SMARTPORT’s ROCKY ROAD

KansasCity.com ^ | Jul. 18, 2006 | RICK ALM and LYNN HORSLEY

[hedgetrimmer]

Dueling leases is latest wrinkle in city’s south-of-the-border business gambit.



Kansas City has leased the same five acres of prime West Bottoms industrial land to two different tenants in a risky bid to leap onto the international trade stage.

Arm in arm with Mexican authorities, city officials for nearly two years have pressed the U.S. departments of State and Homeland Security to approve the first foreign customs clearing house on U.S. soil. Advocates said the unprecedented international trade operation could quickly emerge as a Midwestern funnel, drawing Mexico-bound American exports from an 11-state region.

This spring, city officials signed off on a 50-year lease for the Mexican facility, with an option for 50 more years, on a tract at 14th and Liberty streets.

But the 107-year-old, nonprofit American Royal for decades has used that land for truck and equipment storage, and its lease runs through 2045. City officials hope to placate and persuade the livestock group to move.

The dueling lease problem is only the latest to bedevil the Mexican customs proposal, which is far from a done deal.

Staffed by U.S. and Mexican customs agents, the high-tech facility would process hundreds of truckloads of freight daily, saving hours and even days of routine delays at border chokepoints such as Laredo, Texas.

Public and private interests with big stakes in the project had hoped the facility would be up and running by now. But the State Department has yet to approve the Mexican government operation on U.S. soil.

Meanwhile, Mexican border interests are wary of the potential competition from Kansas City, U.S. critics are wary of the Mexican border moving north, and presidential politics in Mexico is casting a long shadow over the two nations’ future relationship.

Mexico’s July 2 election gave a razor-thin 0.6 percent margin to Harvard-educated former energy minister Felipe Calderon. He is staunchly pro-business and considered a friend to the Kansas City customs plan.

But the returns have been formally challenged by loser Andres Manuel Lopez Obrador, the populist ex-mayor of Mexico City, whose views on warmer business ties with the United States aren’t so easy to gauge.

Todd Nelson, Missouri’s trade representative in Mexico, pledges the state “is going to push forward with this project with whatever administration is in.”

Chris Gutierrez, president of nonprofit Kansas City SmartPort Inc. that is the driving force behind the customs plan, is cautiously optimistic that enthusiasm for the Kansas City project is not waning on either side of the border.

“This is an incredible project for both nations,” he said. “But politics is politics.”

Kansas City has been laying the groundwork for expanded trade and cultural relationships with Mexico for a decade.

The Kansas City “Mexiplex” office at 16th and Baltimore streets is the only one of its kind in the United States, housing a three-state regional office of the Mexican Consulate, the city’s nonprofit Mexican Business Initiatives Corp., and the Hispanic Chamber of Commerce of Greater Kansas City.

City Hall and private business interests have forged trade relationships with counterparts in the Pacific deep-water port cities of Manzanillo and Lazaro Cardenas and the Mexican state of Michoacan.

Last summer, city officials signed similar working agreements with Winnipeg and the Canadian province of Manitoba. A local trade delegation recently returned from Veracruz, on Mexico’s southern Gulf Coast, where a deal there could offer Kansas City a link to European sea shipping lanes.

An inland Mexican customs port would be the crowning touch for Kansas City’s south-of-the-border business gambit.

Dueling leases

City Manager Wayne Cauthen acknowledged that negotiations aimed at moving the American Royal’s parking lot to another site had gotten “tense” at times. He insisted the Mexican deal was simply too good to pass up.

The American Royal uses the property only a few months each year, but Cauthen said the deal with Mexico could trigger new jobs and growth in the local warehousing and freight-handling industries.

“We’re third in the nation in trucking,” he said. “We’re second in the nation as a rail hub. We’re one of the few cities with three interstate highways crisscrossing our downtown.

“Our history has been transportation and distribution. As part of the global economy, this could be something that separates us from many other cities.”

With that dream in sight, the council earlier this year earmarked $2.5 million in loans and $600,000 in direct aid to SmartPort, which would build and own the inland customs facility and sublet it to the Mexican government through agreements with U.S. Customs and Border Protection.

Cauthen hoped American Royal officials would consider other sites, but he conceded if “push comes to shove” the Royal’s lease would have to be honored. American Royal Chairman and Cerner Corp. chief executive Neal L. Patterson said the organization was willing to move its ancillary parking lot, but only if it’s a fair exchange.

“The Liberty Street lot is absolutely instrumental in our putting on our events,” said Patterson, but so far the city hasn’t come up with an acceptable alternative.

If the city has to buy pricey, developed land in the West Bottoms to accommodate the American Royal, Assistant City Attorney Rich Noll estimated the relocation tab could go as high as $6 million.

A rent-free deal

The Mexican government would have no significant investment and would occupy the customs facility operation rent-free, said SmartPort’s Gutierrez.

SmartPort set up the deal to avoid imposing any expenses on Mexico above its ordinary border costs. “Otherwise,” said Gutierrez, “that reduces their rationale for using Kansas City.”

SmartPort meanwhile is seeking a $1.5 million grant from the U.S. Economic Development Administration to purchase high-tech gamma-ray screening devices for drive-through inspections of truck cargo — the heart of the customs function.

Mexican officials last year balked at paying for the high-tech equipment, and Gutierrez said his side acquiesced rather than put the project at risk.

If the grant falls through, it is not clear who would pay for the gamma-ray gear.

Million dollar question marks like that rile Kansas City public relations consultant Joyce Mucci, who in 2003 founded the Mid America Immigration Reform Coalition that today claims more than 400 area members.

Mucci and others in recent months have peppered city and state officials with freedom of information requests seeking more details about the Mexican customs plan, which she criticized as “an under-the-radar deal … another tap into the taxpayer’s pocket.”

Meanwhile, the scope of the project is shrinking.

SmartPort once estimated 800 or more trucks a day eventually could pass through the facility. Gutierrez said the current plan to open with just one gamma-ray inspection device had slashed traffic estimates to about 800 trucks a week.

Either way, a sharp increase in truck traffic in the West Bottoms would stress streets. The city, however, has yet to launch a promised study to assess traffic impacts and future public costs for roadway improvements and maintenance.

Fees charged to truckers to use the Kansas City customs house are expected to repay the city’s $2.5 million construction loan, plus 4 percent interest, within 15 years.

Sovereignty uncertain

Confusion and secrecy have been hallmarks of the ambitious project.

At the outset, Gutierrez and others have said the customs facility would be sovereign Mexican soil similar to a foreign embassy. This has changed. “It will not be Mexican sovereign territory,” Gutierrez said.

The sovereignty issue is one of many awaiting State Department review. The department also must decide whether the deal in Kansas City can be done through federal agency agreements with Mexican counterparts or whether a full-blown U.S. treaty with Mexico will be necessary.

The latter would require Congressional consent and more delays.

Missouri Gov. Matt Blunt, who led a trade mission to Mexico earlier this year in part to promote the Kansas City project, is not happy with the delay. Spokeswoman Jessica Robinson said, “When he visited Mexico he saw firsthand the extensive opportunities that are inherent with this project, and he’s very concerned that any delays are going to cost us those opportunities.”

Two weeks ago, Sen. Kit Bond’s Washington office announced that U.S. Customs had finally checked off on the Kansas City plan and bumped it up to the State Department for further review.

That news came as a surprise to Gutierrez. “We were under the impression it had moved to State six or seven months ago,” he said.

Customs officials have declined to confirm the report out of the Republican senator’s office.

The Kansas City plan has not gone unnoticed south of the border.

Rank-and-file freight handlers in Laredo “are opposed to this project, which they see as an attack on their livelihood,” said Nelson, Missouri’s agent in Mexico.

After meeting earlier this year in Laredo with Mexican freight brokers, truck drivers and others, “We’ve gotten a lot more favorable response,” said Gutierrez, “but it’s not decided whether they’re for it or against it.”

Spokesmen for the Mexican brokers association in Laredo did not respond to interview requests.

The Kansas City project would not appear to pose a serious economic challenge to Laredo, where more than 9,000 trucks a day are processed. Under the most optimistic scenario — two gamma ray machines — Gutierrez said Kansas City could handle no more than 320 trucks a day.

Although a Kansas City customs operation almost certainly would attract new warehouse and freight operations, Gutierrez said Mexican law required licensed Mexican freight handlers at Laredo and other border crossings to escort cargo across the border — including cargo pre-inspected in Kansas City.

Other misunderstanding about the Kansas City project is widespread.

Gutierrez stresses the Kansas City customs port would process only U.S. exports headed out of this country, not imports or immigrants coming in. This hasn’t kept media outlets such as CNN and Human Events Online from suggesting that goods from the Far East would move through Mexican ports and then on to Kansas City for their U.S. customs inspections.

Public confusion also stems from the city’s long-range hope to add a second Mexican customs clearinghouse at the former Richards-Gebaur airfield to inspect outbound U.S. rail cargo headed to Mexico.

The city intends to sell the decommissioned military airbase to Chicago-based private interests for $5.6 million for redevelopment as an industrial and freight district. Kansas City Southern rail lines traverse the sprawling site and link up with sister Mexican lines acquired recently by Kansas City Southern.

Mexican authorities had once favored a joint rail and truck customs operation in Kansas City, possibly at Richards-Gebaur, but that option never gained much traction.

Although the redevelopment of Richards-Gebaur appears to be a go, Kansas City Southern Vice President Warren Erdman said any Mexican customs component there would depend on the overall success of the cargo operation and could be years away, if at all.

“We do not foresee such a rail facility at Richards-Gebaur in the near future,” he said.

[hedgetrimmer]

This spring, city officials signed off on a 50-year lease for the Mexican facility even though the departments of State and Homeland Security haven't approved it, and the American people DO NOT WANT IT.

[hedgetrimmer]

KC Smartport in the news.

[xpertskir]

"SMARTPORT’s ROCKY ROAD"

I thought this post was about icecream. What a waste of time.

[Tolerance Sucks Rocks]

Are the city officials going to invoke eminent ptomaine over the livestock business. Thank you so very effing much, Supreme Idiots!

[janetgreen]

and the American people DO NOT WANT IT

GWBush's brand of "homeland security" - an open corridor from Mexico. Unbelievable. He's trying hard to shove Mexico down America's throat.

Hopefully there will be those in Washington who see the dangers of this insanity on many levels and will reject it. GWBush is trying to sell America out to the highest bidders.

[hedgetrimmer]

Hopefully there will be those in Washington who see the dangers of this insanity on many levels and will reject it

They well may. But the implementers are hard at work, and they are empowered by Congress, but by the president. This will happen via unlected "working groups" and government "frameworks" set up by "trade ministers". Congress, unless they rebuke the president and revoke the Executive Orders he is using to accomplish his agenda, is useless.

[roofgoat]

Pretty Dead Thread. Pretty Sad too.

[hedgetrimmer]

I guess its better than the name calling and insults that have gone on, on other threads.

[dljordan]

"This will happen via unlected "working groups" and government "frameworks" set up by "trade ministers".

We're going to get a North American Union whether we like it or not and the American taxpayer is going to subsidize it.

[hedgetrimmer]

the American taxpayer is going to subsidizeing it.