstate freeway and state highway facilities within the circular focus area. Value of Existing Freight Activity: Proximity of an area to existing freight activity, through known business locations, can affect freight-related growth in that area. Some types of manufacturing and industrial business can generate industry agglomerations to spur economic development. The total value of all commodity inflows and outflows for both domestic and international are listed in billions of dollars based on Transearch 2009 data. Total value was measured by querying activity based on the zip codes that generally encompass the circular focus area. Value of Future Freight Activity: As with the Value of Existing Freight Activity, the proximity of an area to projected freight activity can affect freight-related growth in that area. The total value of all commodity inflows and outflows for both domestic and international are listed in billions of dollars based on projected Transearch 2015 data. Total value was measured by querying activity based on the zip codes that generally encompass the circular focus area. Percent Increase in Freight Activity: The percent increase in future economic activity could illustrate how well recent public improvements are leveraging opportunities, and can also help identify areas that may require additional infrastructure or policy improvements to maintain existing activities and spur freight-related growth. Percentages of anticipated economic growth between 2009 and 2015 were calculated for each circular focus area. Percentage of Existing and Entitled Residential Land: Residential lands are generally considered the most stable land use and the least likely to convert to other uses. The percentage of lands used and entitled for residential purposes Freight Transportation Framework Study 43 Final Report

50 can affect freight-related growth to that area due to compatibility issues and available land for industrial growth. The percentage of each focus area that is shown as existing or entitled residential land was calculated using land use data provided by the planning partners. Percentage of Existing Commercial and Industrial Land: The percentage of existing commercial and Industrial land in an area can indicate how established that area is for non-residential uses. Conversely, this can show how established an area may be as an existing economic center. The area may also require additional infrastructure or policy improvements to maintain economic activities and further expand freight-related growth. The percentage of each focus area that is shown as existing commercial or industrial land was calculated using land use data provided by the planning partners. Percentage of Developable Land: The percentage of land open for development can also affect freight-related growth in that area. When available land is located within the focus area in proximity to rail access, major roads, and near airports, the land can be used to compare freight-related growth suitability. The percentage of each focus area that is considered developable land was calculated using land use data provided by the planning partners. Developable land was determined by eliminating existing and entitled residential, commercial, industrial, and transportation land uses, as well as designated parks and preservation areas. Existing Labor Force: Freight-related businesses require a significant sized labor force within a close proximity. Most available supply chain jobs are not high paying, and workers will most likely be unwilling to travel long distances for employment. Direct access to an existing labor force can affect freight-related growth to that area. Existing labor force was derived using US Census American Community Survey 2010 five-year sample estimates for total labor force, which is considered the available population between ages 18 and 64. Total workforce was measured by calculating the total workers for each census tract which generally encompass the circular focus area. Foreign Trade Zone: The proximity of an area to Foreign Trade Zone (FTZ) service areas and individual FTZ facilities can provide an important economic benefit and affect freight-related growth in an area, especially when international import and export is involved. All businesses located within and FTZ service area are able to apply for FTZ facility status and benefits, given they meet specific freight and commodity related conditions. Performance scoring considered whether a focus area fell within an FTZ service area jurisdiction, as well as identified the number of individual FTZ facilities that currently operate within the circular focus area. Public Policies: Areas that have particular land use regulations and economic policy priorities can have a significant effect on freight-related growth within an area, particularly in creating development ready sites. Performance scoring considered how existing land use, development, and economic policies and Freight Transportation Framework Study 44 Final Report

51 regulations could serve to leverage freight-related growth. Considerations included whether plans or currently in place within the focus area, as well as the known level of freight-related interest shared by policy makers. Opportunity Value: The combination of existing and future assets, and their functional interrelationships, can create additional opportunities for freight growth that cannot be assessed by evaluating individual criteria alone. Opportunity values were determined for each focus area based on the strategic combination of assets positioned to leverage freight-related economic development. Considerations included whether the focus area has defined strategic opportunities, probably strategic opportunities, or minimal strategic opportunities to leverage growth. For the purposes of the screening evaluation, performance thresholds representing a five point gradation were defined for each measure. Table 4-2 presents the various thresholds for each of the criterion used during the screening evaluation. Freight Transportation Framework Study 45 Final Report

52 Table 4-2 Focus Area Screening Performance Thresholds Criterion Performance Measure Description Most Favorable Least Favorable Quantitative Miles to Airport Measures the distance from center of focus area to nearest cargo airport miles to cargo airport miles to cargo airport miles to cargo airport miles to cargo airport Ov er 20 miles to cargo airport Miles of Rail Access Miles of Highways/Interstates Measures linear mileage of rail lines contained within focus area to gauge proximity and density of rail fmeasures i i i linear mileage of major trucking capable roads contained within focus area Over 20 miles of rail line exists in focus area Over 20 miles of major road exists in focus area miles of rail line exists in focus area miles of major road exists in focus area miles of rail line exists in focus area miles of major road exists in focus area miles of rail line exists in focus area miles of major road exists in focus area miles of rail line exists in focus area miles of major road exists in focus area Value of Existing Freight Activity Determines the total value of existing inbound and outbound freight activ ity within focus area Over 10 billion in total freight activity in focus area billion in total freight activity in focus area billion in total freight activity in focus area billion in total freight activity in focus area billion in total freight activity in focus area Value of Future Freight Activity Determines the total value of projected inbound and outbound freight activ ity within focus area Over 10 billion in total freight activity in focus area billion in total freight activity in focus area billion in total freight activity in focus area billion in total freight activity in focus area billion in total freight activity in focus area Percent Increase of Future Activity Determines the percent change between total values of existing and projected freight activity Over 100% increase in total activity in focus area 75% - 99% increase in total activity in focus area 50% - 74% increase in total activity in focus area 25% - 49% increase in total activity in focus area 0% - 24% increase in total activity in focus area Percent of Existing/Entitled Residential Determines the percentage of either existing of entitled residential land within focus area 0% - 9% of focus area is existing or entitled residential 10% - 19% of focus area is existing or entitled residential 20% - 29% of focus area is existing or entitled residential 30% - 39% of focus area is existing or entitled residential Ov er 40% of focus area is existing orentitled residential Percent of Existing Commercial and Industrial Percent of Developable Land Determines the percentage of existing commercial land within focus area Determines the percentage of v acant land within focus area where development is considered possible Ov er 20% of focus area is existing commercial Ov er 80% of focus area is considered dev elopable 15% - 19% of focus area is existing commercial 60% - 79% of focus area is considered dev elopable 10% - 14% of focus area is existing commercial 40% - 59% of focus area is considered dev elopable 5% - 9% of focus area is existing commercial 20% - 39% of focus area is considered dev elopable 0% - 4% of focus area is existing commercial 0% - 19% of focus area is considered dev elopable Existing Labor Force Measures the working age population within the focus area Ov er 100k working age population in focus area 75k - 99k working age population in focus area 50k - 74k working age population in focus area 25k - 49k working age population in focus area 0k - 24k working age population in focus area Qualitative Foreign Trade Zone Determines whether the focus area falls within an FTZ service area or if FTZ sites exist within the focus area Multiple FTZ sites exist within focus area At least one FTZ site exists within focus area The focus area is in an FTZ service area but contains no sites - The focus area is not in an FTZ service area and contains no sites Public Policies Gauges the level of land use regulations and economic policies within focus area that encourage freight related activity Plans and policies are in place which encourage freight related activities Policy makers have substantial interest in encouraging freight related activities Policy makers have some interest in encouraging freight related activities - Policy makers have no interest in encouraging freight related activ ities Opportunity Value Gauges potential of existing and future assets that can be leveraged for freight-related development The focus area has significant potential to leverage assets for dev elopment - The focus area has some potential to leverage assets for dev elopment - The focus area has limited potential to leverage assets for dev elopment Freight Transportation Framework Study 46 Final Report

53 4.1.2 Screening Methodology Technical and qualitative information to support the initial screening of freight focus areas were established through stakeholder meetings and confirmed by the planning partners. For the purposes of this location based study, performance measure data used to define criteria were limited to infrastructure related transportation data, existing land use data, demographic information, freight commodity flow data, and economic and policy based factors that could affect a business to locate in a specific area. Measurements of transportation connections, as well as land use composition were calculated using Geographic Information Systems (GIS). Transportation and land use data was provided by planning partners including the Maricopa Association of Governments (MAG), the Central Arizona Association of Governments (CAAG), the Pima Association of Governments (PAG), and Pinal County. All related values were determined by measuring the distance from the center of the defined five mile circular focus area, or measuring the length or area of factors that fell within the 5 mile zone. Values for existing and future freight activity were calculated based on queries of Transearch commodity flow data provided by Global Insight, Inc, using zip codes as the geographic basis. Zip codes were selected which generally encompassed each five mile circular focus area. The ratio of zip code zone area that falls within the focus area compared to the portion that exceeds the focus area boundaries was calculated using GIS functions. The determined proportion was then applied to the freight value. This calculation ensures that the true value of the freight activity within the five mile area is as accurately represented as possible, and avoids misrepresenting the focus area by including large zip code areas outside of the actual five mile zone. Existing labor force was determined using U.S. Census American Community Survey five year estimates ( ) delineated by census tract. As with zip codes used to measure freight activity, census tracts that generally encompass each focus area zone were selected. The ratio of census tract area that falls within the circular focus area compared to any potions that exceed the focus area boundary was calculated and applied to the labor force totals for each tract. This method ensures a more accurate representation of the labor force within each focus area. Qualitative measures were based on input from planning partners, and a general assessment of existing and future assets and their interrelationships. Including qualitative measures allows the initial screening process to access key factors which could not be quantified by individual criteria alone. While all of the criteria are important, some criteria may be more indicative of a focus area s potential than others. To address the importance of the value of the criteria, weights have been assigned to each criterion. Weights for each criterion range from 1 to 4, with 4 representing the most important factor and 1 representing the least important factors. Miles of major roads, value of existing freight activity, percent increase in freight activity, and opportunity value were given the highest weight (4); Freight Transportation Framework Study 47 Final Report

54 Miles of rail access, percent of developable land, and public policies were assigned the next highest weight (3); Miles to airport, value of future freight activity, percent existing residential, and existing labor force were given a weight of 2; and The remaining performance measures of percent existing commercial and foreign trade zones were given the lowest value of 1. Overall performance scores were calculated by multiplying individual criteria scores of each focus area by the weightings specified above, then totaling scores from every factor to determine a total score for each focus area. The overall results are discussed in the following section Screening Results The results of the various performance measure calculations and observations were each tabulated to facilitate comparison and evaluation. The results for each performance measure were compared to the thresholds defined previously to assign a relative rating for each analysis segment. The ratings are presented on a five point scale using Harvey Balls, a form of ideograms similar to those used by Consumer Reports magazine to rank the features of various products. Table 4-3 illustrates the rating scale utilized for the initial managed lanes screening. Table 4-3 Initial Screening Rating Scale Most Favorable Least Favorable The results of the screening were tabulated for each performance measure, and an average was then calculated to determine a relative rating of each focus area against all other focus areas. Overall screening results are presented below. Table 4-4 includes an overall weighted rating and an overall ranking. The screening results indicate that the focus areas with the most favorable characteristics for freight-related growth potential are generally located in Maricopa County and Pima County. The top tier performing focus areas are Discovery Triangle, West Phoenix, Grand Avenue, Deer Valley, West Chandler, and Tucson International Airport. These areas generally demonstrated a combination of desirable characteristics including multiple transportation connections in close proximity, complimentary existing land uses, substantial projected freight activity growth, and favorable public policies and leveraging opportunities. Focus areas with a medium rating included West Valley, Phoenix Mesa Gateway, Pinal Airpark, Eloy (I-8 & 1-0), North Tucson, Marana, and Surprise. These facilities Freight Transportation Framework Study 48 Final Report

55 demonstrated some desirable characteristics, but were generally further from transportation connections, contained less favorable land uses, and did not show as significant an amount of projected freight activity compared to higher scoring focus areas. Focus areas with least favorable ratings were generally located in less urbanized areas of Pinal County, including La Palma, Maricopa-Casa Grande, and Magma Rail Road. In most cases, these areas scored low due to limited transportation assets, unsubstantial freight activity, and unfavorable public polices and leveraging opportunities. Table 4-4 Focus Area Screening Results Most Favorable Least Favorable Focus Area Name County Overall Weighted Rating Overall Ranking 1 Phoenix-Mesa Gateway Maricopa West Valley Maricopa Discovery Triangle Maricopa West Phoenix Maricopa Grand Avenue Maricopa Deer Valley Maricopa West Chandler Maricopa Pinal Airpark Pinal La Palma Pinal Interstate 8 / Interstate 10 Pinal Maricopa / Casa Grande Pinal Magma Rail Road Pinal Tucson International Airport Pima North Tucson Pima Marana Pima Surprise Maricopa 3 3 The preliminary screening results were discussed with the planning partners who confirmed the initial screening process and overall results appear to reasonably assess the potential for freight related growth as conditions exist in the Sun Corridor today. Freight Transportation Framework Study 49 Final Report

56 However, it is important to note that some focus areas could have considerable potential for future freight related growth if supported by appropriate policies. 5.0 FREIGHT RELATED LAND USE OPPORTUNITIES 5.1 Land Use Context Land use opportunities are key success factors to leveraging a freight system for economic development. Land use opportunities are broadly classified into two categories: redevelopment, and new development. In addition to other criteria, each of these development types requires market demand and access to labor. Redevelopment. Job growth and renewed tax base is a key outcome of redevelopment opportunities. Some dormant lands have good access to regional transportation and are underutilized assets for municipal revenue generation. Remediation costs on some sites can be expensive, and industrial uses can sometimes reduce the costs to mitigation. Some existing facilities may be adaptively reused to reduce redevelopment costs. Access to required skilled labor will influence the location for redevelopment projects; however, many redevelopment opportunities exist in mature markets with access to a range of skilled and unskilled labor. Redevelopment projects can be funded in multiple ways, including sole funding from the private sector; business or development incentives offered from the public sector in exchange for future revenues and job creation; or public-private partnerships can be formed that leverage the strengths and assets of multiple resources. New Development. Job growth and new tax base is a key outcome of new development opportunities. The particular facility type will influence the level of skilled labor required, and therefore, will influence the location of a facility within the region based on access to required labor needs. New development in mature markets, surrounded by similar development, can be accommodated on pre-developed sites, that include public utilities and infrastructure, requiring only vertical building development; or new development can include infrastructure improvements and vertical building development. New development in new markets can be expensive due to land acquisition and cost of materials and labor. If this new development is solely funded by the private sector, this indicates strong, growing demand. If this type of development requires subsides, this could indicate that this type of development is ahead of the market and is either: a pioneering project to catalyze following development, a satellite-type of development that is not anticipated to grow additional development, or is ahead of a market with no imminent demand. It should be noted that industrial and commercial development will create new job opportunities that could drive additional residential and supportive community services. Jobs to housing balance should be a key criterion when leveraging land use Freight Transportation Framework Study 50 Final Report

57 opportunities. Leveraging a freight system for economic development and locating new residential development both enable more integrated and sustainable communities and opportunities to reduce sprawl conditions that create undue burden on public transportation and infrastructure systems. The type of private sector development, relative to a freight system, will be determined by specific transportation, public policy, and supply chain criteria. Together, these criteria define specific facility typologies for development opportunities as part of the Sun Corridor Freight Framework. Transportation. Development sites with high quality access and proximity to regional surface transportation facilities, including: rail, interstate and state highways, will influence the facility type. Business models that include manufacturing as a primary percentage of their revenue may have fewer transportation demands than a similar sized business that anticipates receiving primary revenues based on distribution. Public Policy. Developable sites that are adjacent to regional transportation choices, and have industrial zoning and land use classifications and other economic development policies, will influence a specific business model and resulting facility type. To provide the most flexibility for freight-related businesses and industrial development, it will be important that public policies are established for these uses. There is incentive for municipalities that have these policies in place prior to a business or developer beginning due diligence. Changing public policy can take many months, and sometimes years; as such, land without appropriate public policies is a development risk and can negatively influence site selection. For instance, a business model that includes manufacturing may be more interested in locating its building in an existing Foreign Trade Zone (FTZ), due to the possible economic incentives that could be realized within the zone established by existing policy. Supply Chain. The type of facility and its location will be determined, in part, by the role of the facility in the supply chain process. As illustrated in Figure 5-1, the supply chain process is composed of three primary activities, including: importing, distribution and manufacturing, and consumer point of sale. Importing. International goods and materials are received by a destination port via air, sea, rail or truck, and processed to clear customs, then prepared for regional and local distribution of shipments. Distribution and Manufacturing. Shipments are distributed to either large consolidation centers, or to regional distribution centers (RDC). Large consolidation centers serve to break up large shipments and direct them to regional distribution centers. RDCs serve to receive goods from other vendors and distribute shipments to local retail destinations. Consumer Point of Sale. Local retail stores receive shipments from distribution centers and prepare backhaul to vendors. Freight Transportation Framework Study 51 Final Report

58 Figure 5-1 Supply Chain Process Within this supply chain process exists many opportunities for the Sun Corridor to enhance this regions role allowing underutilized lands to benefit from economic development. While the region can leverage the entire supply chain, especially by developing facilities throughout the Sun Corridor in a rational and coordinated manner, research from this study has shown that a substantial benefit can be realized through growing distribution and manufacturing operations in particular. To guide the development of these operations, facility typologies have been defined for various distribution and manufacturing operations. The purposes of the typologies are to: understand how different operations can contribute to a broader Sun Corridor freight system; help determine the development type for particular sites; and to understand the requirements of each typology to integrate improvements into local public agency plans and polices. 5.2 Facility Typologies and Location Principles Based on the land use context, market opportunities, and supply chain dynamics in the Sun Corridor, typologies have been developed for freight-related facility development. Four principal typologies for supply chain facilities have been defined and are described below in terms of function and distinguishing principles relevant to the region. These typologies represent development options that could be appropriate for sites Freight Transportation Framework Study 52 Final Report

59 along the Sun Corridor. While the four typologies can exist solely and independently within a region, they are not mutually exclusive within the supply chain. To be most successful in attaining a more prominent role in the global supply chain, the Sun Corridor must plan and act regionally to provide all of the typologies in a comprehensive and coordinated manner, although development of specific locations may occur incrementally over time. Furthermore, the typologies have characteristics in common, but differ in the weight of these characteristics based on the primary function of the particular location. For example, any facility distributing goods will offer service to the local market, but one type of facility emphasizes this function and calls for sites that help optimize it while other may treat local distribution as a secondary or ancillary function. The four typologies relevant to freight facilities in the Sun Corridor are listed as follows, along with a description of key location principles: Import Center: As products enter the country, an import center stages them for inland distribution. Possible functions of an import center include redirection of goods to the precise markets currently demanding them; combining goods from multiple sources into load sets for individual stores and customers (referred to as deconsolidation and consolidation); changing modes (e.g., to transfer goods from rail to truck, or to expedite a shipment through forwarding it by air); and processing goods via packaging, labeling, or more complex preparation. Distinguishing principles for an Import Center are: Sites should be close to the international gateway so that goods may be accessed as soon as possible; In the case of the Sun Corridor, proximity to the border should be such that it is practical for Mexican trucks to travel through to the facility without transferring carriage to U.S. operators. Sites benefit from being within an anchor market providing opportunities for immediate local distribution; Locations should have strong connections to the highway system for regional and national distribution, and be in reach of air service and other modal options; The labor pool should find warehouse wages (roughly $14/hour) attractive, and have a reasonable commute to work; In the case of the Sun Corridor, bilingualism is desirable in the workforce, especially when dealing directly with Mexican freight sources and operators; Manufacturing and Local Distribution Center: Sun Corridor manufacturing can capitalize on at least three assets: the natural environment (for example attracting solar energy development); the industrial environment (for example exploiting economies of agglomeration in the aerospace, automotive or biomedical sectors); and proximity to the international border with Mexico (for example adopting interactive production on the maquiladora model that now extends deeper into Mexico). Local distribution typically accompanies manufacturing when there is an anchor market providing local demand (for instance, in food and beverage Freight Transportation Framework Study 53 Final Report

60 production), but the Sun Corridor has become such a large consumer market that locally focused distribution may make sense by itself in some business and retail sectors. Facility functions are production, storage, and direct distribution (with little intermediate staging in the local area). Distinguishing principles for a Manufacturing and Location Distribution Center are: Sites focus closely on the population: for proximity to labor in the case of manufacturing, and for proximity to consumers for distribution; A comprehensive and efficient highway network is necessary in all directions; Air service is essential for manufacturing supplies and distribution; The border should be within a same day truck turn travel time; Labor requirements are diverse: manufacturing process and management skills necessitate tertiary educated personnel with advance technical and/or managerial skills demanding higher pay, while distribution can range from relatively demanding logistical work in a production environment, to relatively simple warehousing and trucking for local consumption. Mixing Center: Products traveling from sources all over the country and world may be staged for destination markets in a mixing center, which combines the characteristics of an import center with forward distribution. The essential functions of a mixing center are redirection, deconsolidation and consolidation, and modal change, along with processing and storage. Distinguishing principles for a Mixing Center are: Access to international gateways, either by proximity or by location enroute to market; Sites should be situated on the threshold of destination markets, and be enroute from domestic origins; Access to an extensive highway network and broad availability of air service are critical, and rail options are desirable; Locations should be anchored by substantial local demand; Labor should find warehouse wages attractive and be able to commute to work, but the greater complexity of work also necessitates more sophistication and diversity in the labor pool; For the Sun Corridor, bilingualism is desirable in the workforce due to the likelihood of origins and destinations in Mexico; Distance to the border should be sufficient to support round trips by Mexican truck fleets. Forward Distribution Center: As products travel across the country, a forward distribution center assembles goods from many long distance origins and local Freight Transportation Framework Study 54 Final Report

61 manufacturing and warehousing facilities, and stages them for delivery to major destination markets within reach of the center. Deconsolidation and consolidation are the key facility functions, but others include mode change (such as rail to truck), redirection, processing, and storage. Distinguishing principles for a Forward Distribution Center are: Sites should be enroute between origins and destinations, thus requiring few additional travel miles to reach the facility; Locations should be near the threshold of destination markets so as to serve as jumping-off points, ideally within overnight truck service range (approximately 550 miles); In the case of the Sun Corridor, locations close to existing Interstate Highways and the proposed route of the Proposed Interstate Route Corridor (PIRC) often referred to as Interstate 11 (I-11) are advantageous for delivery service to West Coast markets,; Excellent general highway access and good modal alternatives are important; Immediate proximity to a large local anchor market improves location economics; The labor pool should find warehouse wages attractive and be able to commute to work. 5.3 Relationship to Sun Corridor Market Opportunities The facility types define four forms of development responsive to the supply chain needs and dynamics that are increasingly creating market opportunities for the Sun Corridor. The drivers of those opportunities are: The Sun Corridor s rise to a top ten consumer market, rendering it a newly compelling location for supply chain networks and a viable anchor market for both local distribution and distribution to other major markets (most notably including Southern California and Southern Nevada, as well as Northern California, the Wasatch Front and the Pacific Northwest). The Sun Corridor s situation on the westbound routes to California and the regions status as the only significant anchor market for 1,500 miles along those routes, placing it at the threshold for distribution to the West Coast. The emergence of nearshoring, especially in Mexico, coupled with the Sun Corridor s position at the outlet from Mexico s key western transportation corridor, a combination that should influence supply chains as they reconfigure their distribution networks from overseas locations in Asia to North America (this opportunity also supports increases in manufacturing in the Sun Corridor). Import centers are a direct answer to nearshoring, manufacturing may integrate with nearshored processes while also accommodating local distribution, mixing centers can integrate Mexican imports with westbound trade from Gulf and Atlantic ports, forward Freight Transportation Framework Study 55 Final Report

62 distribution exploits the westbound threshold for distribution to major West Coast markets, and every form of development gains viability from the magnitude and resources of the Sun Corridor mega-region as a major anchor market. 5.4 Location of Facility Typologies While the focus area screening criteria in Section has been designed to rank objective criteria among the study areas, location principles are required to provide guidance for possible business and facility types that could locate within the Sun Corridor. Location principles have been included in the Facility Typology descriptions in Section 5.3, and describe objective criteria that should be considered when determining possible facility locations. The principles have been defined to achieve two overarching goals: 1) support a regional freight system, and 2) leverage the freightrelated assets within the study area context. The purpose of defining these principles is to provide regional agencies a framework for providing assistance in locating business and facility types, and for local municipalities to have a framework regarding the needs of each facility type Conceptual Location of Facility Types Based on the location principles and typology function described in Section 5.3, facility types have been screened and conceptually determined for the sixteen (16) study areas. Following is a description of possible facility types that would be appropriate within the Sun Corridor study area locations. Additional study areas could be assessed and screened based on the location principles to determine appropriate facilities elsewhere in the corridor. Facility type and location is based on a regional network; multiple facility types could be appropriate at many of the study areas. Additionally, multiple opportunities for either new development or utilizing existing development exist within each study. For this purpose, a Majority Facility Type has been determined based on study area locations. The purpose for identifying probable facility types is based on the regional system and location principles, but will ultimately be determined by the specific business model for each site. For instance, in determining the location and facility type for a specific company whose business model depends more on manufacturing operations than distribution, the location would be more influenced by availability of materials and appropriately skilled workers, than other criteria. Table 5-1 presents the majority facility type that would occupy each of the study areas. The location principles from Section 5.3 have been applied to the study areas, determining the majority facility types, as illustrated in Figure 5-2. Import Distribution Center One location has been indentified based on the study areas, Tucson International Airport, based on the proximity to the Mexican border, existing air freight operations and capacity, and existing Foreign Trade Zone designation. This area could benefit from additional intermodal facilities, including intermodal transfer, consolidation and distribution operations. Freight Transportation Framework Study 56 Final Report

63 Table 5-1 Study Area Majority Facility Types Area Location Majority Facility Type Maricopa County 1 Phoenix-Mesa Gateway Manufacturing & Local Distribution Center 2 West Valley Forward Distribution Center 3 Discovery Triangle Mixing Center 4 West Phoenix Manufacturing & Local Distribution Center 5 Grand Avenue Manufacturing & Local Distribution Center 6 Deer Valley Manufacturing & Local Distribution Center 7 West Chandler Manufacturing & Local Distribution Center 16 Surprise Mixing Center Pinal County 8 Pinal Airpark Manufacturing & Local Distribution Center 9 La Palma Manufacturing & Local Distribution Center 10 Eloy (Interstate 8 / Interstate 10) Mixing Center 11 Maricopa / Casa Grande Mixing Center 12 Magma Rail Road Manufacturing & Local Distribution Center Pima County 13 Tucson International Airport Import Distribution Center 14 North Tucson Mixing Center 15 Marana Manufacturing & Local Distribution Center Manufacturing and Local Distribution Center Nine of the study areas are appropriate locations for a range of manufacturing and distribution functions. Operations located closer to major transportation facilities can leverage distribution functions, while businesses locating close to appropriately skilled labor or specialized materials can leverage manufacturing functions. Mixing Center Five of the study areas are in close proximity to the nexus of major interstate and state highway interchanges. These locations provide appropriate opportunities for storage, redirection, consolidation and reconsolidation to all regional routes. Forward Distribution Center One location within the western area of the Sun Corridor is situated along one I-10, a major east-west route. The area, in the West Valley at SR-85/I- 10, is strategically located to accept goods and materials from other regions, and provide specialized operations for storage, reconsolidation and distribution to western and northwest locations. Additional study areas could also provide facilities for western distribution, including the future route of PIRC/1-11 and nexus of other major interstate and state highway interchanges. Freight Transportation Framework Study 57 Final Report

64 Figure 5-2 Study Area Majority Facility Types Freight Transportation Framework Study 58 Final Report

65 6.0 SELECTED ANALYSIS ZONES As discussed in previous sections, focus areas were identified and evaluated in order to gauge the potential of each location as a future freight activity center. The initial range of focus areas were identified through regional commodity flow analysis and planning partner input, then evaluated, scored, and ranked based on supportive technical criteria. The focus areas were then considered within the context of freight typologies and assigned a type. Freight typologies were determined based on labor force characteristics, geographic location, land composition, and commercial and industrial market projections to further determine the type and level of support appropriate for each unique focus area. Although all of the 16 focus areas have displayed some amount of favorable characteristics and potential as part of the regional freight system throughout previous analyses, the four areas illustrated in Figure 6-1 have been selected as the initial locations to be subjected to further analysis: Tucson International Airport, Phoenix-Mesa Gateway, Eloy (I-8 & I-10), and West Valley. These four analysis zones were not selected based on initial screening performance alone. The zone s overall rating, industrial and commercial market potential, freight typology characteristics, as well as major transportation and location assets were all considerations weighed in the selection process. These four zones were also selected to be representative of each of the typologies described previously. Furthermore the selection of these four areas should not be interpreted as diminishing the relevance of the remaining 12 focus areas for development in accordance with the identified typology as part of the regional freight system. This section describes the four selected analysis zones in further detail. Freight Transportation Framework Study 59 Final Report

66 Figure 6-1 Four Selected Analysis Zones Freight Transportation Framework Study 60 Final Report

67 6.1 Tucson International Airport The MAG Freight Transportation Framework Study - Planning Partners identified Tucson International Airport (TIA) for further analysis. This area s unique characteristics provide important assets and opportunities to the freight industry, especially considering the proximity of the site to the international border, and major transportation infrastructure. The characteristics of the TIA area closely resemble those of an Import Distribution Center as the Majority Facility Type, making this location the most applicable in the Sun Corridor for being developed to better serve this vital purpose in the global supply chain. An Import Distribution Center focuses on accepting imports and redirecting to precise markets. The TIA area encompasses major air, rail and freeway facilities, is located immediately adjacent to a sizeable anchor population, is within two-days by rail or truck of major Texas and Mexican source markets, and is only 53 miles from the Nogales international border crossing Labor Force As indicated in Table 6-1, the population of those aged 18 and over is 77,568 within the focus area, making it the second most populated of the four selected focus areas. Table 6-1 TIA Population Population Population 18 and over: 77,550 County 18 and over: 739,564 State 18 and over: 4,633,315 Table 6-2 indicates the population within the focus area has a higher percentage of high school graduates than either Pima County or the State of Arizona. This is an important demographic for the import distribution center typology type, which relies on many workers with a minimum of a high school level education. Table 6-2 TIA Educational Attainment Educational Attainment High School Equivalency: 24,850 32% County High School: 149,735 24% State High School: 1,008,463 25% Twenty percent of households within the focus area earn less than $35,000 annually, which is consistent with an import distribution center typology, typified by facilities with managers interested in employing workers that earn around $15 an hour ($31,200 annually). Freight Transportation Framework Study 61 Final Report

68 Table 6-3 TIA Household Income Household Income Household Income <$35k: 24,600 20% County Income <$35k: 148,361 39% State Income <$35k: 797, % As indicated in Table 6-4, average household travel time to work within the focus area is 23 minutes, which is on par with both the County and State averages, and could be reduced slightly by freight developments to be more consistent with an Import Distribution Center typology. Table 6-4 TIA Travel Time to Work Travel Time to Work Household Average Travel Time to Work: 23 min County Average Travel Time to Work: State Average Travel Time to Work: 24 min 25 min Transportation Characteristics The focus area is well situated as an Import Distribution Center. Table 6-5 indicates it is located within 55 miles by both road and rail from the Nogales border crossing, allowing for multiple daily turn around trips by carriers. In addition to this border crossing, Mexican markets such as Hermosillo and Guayamas are less than 350 miles from the TIA, and Chihahua is roughly 500 miles away. These distances allow for daily trips, not factoring in time spent at the border crossing. This focus area is also about 1,000 miles (a day and a half trip) from Texas markets including Laredo (adjacent to one of the busiest international border crossings with Mexico), Dallas (served by several major intermodal railway hubs) and Houston (served by major sea ports and intermodal railway hubs). Table 6-5 Texas Markets Other Focus Areas TIA Proximity to Markets Laredo: Road: 950 miles Rail: 1,000 Houston: Road: 1,050 miles Rail: 1,000 Dallas: Road: 950 miles Rail: 950 miles Eloy (I-8 & I-10): Road: 75 miles Rail: 65 miles West Valley: Road: 155 miles Rail: 160 miles Phoenix Mesa Gateway: Road: 115 miles Rail: 100 miles International Border Crossing Nogales: Road: 55 miles Rail: 55 miles Freight Transportation Framework Study 62 Final Report

69 As indicated in Table 6-6, the center of the focus area is only 2 miles from (and located between) both I-10 and I-19, and is between 50 and 65 miles from the proposed future PIRC (I-11) and North-South freeways. Table 6-6 TIA Roadways Existing Freeway To I-10: To I-19: Miles of Major Road: Future Freeway To PIRC (I-11): To North-South Freeway: 2 miles 2 miles 15 miles 65 miles 50 miles The Tucson International Airport campus is entirely contained within the focus area, providing an important amenity for expedited distribution of freight via air services. Table 6-7 also indicates that approximately 5 miles away is the nearest intermodal freight terminal, which is important for future growth opportunities necessitating the transfer of freight between road, rail and air. There is also about 18 miles of rail access within the focus area along the UP Sunset Line and UP Nogales Branch. Airport Distance Table 6-7 TIA Rail & Airport Phoenix Sky Harbor International: Road: 110 miles Rail: 120 miles Rail Phoenix-Mesa Gateway: Road: 120 miles Rail: 100 miles Tucson International: Road: 0 miles Rail: 0 miles To Intermodal Terminal: 5 miles Miles of Access: 18 miles Land Use Within the focus area, residential land use makes up 14%, while commercial and industrial contribute 3% and 6%, respectively, as indicated in Table 6-8. In addition, businesses could be accommodated by existing vacant industrial and commercial properties. Nine percent of land is shown as transportation, due mainly to the Tucson International Airport property. Close to 50% of the focus area is considered developable, showing potential for future growth. There is currently no published future land use information available for the focus area, however, planning efforts are currently underway to develop a future land use plan for this area. Freight Transportation Framework Study 63 Final Report

70 Table 6-8 TIA Existing Land Use Land Use Square Miles Percent of Area Residential: 11 14% Entitled Residential: 0 0% Mixed Use: 0 0% Commercial: 3 3% Industrial: 5 6% Institutional: 13 11% Transportation: 1 9% Developable Land: 46 46% Figure 6-2 TIA Existing Land Use Map Freight Transportation Framework Study 64 Final Report

71 6.1.4 Incentive Areas Foreign Trade Zone Large service areas are designated as Foreign Trade Zones (FTZs) throughout the Sun Corridor. However, individual businesses must formally apply for FTZ status. In order to qualify, companies must import parts, materials, or components for manufacturing, or finished goods or parts for distribution. Companies operating within a FTZ can benefit from: Lower inventory costs Reduced or eliminated U.S. Customs duties Distribution savings Property tax incentives Plans and Policies Pima County Economic Development Pima County identifies past transportation investments as having in part incentivized past private investments such as the IBM, TIA, and the University of Arizona (U of A) employment centers. County plans also call for the creation of a major aerospace and defense corridor stretching from I-19 to I-10 south of existing TIA facilities. The focus of this corridor plan involves: Purchasing 382 acres of private property to facilitate future expansion of the Raytheon facility and provide an opportunity to compliment aerospace and defense companies. Constructing an estimated $201.6 million in transportation improvements including: extending Alvernon Way south; improvements to Corona Road; improvements to Wilmot Road; upgrades on Country Club Road; and creating a new I-10 interchange at Country Club Road. Port of Tucson Trans-loading Facility Pima County and the Port of Tucson are collaborating to develop an intermodal transportation and logistics rail improvement in association with Union Pacific Railroad. The project would include extensions of double-track rail and ties, installation of new power switches, and construction of a double-loop track for unloading grain hoppers and ore gondolas to containers. Potential economic development and community benefits include: Construction jobs. Logistics support for major manufacturers in the aerospace, defense, agriculture, and mining industries. Reduced reliance on trucks and less congestion on I-10 Minimized deadhead containers Freight Transportation Framework Study 65 Final Report

72 6.1.6 Key Opportunities Leverage proximity to land Port of Entry Preserve and protect developable areas south of airport Consider I-10 and I-19 connection with an East-West linkage of interstate grade Target investments to accommodate and compliment Port of Tucson Establish and brand an intermodal logistics and intermodal hub for the Sun Corridor Without policy changes new industrial space is not required for the next 10 years. Absorption of existing space could generate between 500 to 1,100 jobs. Figure 6-3 TIA Key Opportunity Map Freight Transportation Framework Study 66 Final Report

73 6.2 Phoenix-Mesa Gateway The Phoenix-Mesa Gateway focus area has also been identified for further analysis. The Phoenix-Mesa Gateway area demonstrates characteristics that closely resemble desirable characteristics for a Manufacturing and Local Distribution Facility as the Majority Facility Type, which focuses on production for the global market and distribution to local markets. The area has a relatively high number of college educated workers and an existing concentration of manufacturing businesses; it also encompasses major freeway, rail and air facilities, has direct access to a large local market, and is within one-day travel time by truck of major West Coast and Mexican markets Labor Force The population of those aged 18 and over is 78,804 within the focus area, making it the most populated out of the four selected focus areas. Table 6-9 Phoenix-Mesa Gateway Population Population Population 18 and over: 78,800 County 18 and over: 2,746,920 State 18 and over: 4,633,315 As indicated in Table 6-10, the population percentage within the Phoenix-Mesa Gateway focus area of college graduates is higher than both Maricopa County and Arizona statewide averages. A higher educated workforce is necessary for the Manufacturing and Local Distribution typology type, due to the need for additional management positions and workers with advanced technical skills required for modern manufacturing. Table 6-10 Phoenix-Mesa Gateway Educational Attainment Educational Attainment College Degree: 15,800 20% County College Degree: 189,035 8% State College Degree: 672,317 17% Percentages of Maricopa County and Arizona residents with incomes greater than $35,000 are more than twice as high as those in the Phoenix-Mesa Gateway focus area. Jobs associated with this typology will provide additional opportunities for area workers to attain relatively higher incomes making them competitive to local residents. Freight Transportation Framework Study 67 Final Report

74 Table 6-11 Phoenix-Mesa Gateway Household Income Household Income Household Income <$35k: 10,300 8% County Income <$35k: 215,228 16% State Income <$35k: 797, % Table 6-12 shows that average household travel time to work within the focus area is approximately 30 minutes; 4 to 5 minutes longer than both the County and State averages. This indicates workers living within the focus area have a typically longer than average commute to work, and could benefit from additional relatively well paying jobs closer to their place of residence. Table 6-12 Phoenix-Mesa Gateway Travel Time to Work Travel Time to Work Household Average Travel Time to Work: County Average Travel Time to Work: State Average Travel Time to Work: 30 min 26 min 25 min Transportation Characteristics The Phoenix-Mesa Gateway focus area is well situated as a manufacturing and local distribution center. It is less than 10 miles east from the mean Sun Corridor population center, making it the most centrally located of all focus areas in terms of population, and ideally situated to serve both manufacturing and local distribution needs In addition, as indicated in Table 6-13, this focus area is: within 400 miles (an overnight trip) to the Inland Empire and Las Vegas; within 800 miles of Salt Lake City, Reno, and the Bay Area; and less than 200 miles from the Nogales border crossing. Travel distance is considerably further by rail to these destinations because of the lack of direct routes from the area. As indicated in Table 6-14, the center of the focus area is only 16 miles from I-10 and 2 miles from Loop 202. The focus area is also within roughly 7 miles of the proposed North- South freeway corridor. Proximity to freeways is essential for inbound manufacturing materials and local distribution functions. Freight Transportation Framework Study 68 Final Report

75 Table 6-13 Phoenix-Mesa Gateway Proximity to Markets Western Markets Inland Empire: Road: 375 miles Rail: 435 miles Las Vegas: Road: 335 miles Salt Lake: Road: 700 miles Rail: 665 miles Rail: 1,085 miles Reno: Road: 785 miles Rail: 955 miles Bay Area: Road: 775 miles Rail: 855 miles Other Focus Areas TIA: Road: 115 miles Rail: 95 miles West Valley: Road: 70 miles Rail: 55 miles Eloy (I-8 & I-10): Road: 50 miles Rail: 60 miles International Border Crossings Nogales: Road: 175 miles Rail: 155 miles Table 6-14 Phoenix-Mesa Gateway Roadway Existing Freeway To I-10: 16 miles To Loop 202: Miles of Major Road: Future Freeway To PIRC (I-11): To North-South: 2 miles 11 miles 24 miles 7 miles The focus area contains Phoenix-Mesa Gateway Airport, and is only 32 road miles from Phoenix Sky Harbor International Airport. Proximity to airport facilities is especially important for the manufacturing aspects of this typology type, since they often require expedited manufacturing equipment to be delivered on a time critical basis. The nearest intermodal freight terminal is 33 miles away in West Phoenix. There are 9 miles of rail access within the focus area along the UP Phoenix Subdivision, which could accommodate a future rail spur within the focus area oriented around manufacturing and oversized outbound products. Table 6-15 Phoenix-Mesa Gateway Rail & Airport Airport Distance Phoenix Sky Harbor: Road: 30 miles Rail: 25 miles Phoenix-Mesa Gateway: Road: 0 miles TIA: Road: 115 miles Rail To Intermodal Terminal: Miles of Access: Rail: 2 miles Rail: 100 miles 35 miles 9 miles Freight Transportation Framework Study 69 Final Report

76 6.2.3 Land Use Table 6-16 demonstrates that existing land use within the focus area is fairly mixed, with 34% residential, 5% commercial, and 11% industrial. Transportation makes up over 7% of the focus area, due mainly to the Phoenix-Mesa Gateway Airport campus. Over 35% of land within the focus area is identified as developable. This factor, when considered along with high commercial and industrial vacancy rates in the area, indicates an opportunity for substantial development and business relocation. Table 6-16 Phoenix-Mesa Gateway Existing Land Use Land Use Square Miles Percent of Area Residential: 27 34% Entitled Residential: 3 4% Mixed Use: 0 0% Commercial: 4 5% Industrial: 9 11% Institutional: 3 4% Transportation: 6 7% Developable Land: 28 35% Freight Transportation Framework Study 70 Final Report

77 Figure 6-4 Phoenix Mesa Gateway Existing Land Use Map Future land use data within the focus area shows only 6% developable land, 29% less than what is present today. Residential land use is only expected to increase slightly to 42%; whereas commercial and industrial are forecasted to increase significantly, to 14% and 24% respectively. Major concentrations of industrial land are identified directly adjacent north, south, and east of the airport property. Table 6-17 Phoenix-Mesa Gateway Future Land Use Land Use Square Miles Percent of Area Residential: 33 42% Entitled Residential: 0 0% Mixed Use: 1 2% Commercial: 11 14% Industrial: 19 24% Institutional: 4 4% Transportation: 6 8% Developable Land: 5 6% Freight Transportation Framework Study 71 Final Report

78 Figure 6-5 Phoenix Mesa Gateway Future Land Use Map Plans and Policies Phoenix-Mesa Gateway Airport Master Plan The Phoenix-Mesa Gateway Airport Master Plan calls for major expansion of existing facilities, and discusses a desired increase in both passenger and freight service. Key Features of the plan include: Three parallel commercial capable runways New airport traffic control tower 33,000 square foot terminal building with 4 gates 233,000 square yard aircraft parking apron Over 30,000 square yard cargo ramp Full-service, fixed base operator and other specialty aviation services operators Four business jet service centers: Embraer, Cessna, Hawker Beechcraft, and Crownair Freight Transportation Framework Study 72 Final Report

79 6.2.5 Key Opportunities Leverage confluence of air, rail, and highway transportation connections Preserve and protect developable areas surrounding airport Connect SR-24 to future North-South Freeway Develop skills training center advancing technical capabilities needed in manufacturing and logistics High commercial and industrial vacancy rates provide ample opportunities to repurpose facilities Without policy changes, new industrial space is not required for at least the next 10 years. Absorption of existing space could generate between 400 to 800 jobs. Figure 6-6 Phoenix Mesa Gateway Key Opportunity Map Freight Transportation Framework Study 73 Final Report

80 6.3 Eloy (I-8 & I-10) The Eloy area in the vicinity of the I-8 and I-10 split has been identified as having characteristics most consistent with a Mixing Center as the Majority Facility Type. As the name implies, a Mixing Center focuses on mixing and storage of both domestic and import origin goods for distribution. The Eloy area has a relatively high number of high school educated workers, encompasses major rail and freeway facilities, and is within one-day by truck of major West Coast and Mexican Markets Labor Force The population of those aged 18 and over is only 12,238, making it the lowest in population of all four focus areas. Although the population within the 5 mile focus area is low, workers could be drawn from the nearby cities of Casa Grande and Eloy. Table 6-18 Eloy Population Population Population 18 and over: 12,200 County 18 and over: 243,449 State 18 and over: 4,633,315 Table 6-19 demonstrates the population within the focus area has a higher percentage of high school graduates than either Pinal County or Arizona. This is an important demographic for the Mixing Center typology type, which relies on many workers with high school level educations. Table 6-19 Eloy Educational Attainment Educational Attainment High School Equivalency: 4,500 37% County High School: 63,255 29% State High School: 1,008,463 25% Table 6-20 indicates approximately 20 percent of households within the Eloy focus area earn less than $35,000 annually, which is a smaller percentage than both Maricopa County and Arizona. However, the provision of additional jobs in the freight sector associated with development of a mixing center will be competitive for this sector of the population. Table 6-20 Eloy Household Income Household Income Household Income <$35k: 6,300 20% County Income <$35k: 38,381 32% State Income <$35k: 797,181 34% Freight Transportation Framework Study 74 Final Report

81 Average household travel time to work within the focus area is 23 minutes, close to 2 minutes shorter than the County average and nearly 10 minutes less than the State average. This indicates that the potential labor pool is relatively close to the focus area and could benefit further from additional job opportunities within this focus area. Table 6-21 Eloy Travel Time to Work Travel Time to Work Household Average Travel Time to Work: County Average Travel Time to Work: State Average Travel Time to Work: 23 min 33 min 25 min Transportation Characteristics The Eloy focus area is well situated as a mixing center. It is within 400 miles by road (an overnight trip) to the Inland Empire and Las Vegas; and within 800 miles (a day and a half trip) of Salt Lake City, Reno, and the Bay Area. In addition to being only 124 miles from the Nogales border crossing, which allows for up to two daily trips to/from the border, this area is centrally located in the Sun Corridor and among the other identified focus areas: 75 miles from the Tucson International Airport and less than 90 miles from the West Valley forward distribution center. The area also has access to the San Diego market via Interstate 8. Travel distance is further by rail because of the lack of direct routes to many markets. The center of this focus area also has a superb location at the I-8 and I-10 traffic interchange. As indicated in Table 6-23, the Eloy focus area is also only 38 miles from Loop 202 (the next closest freeway), within about 11 miles of the proposed I-11corridor, and 14 miles from the proposed North-South freeway. Table 6-22 Western Markets Eloy Proximity to Markets Inland Empire: Road: 400 miles Rail: 385 miles Las Vegas: Road: 350 miles Salt Lake: Road: 725 miles Rail: 600 miles Rail: 1,015 miles Reno: Road: 795 miles Rail: 910 miles Bay Area: Road: 800 miles Rail: 800 miles Other Focus Areas TIA: Road: 75 miles Rail: 65 miles West Valley: Road: 85 miles Rail: 115 miles Phoenix-Mesa Gateway: Road: 50 miles Rail: 55 miles International Border Crossings Nogales: Road: 125 miles Rail: 125 miles Freight Transportation Framework Study 75 Final Report

82 Table 6-23 Eloy Roadway Existing Freeway To I-10: To Loop 202: Miles of Major Road: Future Freeway To PIRC (I-11): To North-South: 0 miles 40 miles 30 miles 10 miles 15 miles Although not immediately adjacent to major airports, Table 6-24 indicates the focus area is centrally located among Sun Corridor freight airports: approximately 50 road miles away from both Phoenix Sky Harbor and Phoenix-Mesa Gateway, and 67 miles from Tucson International. The area is also less than 40 miles from Pinal Airpark, which has the potential to be utilized as a future freight airport. The nearest intermodal freight terminal is almost 60 miles away in Tucson and there are 10 miles of rail access within the focus area along the UP Sunset Route. Airport Distance Table 6-24 Eloy Rail & Airport Phoenix Sky Harbor: Road: 42 miles Rail: 65 miles Phoenix-Mesa Gateway: Road: 50 miles Rail TIA: Road: 65 miles Rail: 55 miles Rail: 65 miles Pinal Airpark: Road: 35 miles Rail: 30 miles To Intermodal Terminal: 60 miles Miles of Access: 10 miles Land Use Within the focus area, total residential, commercial, industrial, and institutional development combined is less than 9% of the land use. Although over 30% of the focus area is entitled residential land, nearly 60% of the area is Developable suggesting potential for future freight related development growth. Freight Transportation Framework Study 76 Final Report

83 Table 6-25 Eloy Existing Land Use Land Use Square Miles Percent of Area Residential: 5 6% Entitled Residential: 25 31% Mixed Use: 0 0% Commercial: 1 1% Industrial: 1 1% Institutional: % Transportation: 0.5 1% Developable Land: 47 59% Figure 6-7 Eloy Existing Land Use Map Future land use within the focus area shows only 6% developable land, which is significantly less than the 59% shown in the existing land use information. Residential land use is expected to make up over 78% of the focus area based on this future land use information, making it by far the predominant use. Commercial land is also expected to increase to 15%, with major concentrations along the I-10 and I-8 corridors. However, industrial land use is shown as non-existent within the 5-mile focus area. Should the region embrace the concept of establishing the Sun Corridor as a major participant in the global supply chain, it will be vital to ensure residential and commercial land uses do not limit the ability to develop sites closest to major Freight Transportation Framework Study 77 Final Report

84 transportation facilities for freight related uses that would benefit from ready access to various markets. As such, future land use in the vicinity of the Eloy focus area should be reevaluated in the context of supporting freight related uses as a Mixing Center. Table 6-26 Eloy Future Land Use Land Use Square Miles Percent of Area Residential: 62 78% Entitled Residential: 0 0% Mixed Use: % Commercial: 12 15% Industrial: 0 0% Institutional: 1 1% Transportation: % Developable Land: 4 6% Figure 6-8 Eloy Future Land Use Map Freight Transportation Framework Study 78 Final Report

85 6.3.4 Plans and Policies City of Casa Grande 2020 General Plan (2010) Economic Development Assets: The City s location at the intersection of I-10, I-8, and the Union Pacific Railroad Sunset Route is identified as a major economic development asset. Future Land Use: This Plan identifies the areas adjacent to both I-10 and I-8 as major commerce and business corridors. Large tracts of land adjacent to the Union Pacific Railroad alignment and the I- 10/I-8 interchange are also identified as manufacturing or industry centers. These policies differ greatly from the Pinal County General Plan, which designates the area as mostly residential with no major industrial areas. Emerging Projects: Inland Port Arizona Overview: Warehousing and distribution facility served by UP carload service (i.e. hopper and tank car). Encompasses nearly 600 acres of land or 1 square mile. Potential to produce a significant number of jobs and long-term economic impact. The location is well suited as a mixing center. However, this project should reevaluate its positioning to attract more appropriate uses Key Opportunities Preserve and protect developable areas surrounding optimal transportation assets (I-8 and I-10) Promote industrial and freight uses in proximity to key transportation confluence Identify opportunities for lands with additional rail spurs Establish and brand a logistics center for the Sun Corridor Without policy changes in the area, 900,000 sq ft of new industrial space could develop over the next 10 years. This equates to only 5 to 10 new industrial buildings. Freight Transportation Framework Study 79 Final Report

86 Figure 6-9 Eloy Key Opportunity Map Freight Transportation Framework Study 80 Final Report

87 6.4 West Valley The West Valley area demonstrates characteristics most consistent with a Forward Distribution Center as the Majority Facility Type, which focuses on goods movement to ultimate markets; in this case the major metropolitan areas in the West Coast, Mountain West and Pacific Northwest regions. The area has a relatively high number of high school educated workers, encompasses major rail and freeway facilities, has direct access to a large local market, and is within one-day by truck of major West Coast Markets Labor Force The population of those aged 18 and over is only 15,329 within the focus area providing a solid basis for labor force. This basis is enhanced by proximity to significant populations immediately to the east in the greater Phoenix metropolitan area. Table 6-27 West Valley Population Population Population 18 and over: 15,300 County 18 and over: 2,746,920 State 18 and over: 4,633,315 The population within the focus area has a higher percentage of high school graduates than either Maricopa County or the State of Arizona. This meets the demographic needs of the Forward Distribution Center typology type, which requires large numbers of workers with high school level educations. Table 6-28 West Valley Educational Attainment Educational Attainment High School Equivalency: 4,800 31% County High School: 566,076 24% State High School: 1,008,463 25% Compared to Maricopa County and Arizona, a smaller percentage of households in the focus area earn below $35,000 as a household income annually (11%), as shown in Table This may present a challenge in attracting quality workers for lower paying freight related jobs, although proximity to greater populations will likely mitigate some of this concern. Freight Transportation Framework Study 81 Final Report

88 Table 6-29 West Valley Household Income Household Income Household Income <$35k: 3,200 11% County Income <$35k: 215,228 16% State Income <$35k: 797,181 34% Average household travel time to work within the focus area is 34 minutes, over 6 minutes longer than the County and State averages. This commute time indicates that workers within the focus area could benefit from employment opportunities closer to their homes, also potentially offsetting workers concerns with relatively lower pay for Forward Distribution Center jobs in the focus area. Table 6-30 West Valley Travel Time to Work Travel Time to Work Household Average Travel Time to Work: County Average Travel Time to Work: State Average Travel Time to Work: 34 min 26 min 25 min Transportation Characteristics The focus area is well situated as a forward distribution center to serve West Coast markets in particular. It is within 304 miles by road (an overnight trip) to Southern California s Inland Empire and Las Vegas, and within 750 miles (a day and a half trip) to Salt Lake City, Reno, and the Bay Area. This West Valley focus area is also 212 miles from the Nogales international border crossing allowing for one, to/from trip per day. The mean population center of the Sun Corridor is just over 50 miles to the east from this focus area, indicating that it is well anchored to the significant local area market. Travel distances are further by rail because of the lack of direct routes to many markets, especially along the West Coast. Future investments in rail connections could further increase market proximity and substantially benefit this focus area as a Forward Distribution Center. As indicated in Table 6-32, the focus area has excellent highway assets including I-10 and SR-85. The center of the focus area is only 1 mile from I-10, and 12 miles from Loop 303. The focus area could also be further enhanced by the completion of the PIRC (I- 11) freeway, which could be ultimately be constructed within or immediately adjacent to the focus area. Freight Transportation Framework Study 82 Final Report

89 Table 6-31 Western Markets West Valley Proximity to Markets Inland Empire: Road: 305 miles Rail: 340 miles Las Vegas: Road: 295 miles Salt Lake: Road: 715 miles Rail: 565 miles Rail: 1000 miles Reno: Road: 735 miles Rail: 855 miles Bay Area: Road: 705 miles Rail: 740 miles Other Focus Areas TIA: Road: 75 miles Rail: 165 miles Eloy (I-8 & I-10): Road: 85 miles Rail: 115 miles PM Gateway: Road: 50 miles Rail: 60 miles International Border Crossings Nogales: Road: 125 miles Rail: 215 miles Table 6-32 West Valley Roadway Existing Freeway To I-10: To Loop 303: Miles of Major Road: Future Freeway To PIRC (I-11): To North-South: 1 miles 12 miles 16 miles 15 miles 65 miles The focus area is less than 50 miles from Phoenix Sky Harbor Airport for high value air freight shipments. The nearest intermodal freight terminal is only 25 miles away in West Phoenix, and there are almost 10 miles of rail access within the focus area along the UP Phoenix Subdivision. Table 6-33 Airport Distance West Valley Rail & Airport Phoenix Sky Harbor: Road: 40 miles Rail: 35 miles Phoenix-Mesa Gateway: Road: 75 miles TIA: Road: 160 miles Rail To Intermodal Terminal: Miles of Access: Rail: 60 miles Rail: 165 miles 25 miles 10 miles Freight Transportation Framework Study 83 Final Report

90 6.4.3 Land Use Existing land use within the focus area is made up of only 10% residential and less than 2% commercial and industrial. Approximately 20% of the focus area is entitled residential land and over half of the area is considered developable, showing tremendous potential for future growth. Table 6-34 Existing Land Use Land Use Square Miles Percent of Area Residential: 8 10% Entitled Residential: 16 20% Mixed Use: 0 0% Commercial: 1 1% Industrial: 1 1% Institutional: 1 1% Transportation: 2 3% Developable Land: 50 64% Figure 6-10 West Valley Existing Land Use Map Freight Transportation Framework Study 84 Final Report

91 Future land use within the focus area shows only 9% developable land, which is substantially less than the 60% developable listed in the existing land use information. Residential, commercial, and industrial are expected to increase to 49%, 25%, and 6% respectively. Concentrations of commercial and industrial land use are planned for the I-10, SR-85, and UP railroad corridors. Although land use policies generally support future freight opportunities, consideration must be given to preserving sufficient, appropriately zoned land near the SR-85 and I-10 interchange, as well as the future PIRC (I-11) corridor for possible distribution facilities. Table 6-35 Future Land Use Land Use Square Miles Percent of Area Residential: 38 49% Entitled Residential: 0 0% Mixed Use: 4 5% Commercial: 19 25% Industrial: 5 6% Institutional: 3 4% Transportation: 2 3% Developable Land: 7 9% Freight Transportation Framework Study 85 Final Report

92 Figure 6-11 West Valley Future Land Use Map Plans and Policies Town of Buckeye Transportation Master Plan Rail Strategy: Recognizes rail freight as an important tool for economic development. Cautions that access to rail service alone is not adequate for quality job creation, and that other complimentary initiatives must be in place. Discusses the possible linking of UP and BNSF rail lines to increase freight activity and economic development opportunities. Explains multi-modal approach to transportation, which will balance the needs and considerations of both freight and commuter rail. Freight Strategy: Supports National I-10 Freight Corridor Coalition and its goal to establish a template for substantial ITS improvements along the I-10 corridor. Supports ADOT I-10 Phoenix Bypass Study to establish a freeway bypass starting south from I-10 west of Buckeye and connecting with I-8. Freight Transportation Framework Study 86 Final Report

93 6.4.5 Key Opportunities Implement general plan for industrial and freight lands o Reevaluate areas designated for future residential and expand areas for commercial and industrial around major transportation infrastructure Preserve truck routes with Interstate Highway access Support rail connections to promote efficient transportation of goods into the area and exporting of finished goods from the area Leverage access to available skilled labor Without policy changes in the area, up to 620,000 sq ft of new industrial space could develop over the next 10 years, generating between 600 to 1,200 jobs. Figure 6-12 West Valley Key Opportunity Map Freight Transportation Framework Study 87 Final Report