Nixon, local leaders squaring off over funding for China Hub project
St. Louis Post Dispatch
October 25, 2009
By Tim Logan
For nearly two years, some of St. Louis' heaviest hitters have been trying to develop a hub for Chinese cargo flights at Lambert-St. Louis International Airport.
They say it could be one of the biggest booster shots this region has seen in a long time -- a chance to matter in the global economy.
But now, a tight state budget may keep the cargo project from ever getting off the ground.
Gov. Jay Nixon and St. Louis area business leaders are locked in a face-off over $1.1 million, money that the region's Midwest China Hub Commission says it needs to build the business case for freight here, but that Nixon says Missouri just can't afford to spend on a long shot.
The money is part of $2 million that the Missouri Legislature approved earlier this year to fund planning and marketing for the project. Nixon froze the money as part of $325 million in spending cuts to deal with the state's budget shortfall.
The commission wants to use the money to hire Guenter Rohrmann, a world-class air freight expert and former top executive at DHL. It would be his job to sell St. Louis to airlines and shipping companies that would fly goods to and from China via Lambert.
At the group's meeting Wednesday in Clayton, Rohrmann laid out his strategy to plumb the market and determine, within a few months, if there is enough demand to make those cargo flights feasible. He sees potential.
"We're very positive that we will be able to convince one or two airlines to take a serious look at St. Louis," said Rohrmann, who would charge $931,000 plus travel costs for his services.
If that's the case, flights could start by October 2010, to catch the busy pre-Christmas shipping season. If the answer is no, the project would shut down early next year, said Mike Jones, chairman of the Hub Commission. Either way, it's worth finding out.
"The only way you lose is if you quit playing," said Jones, a top aide to St. Louis County Executive Charlie Dooley. "I'd hate to forfeit this because we wouldn't man up an effort."
But time is growing short if flights are to start next year. So in recent weeks, local leaders have been leaning hard on Nixon to loosen his purse strings.
Earlier this month, eight local business and labor officials signed a letter urging Nixon to pay for the expertise, by the end of the month. Another letter -- signed by Dooley and St. Louis Mayor Francis Slay and hand-delivered to Nixon's office on Tuesday -- used stronger language.
"It is time for you to state in strong and unequivocal terms that the state of Missouri is behind this project," Slay and Dooley wrote, according to a copy of the letter obtained under the Missouri Sunshine Law. "We cannot nickel and dime a project of this importance and magnitude."
Wednesday morning, at their meeting in Clayton, the commission got its answer.
As board members leaned in to hear her on the speakerphone, Missouri's acting director of economic development, Katie Steele Danner, laid out what Jefferson City could give: $300,000.
The state supports the strategy, Danner said. Nixon likes the idea. They just don't have the cash right now.
"Economic conditions do not allow us to make any additional financial commitment at this time," she said.
In a letter sent the same day, Nixon chief of staff John Watson told Jones that he would consider helping out more when the budget improves, but that Missouri faced "historic economic challenges." Nixon's office declined further comment.
Just Monday, the state announced it was laying off about 100 parks workers, and earlier this month it had to borrow $150 million from reserves to pay bills.
Still, the news made St. Charles County Executive Steve Ehlmann throw up his hands.
"Are we dead in the water?" he asked at Wednesday's meeting.
Right now, it is unclear.
The effort is funded by a two-year, $1.725 million grant from the U.S. Department of Commerce, which mostly pays for a staffer, for the commission's executive director Jason Van Eaton and for a more than $400,000-a-year contract with Stephen Perry, a British veteran of China trade talks who helped get the project started last year.
There's also $800,000 a year that's been pledged by local business groups and governments, from Civic Progress to the Missouri Department of Transportation. About $628,000 of that has been collected. It has paid for marketing efforts and matching the federal grant. About $253,000 of it was used to reimburse Perry, the law firm Stone, Leyton and Gershman and Van Eaton's consulting group for costs they incurred before the commission was formed.
Private businesses have spent more than $1 million on the effort, according to Dooley and Slay's letter, much of it by McEagle Properties. The developer, based in O'Fallon, Mo., co-owns NorthPark, a 550-acre business park east of Lambert that would probably be a hub of China trade activity.
For the agencies on the commission, re-upping for another year means another $100,000 each, in belt-tightening times. Budgets for next year are being written. They need to decide soon, said Van Eaton.
"If we can't do this contract (with Rohrmann), I wouldn't recommend we move forward," he said. "We're kind of at a fork in the road."
For all the money that has been spent so far, there has been relatively little tangible success. Trade delegations and agreements with the Chinese, yes, but no airlines, no freight forwarders and no big exporters have yet signed up to ship goods between St. Louis and China.
That is precisely why the commission needs to hire Rohrmann, Jones said. His firm has the industry knowledge and the relationships to see if this project can succeed, and, if it can, to help make it happen.
Still, there may be other alternatives.
Commission members might be able to shift funds around, or scrounge up more money to hire Rohrmann. The state might change its mind and kick in more cash. The commission might find a less expensive consultant -- one board member privately referred to Rohrmann's plan as "a Cadillac," when "a Chevy" might do.
But several commission members stressed that if this project is going anywhere, it needs the state's buy-in. That means more funding from Jefferson City.
And although, Ehlmann said, he was sympathetic with Nixon's budget dilemmas, a few hundred thousand dollars isn't that much money for what might be the best economic development prospect the St. Louis region has going these days.
"As bad as things are, I don't know what else we've got going for us right now," he said. "I don't know what Plan B is."
