(The following article by Pat Flannery was posted on the Arizona Republic website on May 31.)
TUCSON, Ariz. — Despite all the happy news about the Valley’s economic growth, there’s a downside that no one has talked about until recently: a potential rail-freight crisis that could sidetrack local efforts to attract new industry.
Simply put, metropolitan Phoenix’s rail yards are near capacity, jammed on a daily basis with freight cars that sometimes can’t be delivered to customers on time because of gridlock.
The problem was so acute earlier this year that at least one local rail customer, Biagi Brothers Inc., a California-based distribution company, felt driven from the Valley. It set up shop farther south, where Union Pacific Railroad was better able to serve it.
advertisement
“We’re in Tucson now,” said Jose Lopez, Biagi’s facility manager. “I don’t like it, but that’s where they’ve pushed us.”
If such cases spread, it’ll be an economic-development guru’s worst nightmare: too much business strangling new growth.
For Valley residents, there could be several long-term effects. Constraints on new industrial operations would mean fewer new jobs, and the loss of some jobs like Lopez’s. If the space problem persists, it also could hike local freight costs, driving up consumer prices for various types of goods when they go to market.
Though rail officials downplay the severity of the problem, both Union Pacific and BNSF Railway Co. concede that local volume is way up and that they will need to expand local capacity before substantially greater numbers of customers can be served. In the interim, they are using new yard-management and staffing techniques and making operational changes to ease the crunch.
“We acknowledge all those horror stories, but things are getting better,” said John Bromley, Union Pacific’s director of public affairs.
The difficulties are such that real-estate brokerage CB Richard Ellis warned in a recent industrial-market newsletter, “The limited availability of rail-served sites will impact the Valley’s distribution market, forcing users south into industrial product in Casa Grande and Tucson.”
The explanation for this squeeze is that the two railroads serving Phoenix are running out of track space in their metro area yards, where incoming cargo and flatbed cars are parked, offloaded, or sorted and transferred to short-haul routes that deliver them to their final destinations at industrial sites.
Rail-traffic bottlenecks are not unique to Phoenix. It is a problem in many major U.S. cities, particularly port cities like Los Angeles, where the volume of rail freight has far outstripped the existing infrastructure’s ability to handle it.
“Nationally, there has been an unprecedented demand for transportation,” Bromley said.
The Association of American Railroads reported in early May that year-to-year comparisons of freight-railcar traffic showed increases in 18 of the preceding 20 months, while “intermodal” traffic – trailers and containers on flat railcars – was up in all 20 of the preceding 20 months.
The national economic expansion is one explanation. So, too, are soaring fuel prices, which have driven some freight customers from trucks to rail.
Bromley said Union Pacific’s local freight volume has increased by 44 percent since 1998. The carrier’s branch line to metro Phoenix now serves 147 customers via seven daily trains. Local yards have a capacity of 2,200 cars a day. Volume is considered constrained at 1,500 cars a day. While the carrier had been operating near capacity, various recent measures took the number of cars down to slightly over 1,000 a day.
The number of cars sitting for two days or more waiting to unload is now below 100, a notable improvement over earlier this year, Bromley added.
BNSF, which has 10 trains a day arriving in the Valley, would not discuss business volume. But spokeswoman Lena Kent said, “We do have some constraints in the Phoenix area, (and) we have been working on improving the flow into and out of our yards.”
Local economic-development experts say it is a disturbing development, given regional efforts to diversify the employment base, expand local trade and encourage multimodal transportation. Restrictions on rail service could become a disadvantage as the area competes with other cities for industrial relocations.
“We are certainly aware of the issue,” said David Valenzuela, vice president of business development for the Greater Phoenix Economic Council. “Right now, it does bear watching.
“We have (relocation) prospects looking for rail access. There are buildings in places that have issues in getting service.”
The railroads have discussed the problem with GPEC and the Maricopa Association of Governments. But while local cities might consider setting aside acreage in their land-use plans for new rail-served industrial projects, few are in a position to spend money expanding local rail infrastructure.
Nearly everyone concedes local rail infrastructure is old and inadequate. But it will be largely up to the railroads to modernize and expand. And as MAG’s Roger Herzog noted, “The issue of major investment is a tricky one for the railroads.”
Kent said BNSF bought more than 600 acres in Surprise about a year ago. While no plans have been announced for the land, it presumably is available to expand operations.
Bromley said Union Pacific also has a limited amount of room to expand its main yard east of Seventh Street and south of Jackson Street in downtown Phoenix. He said expansion is in the works, though timing is uncertain. The cost, he said, “could be in the millions.”
Whatever comes down the line, it won’t help Biagi Brothers, the company that until recently made its home at 3602 W. Washington St.
Among Biagi’s clients is a major Corona beer importer. The beer arrives on rail from Mexico and gets transferred to trucks. Lopez said five to seven truckloads of wine and spirits a day leave Biagi’s warehouse for Las Vegas.
Biagi had six freight cars delivered daily to its warehouse. But it was looking for a bigger warehouse where it could move up to seven a day. Already, it was feeling the capacity crunch because Union Pacific sometimes couldn’t get Biagi’s cars to the warehouse in a timely fashion.
When Biagi looked at other rail-served warehouses in the Valley, Union Pacific kept turning down locations, directing the company first to Buckeye, then to Tucson.
“They basically opposed every warehouse in the area,” Lopez said. “I guess some (other) companies moved into town, and it messed everything up for everybody.”
Biagi finally settled on a new Tucson location, but Lopez wasn’t thrilled. He uprooted his family from its East Valley home, and there were business repercussions as well.
“We lost some of our customer pool because we moved two hours south,” he said.