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"Stranded Asset": Industrial Authority Weighing Future Of West Kentucky Megasite

megasite.jpg
via JLL report, cropped
/
West Kentucky Megasite

The board that oversees the West Kentucky Megasite in Graves County is weighing the future of the property after a benchmarking report ranked it at or near the bottom in every category.

Mark Manning is chairman of the eight-county Purchase Area Regional Industrial Authority, which has a representative from each county in the Jackson Purchase on its board.

The industrial authority oversees the 2,110 acre site, which is comprised of two parcels linked in the center and shaped like a figure-eight. “Some people would say it’s not a true megasite now, but if somebody wants to call it a megasite because it’s got a lot of property that’s fine,” Manning said. The site is currently leased for farming and that income is being used for various projects.

“The site is over 2,000 acres. It’s been in existence close to 20 years and has yet to have a single, viable prospect,” Manning said. He explained the site was designed with “great intentions in a different time” when people thought that with enough acreage, it could attract “something huge” like an automobile plant. The megasite was created as a result of USEC beginning the process of closing. He said studies at the time contained information about each county creating industrial parks and that morphed into a megasite.

“What we have done as a board is try to take a step back and take a hard look at what we have and what we’re doing and what we need to do to find a measure of success,” Manning said.

The board hired a firm to give an “unvarnished review” of the site. That’s where Jones Lang LaSalle (JLL) comes in. The firm did the recent Toyota/Mazda plant search that ultimately located in Alabama. JLL benchmarked the West Kentucky Megasite against a dozen similar sites in the southeastern U.S., in the categories of configuration, flood plain, transportation, natural disaster risk, etc. They also looked at a cost-benefit ratio.

Nowadays, a typical automotive site has about 800 to 1,000 acres, no flood plain, proximity to one or two class-1 railroads, heavy infrastructure, 12-inch water, 8 to 12 inch sewer, heavy electricity, heavy gas and near two interstate highways. The West Kentucky Megasite is lacking in most of these categories.

"From the perspective of a large manufacturer, the West Kentucky Megasite has many challenges which would likely eliminate the site from consideration," states the JLL May 2018 Site Assessment and Benchmark Report. "In almost all categories, particularly site features, labor availability and logistics, the site ranks near the bottom of the evaluated list." The report also lists lack of workforce density, Class-1 rail access, contiguous usable acreage, direct interstate access and relative distance from a full-service airport.

The report notes flood risk as the “number one impediment” to the site, describes complications with electrical service and limited interest from the Tennessee Valley Authority, its close proximity to the New Madrid fault zone (though this risk can be mitigated with proper engineering) and that the region lags in engineers with advanced manufacturing and robotic experience. However, the report found the site is well located in the center of the U.S.

flood_area.jpg
Credit via JLL Report, cropped
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via JLL Report, cropped
Flood Area
typical_site_configuration.jpg
Credit via JLL Report, cropped
/
via JLL Report, cropped
Typical Site Configuration

In looking at the site’s cost/benefit ratio, Manning said, “It appears that the costs to develop the site, should we choose to go forward with that, are very, very high and we don’t know where we’d get the money.”

One scenario suggests the required infrastructure investment for a large-user would be $28.3 million. This amount reaches $36.1 million on the upper-range and, on the lower-end, $4 million with minimum investment. The report notes that the latter is competitive, but attracting a distributor or light assembly user at that level would be difficult given their preferences for immediate interstate access, existing facilities and proximity to international ports.

Such light or mid-size industrial use (a smaller user is considered fewer than 1,000 employees), is prohibited at the site. Manning explained this is because the original intent was not to attract projects that could be served in an existing county industrial park.

"It is not likely that a very large user would immediately consider the West Kentucky Megasite, due to factors including labor availability, geographic location and site constraints,” the JLL report states.

Manning said the board will soon be making hard, but necessary decisions. “Sometimes, you have what I call a stranded asset. And that’s an asset that has value, but it may not be the value you need.” He said the board is “looking hard” at the site in communication with the state and will make a decision, now backed by facts.

When asked what that decision could be, Manning said it could go in any direction. One direction could involve making no change. “Twenty years from now we might be in the same spot we’re in now,” Manning said. “Or, if something happens that I’m not able to conceive, maybe there could be a good use for it as an industrial property… but personally, I find that unlikely.”

Another option is disposing the property and using the assets for other economic development purposes with more immediate results. “In order to do any kind of major transaction with the property we are required to have permission from the state of Kentucky,” he said. “Is it smart for us to take an illiquid asset and do something with it that can have more immediate results? Personally, I think we can.”

“Theoretically, if you sold the property today each county would probably wind up somewhere a little bit north of a million dollars apiece,” Manning said, adding that in Calloway County (of which he is the President of the Murray-Calloway Economic Development Corporation), this could mean acquiring some additional property. In Marshall County, he said, it could go towards the development of an industrial park there. In Fulton County, it could go toward acquiring additional property.

“What I want people to know is this is being looked at today very professionally, very methodically and that we recognize that some hard decisions need to be made and we’re going to make them,” Manning said. “I think it will be sooner rather than later, but if it takes a little more time to get where we need to go that’s okay, too.”

“Everybody wants this region to prosper. And when I say region, I mean region.” He said, and to do that, each county needs to succeed in order for the region to have critical mass. He said there has been a lot of buzz for big projects in Kentucky.

“And those really big projects are fantastic ,but you’re not going to put Nucor steel in Murray, Kentucky. We’re just not that heavy industry kind of place. We do really well with light to medium manufacturing that does metal fabrication, plastic, paint, assembly and food processing. And I want to see us develop enough of that throughout the region that we actually have a cluster, if you will, and then can develop the skills for people to have meaningful employment. Because that’s what it’s all about. It’s not about cutting ribbons. It’s about providing meaningful employment for people to support families. And that’s what we have to do. Murray State is a great asset and they hire a lot of people. Without manufacturing, though, to supplement those things then we become a very different and lesser community.”

The Graves County Economic Development Board did not return a request for comment.

The Purchase Area Regional Industrial Authority meets on May 16.

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