Tag Archives: Warehouses

Lower Mac Truck Adventures

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So when I see errant trucks on residential roads in our township I tend to (time permitting) follow them. I do this fairly often (since it happens very often) in an effort to try to figure out where they are coming from or heading to and why they end up in the wrong places (often dangerous places) so frequently.

Here is an example from last week where I happened to have someone in the car with me to take photos. My intention here is not to call out the individual driver (though in this case he exhibited some pretty egregious decision making) but rather continue to shine a light on the issue in an effort to try to find the solution. Not a bandaid, but the solution.

Variations of what you see below have become a common occurrence on the townships road network. On a daily basis. 

So first, this is what it’s like staring down an oncoming truck on Willow Ln. The worst part happens just before this when the truck forces your right wheels almost entirely off the road and into someones front yard. *Note we actually got word today that PennDOT is honoring the townships request to post signs restricting trucks on Willow Ln. This of course is only part of the battle. As now the inevitable need to enforce the signs is the next step.

Staring down an 18 wheeler on Willow Ln.

Clearly lost, a little further along still on Willow Lane (after a couple more encroachments at the S turns after the bridge) The truck pulled over for a good 5 minutes. Blocking the crosswalk. Probably I would guess seeking directions. Those directions (as evidenced in the following photos) did not help. . .

Pulled over on the shoulder… blocking a crosswalk

You would think the truck is heading to Rt. 100. And you’d be correct. But not before an inexplicable detour around Willow Lane Elementary/Fire Station. Next the truck took a right onto Millcreek Rd. making a big circle around the fire dept. WLES. Here in this photo it is turning onto Sauerkraut Ln. Blatantly ignoring that Sauerkraut is restricted “no trucks”.

Right hand turn onto road posted “no trucks”

Finally making it out to Rt. 100, here the truck lines up to make the right hand turn taking up the entire left turn lane of Willow. Any car that gets into the right lane will be in a blind spot.

Taking up entire left turn lane to go right.

So now we got a straight shot to the trucks destination on Industrial Blvd.? (Pratt Industries) You would think, but not quite yet. Some more inexplicable decision making and subsequent havoc to cause first. Next our truck adventure takes a detour onto Gehman Rd. Here is where the fun really begins.

Next maneuver takes two pictures. Upon approaching Scenic View the truck sees and apparently decides to obey the signs prohibiting trucks from heading further up to Mountain Rd. This is good. As a ton of property damage has been done up that way. So instead of taking Scenic View (which I have argued in the past should be restricted as it ends up being the “turnaround”) The truck executes a jack-knifed u-turn.

Truck pulls into oncoming traffic lane preparing to pull a u-turn.

The U-turn. Stopped traffic in all directions for a few minutes. Moments after this photo the truck completely jack-knifed it’s trailers pushing it sideways through the mud.

The rest of the story is comparatively un-eventful. Just your standard multiple oncoming traffic encroachments but the driver managed to finally and thankfully without an accident make it to the destination (Pratt) on Industrial Blvd via Rt. 100 to Alburtis Rd.

Almost a half hour later, thankfully the truck finally arrives at Pratt Industries completely it’s harrowing Lower Mac adventure through the residential heart of our township.


 

 

How many acres of warehouses does it take…

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…to equal the local tax base and job creation benefit of 1 manufacturing facility? 

Here is the math.

 

Mack Trucks - Lots of employees per acre of land at excellent wages. Manageable impact (well worth it for the excellent paying jobs) and good local tax generation.

Mack Trucks – Lots of employees per acre of land at excellent wages. Manageable impact (well worth it for the excellent paying jobs) and good local tax generation.


MANUFACTURING
Mack Trucks consists of 922,950 SF of floor area on 147 acres. The facility generates exactly 9,000 dollars a year in municipal property taxes. The employee counts fluctuate yearly, but they average around 1,850 employees annually. This year Mack is on track to contribute around *84,000 dollars in local services tax receipts. On average 100 of those 1,850 employees live in the township so we collect another 7,000 dollars in **earned income tax.

Property Tax – 9,000
LST – 84,000
EIT – 7,000
$100,000 yearly Lower Mac tax benefit
1850 employees over 147 acres – 13 jobs per acre.

All together Mack Trucks injects 100,000 dollars annually into Lower Macungie Twp. directly through tax receipts. 

The question here is how many warehouses on how many acres of consumed land (in our case prime farmland) does it take to match that amount of tax base generation and jobs?

Low revenue per acre paired with costly liabilities. Not a winner for the local government.

Low revenue per acre and few employees paired with costly liabilities. Not a winner for the local government.

 

WAREHOUSES
The answer is more than 5 buildings totaling 2.5M + SF of floorspace eating up nearly 200 acres of former farmland. Total property tax receipts on 5 properties analyzed are $45,000. On average all 5 buildings together employ about 600 people. Problem is many are part time or otherwise do not qualify for the 12,000 a year threshold in earnings for the township to collect the LST. Employee turnover is also very high. So the total LST generation for these 5 buildings is roughly $26,000. Of those 600 employees only a small percentage, 34 live in the township. We collect about $3,000 dollars in EIT from them total.

Property Tax – 45,000
LST – 26,000
EIT – 3,000
$74,000 yearly township tax benefit
600 employees over 200 acres = 3 jobs per acre of land.

All together 5 warehouses analyzed which eat up nearly 200 acres of land and generate a grand total of $74,000 dollars. 35% less than Mack on 35% more land. 

Conclusion
5 warehouse facilities eat up about 35% more land (in Lower Mac’s case irreplaceable prime farmland) but in total generate about 35% less revenue.

Jobs? That’s 13 jobs per acre for Mack Trucks vs. 3 jobs per acre for the warehouses. Mack generates over 300% more jobs per acre than the warehouses.

This is of course only one half of the equation. The municipal liabilities which aren’t as easily quantified but verifiable are exponentially more impactful with the warehouses.

Now, Mack Trucks is a powerhouse. That’s readily acknowledged. But what about other manufacturing facilities in the township? The numbers remain staggering. Similar numbers for special effects producer Smooth on. 350% more jobs per acre than warehouses and 170% more tax revenue generation per acre. And smooth has so little impact on it’s neighbors that it’s located within a neighborhood. (I live next to the facility and it’s an excellent neighbor) It’s outstanding tax generation numbers are also a credit to the companies very high wages. We get the added benefit of a company mentality and philosophy that encourages employees to live near the facility. Oftentimes within walking distance.

How about Victaulic? Situated on just 10 acres it employs over 150 employees locally. Again, over 350% more jobs per acre than the warehouses. And this little powerhouse generates over 125% more revenue per acre.

 
*LST Persons working in the township are assessed $52 for local services. Those earning less than 12,000 per year are exempt. 

** EIT Collected from employees who reside in the township. 1/2 of 1% of earnings. 

*** Property Tax – Lower Mac has a .50 millage property tax. 

 

Stop crowing about warehouse projects

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Read today another real estate group and other economic development professionals crowing about another warehouse project along I78. They talk glowingly about the “hundreds of jobs” the project is forecasted to bring. (these forecasts usually end up being low, do not break down full time vs. part time and sometimes are inflated with temporary construction jobs.)

That being said giving the promoters of the project the benefit of the doubt and assuming this project will create 600 full time permanent jobs. . .  Let’s #Dothemath and stop looking at job counts alone in a vacuum.  We also must account for revenues, expenses, assets (land) and long term taxpayer liabilities. To do this we look at community return on investment. 

Returns on investments – New Hamburg Commerce Park
Acres of land consumed: 200 acres mostly lost farmland.
Total Jobs: 600
Jobs/acre of land lost: 3 jobs per acre
Municipal revenue per acre: Unknown but based on Lower Mac comps very low.
Municipal liabilities per acre: High impact.

Warehouses generate very low jobs and revenue per acre. What a community does get... freight traffic which is a very expensive public liability.

Warehouses generate very low jobs and revenue per acre. What a community does get… freight traffic which is a very expensive public liability.

To compare let’s take a Lower Macungie manufacturing facility. I usually use Mack Trucks to demonstrate but this time let’s use our newest facility Smooth-on.

Returns on investments – Smooth On 
Acres of land: 12 acres. A reuse of an unused existing facility in a mixed use walkable neighborhood. This transition required no new infrastructure and no municipal taxpayer dollars. (I excluded the parking lot which is a separate parcel and will be redeveloped into employee housing reducing employee trips to and from the facility as an added bonus)
Total Jobs: 150
Jobs/Acre of land: 12 jobs per acre of land (all excellent paying jobs)
Municipal revenue per acre: $242/acre. In Lower Mac this is 2x the ROI of a warehouse.
Municipal liabilities per acre: Low impact.

Smooth on employs 150 people at excellent wages. Large majority full tim positions. Photo from the Morning Call

Smooth on employs 150 people at excellent wages at it’s East Texas facility. Large majority full time positions. Many employees choose to live within walking distance of the facility. Many more will in the future as the company re-develops a vacant parking lot with employee housing. This facility provides fantastic return on investment for Lower Macungie Twp. 
Photo from the Morning Call

Another warehouse project. Another terrible low return and high impact project. *Missing information here is what taxpayer subsidies are being utilized on the Hamberg project. It’s likely there is some kind of assistance. Usually a RCAP grant or something similar. This is almost always the case. If so this makes the equation even more lopsided. I’ll dig a little deeper..

This particular project is outside the Lehigh Valley but it’s the same story. Moving forward our economic development and planning forces (local and regional) must start considering land as the increasingly finite resource it is. That means demanding higher return on investments. Especially when a commodity lost in the exchange is farmland, which is in itself a form of irreplaceable industrial infrastructure. The manufacturing facility example above generates 4-5x the return on investment in even the most conservative ballpark estimate. We’ve got to seek higher value development.

*Disclaimer – As always, logistics operations were always in the cards for our region. This is because of geography and highway access. My problem is I worry we have already lost balance and will go far beyond a certain critical mass our infrastructure can reasonably support. It boils down to a financial and impact equation. Financial solvency is a prerequisite for long term prosperity. We have not been and still are not doing the math. If we don’t expect to repeat this 20 years from now. 

Peak Warehouse

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Morning Call posted a story today “Upper Macungie to push for new I-78 interchange to relieve truck traffic“

“We’ve got to get another interchange in here,” township Supervisor Kathy Rader said. “In the next 20 years, they expect freight to double in this area. … The statistics are staggering.” – UMT Supervisor Kathy Radar

I generally agree. This interchange is critical. It must happen. We’ve built ourselves into a corner. But in order to avoid repeating the same mistake it must happen with the following caveats:

1. Warehouses and warehouse developers that generate the need and count on the free flow of freight should contribute to design and construction. Sounds like that’s happening to an extent with design. This offsets fact these businesses are a net drain on local economies. As I often say relating to muni budgets these land developments are fiscal parasites.

2. Zoning must be in place in combination with a farmland preservation strategy to prevent the area around any proposed intersection from building out in the same fashion as Rt. 100. 

What can’t happen is for a new interchange to induce even more warehousing further westward. This would totally negate any benefits aimed at freeing up Rt. 100.

Think of roads as a system of pipes. In the day and age of GPS more so than ever before congestion will flow to where it’s least backed up. Rt. 100 is now a severe kink in the pipe. For this to work a new interchange must clearly be the path of least resistance. If we allow sprawling growth to surround a new interchange we will be having the same conversation 20 years from now. We have to stop the induced congestion cycle. Any new intersection must be accompanied with growth boundaries.

Break the cycle.

Break the cycle.

We have to break the cycle. A new interchange should be built for the purpose for handling existing traffic on Rt. 100. It can not be seen as vehicle to induce even more warehouses west of Fogelsville. This also relates to capacity on Rt. 22. We are already spending a BILLION dollars on the current widening project. The next induced widening may be impossibly expensive. Therefore we must get land use under control.

We have reached peak warehouse. We’ve built ourselves into a corner. The next steps will determine our quality of life relating to traffic, air quality and safety moving forward.

And yes, this fundamental problem relates to Pennsylvania’s highest in nation gas taxes.

Rail never really in play to move freight in Lower Mac….

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Why isn’t rail used more to transport freight form Lower Mac warehouses?

Excellent question. One I get frequently. Most recent by an old friend on facebook. I thought I’d post the answer here since it’s a pretty common (and good) question. Every rail car takes a half dozen or more tractor trailers off the road.

Rail transportation is safer, more efficient and better for the environment than trucks. Reality though is, trains were never in play to service warehouses in Lower Mac. To ever say they were was misleading.

Rail transportation is safer, more efficient and better for the environment than trucks. Reality though is, trains were never in play to service warehouses in Lower Mac. To ever say they were was misleading.

Why isn’t rail utilized more to transport freight in Lower Macungie? Afterall, this was one of the flawed reasons used by both the developer and then parroted by certain Commissioners in 2010 to justify the 700 acre negotiated rezoning from agriculture protection to largely industrial warehouses.

Here is the problem:

From the LVPC: (Lehigh Valley Planning Commission) – “The freight and freight-related business growth in the region has been significantly e-commerce and quicker turn around type companies (Amazon, Trader Joe’s for example). Since customers buying products from these companies expect 2-day or less delivery or the business deals in highly perishable goods, the longer time transfer rail lines are not viable to these companies.”

 

Basically, certain types of freight have a high percentage likelihood of being transported by rail. Others don’t. So, had Lower Macungie been serious about inducing rail usage leaders in 2010 could have negotiated assurances into the rezoning agreement guaranteeing it.

Most who opposed the 2010 rezoning understood rail was unlikely and that using it as justification for the re-zoning was lip service. (This was mentioned many times in public comments by those opposed, unfortunately as most followed closely understood the decision was already made.) Bottom line is pressure for these warehouses locally was always e-commerce and other types that exclusively use tractor trailers.  So justification that properties had rail access made no sense and was in my opinion very much misleading.

To date there are ZERO rail sidings that will be built on “Jaindl” warehouses off Spring Creek Rd. In fact there isn’t a warehouse with current rail access in the entire township. There is one siding “ghosted” onto one new plan. But, there is a low likelihood it’s ever built. 

Lastly, and ironically a material distributed at a very high percentage by rail is quarry rip rap. So essentially, Commissioners in 2010 took a proposed use (a quarry) where a significant portion of the output (rocks and materials) would generate a high likelihood of rail usage and they negotiated a different land use with literally zero likelihood of using rail.

Yes, a quarry has a numbers of negatives obviously. But traffic standpoint only, Commissioners in 2010 actually negotiated a far more traffic intense outcome.

 

The true costs of the Lehigh Valley Warehouse Economy.

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Lots to chew on in this eye opening post from Joe Cortright, President and principal economist of Impresa, a consulting firm specializing in regional economic analysis, innovation and industry clusters. The subject – the true costs of a high concentration of freight traffic – is ultra relevant to a Lehigh Valley that has gone “all in” on logistics warehouses.

Remember, in the next 5 years we’re planning on spending 250 million+ dollars – strike that guess we are up to 800 million+ dollars – to widen Rt. 22.  When it’s all said and done the nearly – and likely eventually to be over – billion dollar mega-project is a response to projections that the Valleys freight traffic will double in the next 20 years.

Focusing on that freight traffic a moment…According to the Congressional budget office: “Truck freight movement gets a subsidy of between $57 and $128 billion annually in the form of uncompensated costs, over and above what trucks pay in taxes”

The widening of Rt. 22 is a big part of that taxpayer subsidization of the warehouse industry. Remember, the bulk of 2.5 billion coming to the Valley is a result of the +.28 gas tax bandaid and other increases in other user fees in Pennsylvania. Increasing gas taxes is a well I’m convinced we’ll be perpetually pressured to dip into over and over until we fundamentally reform the way we fund roads. It is a short sighted bandaid that I’m happy many local reps voted against.

Smart growth is making sure the balance of land uses in your municipality generate enough revenue to mitigate the costs of liabilities. This is a fundamental way to keep property taxes low long term. With the Valleys warehouse economy we unfortunately have a concentration of buildings that not only don’t pay for themselves but rather generate massive un-funded liabilities. Now, school districts salivate over these mega shell buildings of course. (A rational but also desperate response to a broken and inequitable education funding system.) Problem is, in the grand scheme chasing warehouse revenue is basically robbing Peter to pay Paul since the decrease in school taxes is negated with a disproportionate increase in municipal and other taxes. Here in the East Penn area warehouse developers actually double dipped since the East Penn School District was hoodwinked into paying for a major multi million dollar local road expansion.

What’s the answer? Well for one right sizing the revenue we collect from high liability land uses. Problem is in PA we have very little in the way of tools to do this locally.

Now someone inevitably always says, “well you shop Amazon”. Yes, I am guilty. Love Amazon. But as Joe Cortright points out if the subsidy plug was pulled then shipping companies would naturally and creatively respond. That’s how the market works. Personally, I would gladly pay a little more for my weekly amazon packages. The doorstep convenience would still be well worth it.

I’d also realize savings elsewhere since it’s likely any cost increases to my Amazon bill would also be offset since massive subsidies:

  “-borne by all of us – would go down by a comparable amount. And there would be important savings in costs for freight either moved by other modes (especially rail, which is about two-thirds cheaper), or sourced from closer locations.”

“If trucking companies paid the full costs associated with moving truck freight, we’d have less road damage and congestion, fewer crashes, and more funding to pay for the transportation system.”

In other words, take away the subsidies and force the shippers to get more innovative and efficient. These innovations are coming someday anyhow but with the massive subsidies in place the industry is not motivated.

 

How do we safely move freight in Lower Macungie/Greater Lehigh Valley?

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For better or worse we’re now in the business of moving freight in Lower Macungie Twp. Much of our former agriculture land (which was at one time very high ROI, low impact and great for property values) is now or about to become warehouses. (very low ROI and extremely high impact terrible neighbors)

Moving freight is now a huge part of our local and regional economy. Because of that, local governments have to address the issue.

How do we achieve balance between the needs to move freight and safety/quality of life?

How do we achieve balance between the needs to move freight and safety/quality of life?

In Upper Macungie distribution warehouses probably always made sense due to a location directly adjacent to I-78 with direct highway access to all points N, S, E & W. In Upper Macungie they have the ability to separate the trucks from residential portion of the township. Here in Lower Macungie we are much further from interchanges. Therefore, trucks coming in and out of the township to and from the warehouses are frequently ending up on local residential roads. Day and night trucks rumble through Macungie and Alburtis intermingling with pedestrians and residential neighborhoods. In Lower Macungie we see them on local roads such as East Texas Rd, Spring Creek Rd, Sauerkraut Ln, Willow Ln ect.

In the next 10 years the amount of warehouses will double. The biggest of these mega warehouses are forecasted to generate up to 40 trucks an hour 7 days a week and 24 hours a day. The problem will only get worse.

We need answers. Moving forward how do we balance the needs of a safe, livable community with the need to efficiently move freight? I’m not sure there is a blueprint. Are there any other examples of areas that have gone this far overboard with distribution warehouses? 

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