Project: Global III Intermodal Terminal - Rochelle, IL

1.0 Synopsis

The $181 million Union Pacific (UP) Global III Intermodal Facility in Rochelle, IL, constructed in 2003, is a hub for rail intermodal shipments to the Northern Midwest, with links to the rest of the country and the world. The 1200 acre facility has 133 employees and has achieved a peak of 207,000 intermodal lifts a year (for 2007). The development is estimated to have attracted approximately 400 jobs in distribution, warehousing, and logistics to Rochelle and vicinity; less than the 1600 jobs forecast by consultants. Real estate speculation in the wake of construction of the facility quadrupled the values of farm land in the vicinity, but the bubble has since burst and values have returned to previous norms.

2.0 Background

2.1 Location & Transportation Connections

The Rochelle Global III Intermodal Facility is located 80 miles directly west of Chicago in the City of Rochelle, Ogle County. The facility is located near the intersection of the north-south Interstate 39 (I-39 Distribution Corridor) and the east-west Interstate 88 (I-88 Illinois Research and Development Corridor), about a mile southwest of downtown Rochelle.

Global III is 25 miles south of UP's second-largest airport hub at the Rockford International Airport. Both the Burlington Northern Santa Fe (BNSF) Railway Line and the UP Main Line intersect in Rochelle, making Rochelle a primary railway hub in the Midwest. Global III moves intermodal containers to eastern railroads in the Chicago area for interline movement and is shuttled to Texas, Mexico and other Southwest UP markets. One of the main trade corridors served includes the Midwest distribution center including Milwaukee, Madison, WI; Springfield IL and the Quad Cities. A large amount of material is carried to the west coast through to the Port of Los Angeles and Port of Long Beach and sent to Asia.

Because of Global III's convenient location outside of the Chicago urban area, economic development officials promote the efficiency benefits associated with loading and unloading shipments in Rochelle without having the rail cars travel through Chicago. Containers can be turned over at two-three times faster with transloading at Rochelle rather than in the City of Chicago, which is notorious for its congested rail corridors. For trucks carrying shipments in and out of the facility, the interstate is a five-minute drive from Global III.

2.2 Community Character & Project Context

Rochelle is a quiet town best known for the diamond crosshatch crossing of the BNSF and UP lines, a transportation interchange that provides nicknames for the town such as ?Hub City? and for the high school football team "the Hubs." Besides being at the confluence of two major national rail lines, the city also owns and operates its own short-haul railroad that serves 13 different industries. This short-haul railroad creates competition between BNSF and UP, providing the businesses located around Rochelle lower rates for cargo.

Today, the city is a commercial center for surrounding farms. Industries are concentrated on the southeast side of the town. Local industries include frozen food distributors, grain industries, ethanol plant and production, and refrigerant material manufacturing. In 2000, the population was 9,424, with a median household income of $37,984. According to the 2008 population estimates from the US Census Bureau, the population had risen to 9,847; an annual growth rate of 0.56 %  similar to the CAGR of 0.52 % and above the Illinois statewide rate of 0.35 %.

3.0 Project Description & Motives

Global III was built to meet the growing need for intermodal terminal capacity in the Chicago market area. The history of the project began with persistent local political and economic development officials who envisioned an intermodal facility in Rochelle in the late 1990s. At the same time, UP was looking for a site to build an intermodal facility, and was not successful in development bids for two sites closer to Chicago ? one at DuPage Airport and another in DeKalb County. Rochelle development officials saw the intermodal terminal as a major economic development opportunity and convinced UP to build the facility in their town. Global III was completed in 2008 at a cost of $181 million (2003 dollars).

The intermodal facility spurred on significant investment in the highways and roadways in the area. When Global III moved in, UP dedicated approximately $4 million (2003 dollars) on road improvements in the area. Approximately $2.5 million was used immediately during the construction of Global III in 2003 for three major roadway construction projects:

• The widening of SR-251 and access to Intermodal Drive
• The construction of Intermodal Drive
• The Thorpe Road overpass upgrade

The remaining $1.5 million was used for Phase I of the Jack Dame Road crossing, intended provide a truck traffic bypass to Rochelle's urban downtown. This was leveraged into a $5 million project (2003 dollars) for Phase I that was funded in collaboration with UP ($1.5 mill), IDOT ($2 mill) and EDA ($1.5 mill) and completed in 2008. Currently, the City and County are seeking Federal funding for Phase II, which consists of an overpass over UP main and switching line and connecting to SR-38 to provide better circulation in the area.

Jack Dame Road is part of a plan to build a truck loop around the intermodal facility. This truck loop is intended to be able to carry a weight class of 120,000 pounds, attracting larger weight-bearing vehicles on the roadway. The goal of this plan, as well as the other transportation investments, is to create a major international intermodal hub in Rochelle to serve a multitude of businesses giving the Midwest a global reach.

4.0 Project Impacts

4.1 Transportation Impacts

4.2 Demographic, Economic & Land Use Impacts

The road investments made by UP have spurred spin-off development around the facility including Del Monte warehouse facility, Rainier Manufacturing of garage doors, several frozen food distributors, an ethanol plant with dry distillers grain (DDGS) byproduct, Swenson's spreaders and Walker-Schork International dealership. Further afield, Global III also attracted new developments such as the Spectrum (originally RayoVac) battery packaging and distribution center in Dixon and the Wal-Mart distribution center that opened in April, 2006 outside Sterling, Rock Falls, 38 miles southwest of Rochelle.

There are varying opinions about the success of operations of the intermodal facility. According to the Rochelle Economic Development department, Global III has met and exceeded expectations for job growth, capital investment and increased tax revenue to the city. On the other hand, UP and other experts in freight and inland port development have been less certain about the success of the facility. Insight Research Corporation predicted in a 2001 study that annual lifts would reach up to 400,000 per year by 2010, and employment at the facility would employ approximately 400 staff by 2010. In reality, annual lifts reached peak of more than 200,000 in 2007 before the economic recession reduced goods movement to less than 150,000 lifts per year in 2009 and employment at the facility currently stands at 100 jobs. As shown in Figure 4, transportation and demand for goods shipment was hindered by the economic recession that began in 2008 and recovery remains uncertain.

The same Insight Research analysis predicted Global III would generate tax revenue of $115.2 million by 2010 and generate $44.8 million in new annual payrolls. For Union Pacific operations and other potential Rochelle industrial jobs, the estimate was for 1,204 new jobs by 2010. The overestimated projection assumptions for annual lifts and number of employees in the study were three times the amount actually documented by UP in 2009, resulting in economic impacts that were likely overstated. This is also partly due to the impacts of recent economic recession nationwide and lesser demand for goods movement. The range of jobs estimated varies widely, but considering that projected assumptions are three times the actual operations, it is likely that the number of direct jobs generated by Global III is in the range of 400 new jobs.

Specific examples of new jobs include the distribution facilities of RC 2 Corporation with 42 new jobs (retaining 8) in 2004, Clark Steel with 50 new jobs in 2006, Del Monte with 10 new jobs (retaining 28) in 2007, Allstate Insurance Northern Trust's data storage center with 24 new jobs in 2008, and Sara Lee's manufacturing facility with 25 new jobs (and 192 retained) in 2008. Based on data on business patterns, the Rochelle zip code (61068) experienced a net increase of 391 jobs between 2002 and 2007 (from 5045 employees to 5436 employees). From 2002 to 2007, Ogle and Lee Counties experienced a net increase of 417 employees from 2002 to 2007. Based on these data, it is estimated that Global III has attracted approximately 400 new direct jobs in Rochelle and vicinity.

Some local officials have qualitatively observed that land prices surrounding Rochelle have doubled, or even tripled in the years after Global III's construction due to out-of-state developers purchasing thousands of acres zoned for commercial, industrial and residential development. According to development officials, the price for farmland leading up the construction of Global III in 2001 ranged from $15,000-$20,000 per acre in the area adjacent to the facility. From 2002 to 2005, farmland prices almost quadrupled. But since then, they have reverted to 2002 levels, demonstrating the bubble that speculative acquisition created and that the combined impact of a lack of industrial development interest and the current recession has burst.

Finally, a significant amount of real estate speculation followed the announcement of plans for Global III. Several developers -- including Centerpoint and ProLogis-- purchased over 200 acres of what was previously rural farmland after discovering Global III's plans. Real estate speculation in the wake of construction of the facility quadrupled the values of farm land in the vicinity, but the bubble has since burst and values have returned to previous norms.

5.0 Non-Transportation Factors

Several non-transportation factors led to Global III being sited in Rochelle. First, the City of Rochelle was very aggressive about attracting warehousing and freight with its aggressive economic development team. Rochelle and Ogle County are well poised for big box warehouse distribution, mostly distribution redistributed and resorted. Because of Rochelle's aggressive marketing and the fact that much of the new development does not have direct access to Global III, it is likely that some of the development would have occurred regardless of the intermodal facility. The city can provide special incentives; for instance Rochelle owns its own electric utility so it can lure businesses to the area by negotiating rates to new businesses.

The City took advantage of a state-level initiative to encourage transportation infrastructure for economic development purposes. Through the Illinois Department of Transportation (IDOT), the Economic Development Program (EDP) and Truck Access Route Program (TARP) exist to encourage new or expanding manufacturing and warehousing (not retail) ? either building new or improving existing roadways. Rochelle and Global III have qualified for some of these funds totaling approximately $9 million since 20021. This financial support helped traffic circulation around Global III.

The challenges that are being faced in the Northwest Illinois region cannot be ignored. During the past ten years (2000 to 2010) the larger NW Illinois Region (including the six counties surrounding Global III has undergone economic upheaval with the closure of the Savanna Army Depot Base and the loss of a number of major manufacturing plants. Job losses in the six county region add up to about 2,500 jobs and continue to mount.

6.0 Resources

6.1 Citations

1. City of Rochelle.  “Manzullo: $3 million grant will create hundreds of jobs in Rochelle.”  September 8, 2008.
2. Illinois Department of Revenue.  Property Tax Statistics.  Accessed July 1, 2010.  http://www.revenue.state.il.us/AboutIdor/TaxStats/index.htm
3. Illinois Department of Transportation Economic Development Program.  List of Projects for the City of Rochelle from 1999 to Present.  Provided by Jason Nelson, April 30, 2010.
4. Insight Research Corporation.  “Union Pacific Railroad Rochelle Intermodal Project and Related Private Industrial Expansion Ten Year Impact Analysis.”  Prepared for Union Pacific Railroad.  May 8, 2001.
5. Ogle County Planning and Zoning Department.  “I-39/IL Route 251 Distribution Corridor Plan.  Ogle County, Illinois.”  May 2004.
6. Ogle County Supervisor of Assessments.  Flagg Township Assessor Data obtained from Jim Harrison on June 1, 2010.
7. Szatan, Jerry.  “Building Freight’s Future.”  Urban Land.  April 2007.
8. “The Middle of Somewhere: How Jump in Global Trade Made Tiny Rochelle, Ill., A Must Stop for Trains, Trucks.”  Wall Street Journal.  April 14, 2006.
9. The Tioga Group.  “Inland Port Feasibility Study.”  Project No. 06-023. Prepared for Southern California Association of Governments.  June 30, 2006.
10. Union Pacific Railroad.  “Rochelle Global III Intermodal Terminal.”  http://www.uprr.com/customers/intermodal/featured/global/index.shtml.  Accessed April 2010.

6.2 Interviews

Organizations

Former Economic Development Director, Newsman

Greater Rochelle Economic Development Corporation

Illinois Department of Transportation, District 2

Ogle County Highway Department

Union Pacific

Footnotes

Case Study Developed by Cambridge Systematics