Project could yield thousands of jobs

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Economic development leaders have scored several monumental victories in Lehigh Valley history.

In 1881, they lured a giant silk company from New Jersey by building a factory for the company and naming it after the owner's wife, Adelaide. At the time, it helped the region become the silk textile capital of the world.

And around 1944, an Allentown dentist learned from a patient that Western Electric in New York wanted to move its location. The Allentown Chamber of Commerce ended up wooing Western Electric, subsequently known as AT&T, Lucent Technologies and now Agere Systems. The company has provided high-tech jobs since.

Now comes another contender for the list of most significant economic development projects of all time in the Lehigh Valley. This time, it's not the recruitment of a single large employer. Rather, it's a plan for a gigantic industrial park on former Bethlehem Steel land in the southeast corner of Bethlehem. The area makes up a quarter of the city's taxable property.

Bethlehem Commerce Center has been dubbed the biggest economic development project in Lehigh Valley history by politicians and economic development leaders.

Biggest in land area, at 1,600 acres, or 21/2 square miles, is true enough, but is it the most significant?

The short answer might also be yes. In fact, it may well be the largest reuse of a privately owned industrial site in the United States.

And if two proposed developments on the site are successful over the next decade, it will close a chapter on the 125-year evolution of the Lehigh Valley economy — one that relied on mega-manufacturers such as the Adelaide silk mill, Western Electric and Bethlehem Steel.

Plans call for creating thousands of jobs at scores of companies on the land once controlled by the single-biggest manufacturing giant in Lehigh Valley history, Bethlehem Steel. The plans are a microcosm of what's happened to the local economy in recent decades: the decline of big factories and the rise of more and smaller employers.

And maybe, officials hope, this project will help usher in an era of lasting prosperity, less vulnerable to the tempestuous ups and downs of large goods-producing industries. Even nearby Lehigh County officials are interested. Indeed, it could be a prosperity not just for the city of Bethlehem and for Northampton County but for the entire Lehigh Valley and beyond.

Ready to roll

This project is different from the dreamy plans for an elaborate entertainment and retail complex called Bethlehem Works, which was proposed with great fanfare in 1997 and has yet to happen.

This huge industrial park is adjacent to Bethlehem Works, but 10 times larger. It is land unfamiliar to passers-by because much of it is invisible from nearby Route 412 and Interstate 78.

The main developer is Lehigh Valley Industrial Park Inc., a nonprofit group that has been around for 45 years and developed six successful industrial and office parks in the Lehigh Valley, under the names LVIP.

Today, some 17,000 people work in LVIP parks.

And unlike other snail-paced projects in the region, LVIP officials are ready for action. They announced plans in January to redevelop 1,000 acres and hope to have a shovel in the ground by April for the first phase of the project covering about a quarter of the land.

Just last week, LVIP announced the first tenant on that parcel, United States Cold Storage, which will build a $14 million refrigerated warehouse.

Ghosts of developers past

For those in local economic development circles, an irony stems from LVIP's involvement.

LVIP was created in 1959 by visionary business leaders. They foresaw the need to diversify the region by incorporating smaller companies into the economy, fearing the downfall of large manufacturers, particularly Bethlehem Steel.

Now, almost half a century later and the prophecy fulfilled, LVIP's descendants will take ownership of the very soil Bethlehem Steel occupied. They will place smaller companies there to diversify the economy.

The ghostly whispers of those development forefathers are present today in LVIP board meetings, said LVIP Chairman Jeffrey Feather.

''We're just fulfilling the mission of some bright and far-seeing people who started LVIP 45 years ago and felt the economy should be diversified,'' Feather said. ''That keeps us going sometimes.

''It's a hell of a challenge.''

Tax money trough

If anyone can get the project done, it's LVIP. That's true if for no other reason than the nonprofit group has long-standing ties with county, state and federal sources of government money, which is necessary for the project to succeed.

The redevelopment plan would be dead on arrival without free flow from the tax-dollar spigot, officials concede.

Recent injections include $13 million of county tax money to construct the industrial park's main thoroughfare, dubbed Commerce Center Boulevard. The state has dropped off checks for $1.6 million and $930,000. And the federal government is considering ponying up money for widening nearby Route 412, an estimated $59 million project.

So it's fair to say local taxpayers have a vested stake in the plan because they will be paying for a good chunk of it.

Besides knowing local politicians and government agencies, LVIP has other relationships locally that include commercial real estate brokers, power wielders in the business community and key economic development leaders who can be persuasive — maybe even twist arms if needed — to clear hurdles.

''Relationships are going to be vital,'' said Kerry Wrobel, president of LVIP. ''We need state and federal and local cooperation.''

Not only does LVIP plan to break ground next month, it has prospective companies wanting to buy lots in the initial 265-acre phase of the project, a parcel LVIP has been working on since June 2001, before it decided to expand its interest to 1,000 acres.

LVIP plans to close a deal on the land this month, buying it from International Steel Group, or ISG, which bought Bethlehem Steel's assets out of bankruptcy.

LVIP is exactly the type of group that can make the project succeed, said Robert L. Kiel, regional director of Liberty Property Trust, a developer that often buys property in LVIP parks.

''They're ideal for that kind of redevelopment because they are nonprofit,'' said Kiel. ''They can qualify for state grants and federal money, which most private developers cannot. They have time to do it. And they work with multiple developers, as opposed to one developer going in there and controlling it for themselves.

''With that kind of flexibility, you can bring a lot of jobs and opportunities into the marketplace.''

Private developer's role

LVIP also is paving the way for a private developer to build on the adjacent 550 acres that is considered part of the Bethlehem Commerce Center.

LVIP is acting as a project manager and agent for private developer Majestic Realty of Los Angeles. Majestic plans to construct and own big box-type buildings and lease them to manufacturing and warehouse/distribution companies.

Sometimes warehouses are pooh-poohed by economic developers because they provide too few jobs for the large amount of land they occupy. But in this case, most any recycling of the Bethlehem Steel land would be a benefit.

The 56-year-old Majestic has experience building on former industrial sites and a long record of success. It builds offices, factories, hotels, retail space and research and development facilities. All told, it has developed more than 50 million square feet of property in 10 states. To put that in perspective, consider that there's only about 37 million square feet of industrial property in the entire Lehigh Valley.

''They bring a lot of credibility to the table,'' said Tony Hanna, Bethlehem's economic development director.

The family-owned company is led by owner and Chief Executive Officer Edward P. Roski Jr., one of the richest people in America. Roski ranks No. 263 on Forbes magazine's 400 Richest Americans. The publication estimates Roski's net worth at near $1 billion.

He is part-owner of the Los Angeles Lakers basketball team, the Los Angeles Kings hockey team and the Staples Center sports arena where those teams play. Roski also owns a casino in Las Vegas.

So Majestic's involvement in the redevelopment of Bethlehem Steel land brings an established record of success and financial prowess. Majestic has an agreement to buy the 550 acres of Bethlehem Steel land, but it hasn't closed the deal.

''We like what the Lehigh Valley has to offer,'' Thomas Cozzolino, a Majestic vice president, said when the company first bid on the land in September 2002. ''We're in this for the long haul.'' Cozzolino and Majestic officials did not answer requests for comment for this story.

Among the tasks LVIP will handle for Majestic is moving a truck-to-rail transfer station, called an intermodal, from LVIP's tract to Majestic's property, near the old Bethlehem Steel coke works and I-78. It also will handle some environmental work and oversee completion of Bethlehem Commerce Boulevard, which will provide road access to Majestic's parcel of land.

Other operations on the site already include a Conectiv electricity-generation plant and a steel-forging operation.

They too are part of Bethlehem Commerce Center. And the potential for good things to radiate from that site is hard to exaggerate.

Jobs, jobs, jobs

Bethlehem Commerce Center would create 6,000 jobs when it's completed about a decade or more from now, according to estimates.

Those jobs sound good about now, a time when the Lehigh Valley economy is struggling to recover from the recession of 2001. Business has improved locally, but the thousands of jobs sucked into the black hole of that recession haven't returned. Today, about 3,500 fewer people are employed locally than in March 2001, when the national recession began.

If those 6,000 commerce center jobs were filled by Lehigh Valley residents today, the local unemployment rate wouldn't be 5.7 percent. It would be 3.8 percent, among the lowest rates in 30 years. The number of unemployed people in the region would be cut by one-third.

The jobs would include everything from factory work to professional office work.

The workers would take home some $210 million a year, based on an average annual salary of $35,000.

''The jobs are a big deal, but what kind of jobs will they be? That's the bigger deal,'' said Nancy Dischinat, work force development director for the Workforce Investment Board, which operates CareerLink job centers locally.

In the past three years, the number of high-paying jobs locally has dwindled. It remains one of the biggest problems for Dischinat and her colleagues, who try to help both the unemployed and the local companies that need to hire people.

The economic impact

But even if the jobs pay modest wages, $210 million of new money has an effect.

That would be money that mostly gets spent in the local economy, which would help home sales, auto sales, banks, grocery stores and merchants of all kinds.

And there's a multiplier effect to spent money as it passes through the hands of people in the Lehigh Valley. A worker buys a home, and the real estate agent takes a commission and buys a car. The car salesman gets a bonus, which he spends on jewelry for his wife.

And there are spinoff benefits from companies locating in the industrial park, such as janitorial services to clean offices, landscaping to beautify the grounds, catering for work lunches and stocking vending machines in factory break rooms.

That jobs multiplier is something work force officials eye carefully.

''We always ask: What auxiliary companies do they bring?'' Dischinat said. ''It's a bigger picture. With every company that comes in here, we're looking at the potential for what else?''

That's not even counting what it costs to construct the roads and buildings, which would boost construction employment and possibly the businesses of local building materials suppliers, for example.

Though relatively short-lived, that type of infrastructure construction is among the most helpful types of spending in a local economy, said Kamran Afshar, a Bethlehem economist and market researcher.

All told, the amount of investment in Bethlehem Commerce Center is expected to exceed $1 billion, a conservative estimate considering the new electricity plant on the site cost $600 million alone.

The benefits, though, go beyond the jobs and dollars.

Importance of brownfields

Unlike many office parks in the region, this plan wouldn't involve bulldozing a farmer's field and robbing the region's open space, which is disappearing at an alarming rate. Every five years, land the size of Allentown is being consumed locally, according to the Lehigh Valley Planning Commission.

This is a so-called brownfields project, meaning it's constructed on a former industrial site where there could be varying levels of contamination. Some officials have called it the largest privately owned brownfields project in the United States — although several federal Environmental Protection Agency officials couldn't confirm that because there's no master list, and the definition of brownfields varies.

Regardless of where it ranks nationally, it's by far the largest brownfields project in Lehigh Valley history. And it's important that LVIP has taken the lead to do something about it, said Raymond Suhocki, president of Lehigh Valley Economic Development Corp., a public-private agency that acts as an umbrella for many economic development activities in the region.

''This could have been left to lie fallow, as many brownfields are — just fenced in and let go. Here's an initiative to turn this property around,'' he said.

It harkens to LVIP's creation. It built industrial parks when no private developer would.

''They've been the leader again to say: Here's a brownfield, it's important to the Valley and the city, let's go ahead and do it,'' Suhocki said.

''Being a public-private partnership, I think that's exactly what they should be doing — to encourage others to follow, to show this can be done, that this is a good business decision.''

The land-use aspect of the project is not lost on LVIP, Wrobel said.

''The issue that resonates today is suburban sprawl,'' he said. ''Here, we can address the leading issue in economic development right now, which is how do we redevelop urban areas and save our greenfields?''

The need to develop cities and slow development of open space was highlighted in a much-ballyhooed report by the Brookings Institution of Washington, D.C., released in December.

That report examined Pennsylvania and profiled the Lehigh Valley. It attributed the Lehigh Valley's economic ills, such as lagging job and income growth, on deteriorating cities and overdevelopment of farmland.

Bethlehem Commerce Center seems the antidote. It would be located in the city of Bethlehem and wouldn't use any farmland.

It would be one of the few major employment campuses inside a city locally. And it's close enough to south Bethlehem neighborhoods that people could walk to work.

Obstacles and challenges

While redeveloping a brownfield site in a city is noble, it's also fraught with challenges.

For an economic development project, its size is unprecedented locally. Stabler Corporate Center, also off I-78 one exit to the west, is an office park similar in size but is a private project. It has failed to attract significant development since it opened in 1987.

Bethlehem Commerce Center will be about the size of all the LVIP parks combined. Put another way, it's about double the land area of nearby Hellertown.

Before anything can happen, LVIP and Majestic have to formally acquire the land from International Steel Group. There are no major hurdles there, officials say, except that ISG is so busy with acquiring other steel companies, completing the land sale isn't always at the top of its priorities list.

But even once the land transfers hands, big issues abound. They include overseeing the completion of Commerce Center Boulevard and moving the intermodal rail facility so its tracks don't cross the boulevard. Nearby Route 412 needs to be widened to accommodate more traffic between the industrial park and I-78. Without a federal government handout, the Route 412 project is more than $30 million short and may be delayed.

Foundations of Bethlehem Steel buildings are still buried, some areas have varying levels of contamination to clean up, and the government has a labyrinth of regulations to follow when dealing with old industrial sites.

''I think the magnitude of the work that has to be done in the first 36 months is the real challenge of this project,'' Wrobel said. ''The devil is in the details. There are so many issues on-site.''

Fortunately, some of those details land right in LVIP's wheelhouse. It is experienced at doing the grunt work of development, such as getting zoning approvals and running utilities to the site.

''It's not sexy. It's more mundane work,'' Wrobel said. ''But that's where our area of expertise is.''

Selling it

And once Bethlehem Commerce Center is built, economic development leaders have to attract companies to fill it.

Manufacturing space probably will be easier to sell than office space in the near term. The office vacancy rate in the Lehigh Valley is at an all-time high, at 19 percent, according to commercial real estate service Trammell Crow Co. Rental rates have plummeted as a result.

But those markets run in cycles, and filling Bethlehem Commerce Center could take 10 to 15 years, time enough for the office market to get healthy.

Suhocki said he's confident that will happen locally because of the Lehigh Valley's fortunate proximity to major cities including New York and Philadelphia.

''We're in a great marketplace,'' he said. ''So I think there would be no problem absorbing that development.''

LVIP is still working on pricing for the properties, but officials are optimistic.

''I can tell you interest is strong,'' Wrobel said. ''We don't feel we have to discount our prices because they're coming into a brownfields site.''

Among the likely tenants are Liberty Property Trust, LVIP's biggest customer, owning more than 1 million square feet of space in LVIP parks. The two groups have a 25-year history together.

''There's a good chance we'll end up owning some land in LVIP VII,'' said Kiel, the Liberty Property official. ''I think we'll end up going down there and doing a project, or doing several projects.''

'There's nobody else to do it'

If a private developer attempted to reuse the land, it would certainly cherry-pick the areas easiest to deal with and fence off the trouble spots, whereas LVIP plans to redevelop the entire area.

''There's no private developer that wants to touch it,'' said Feather, the LVIP chairman. ''It's beyond the city or the county's ability to do it. There really wasn't anybody else here. If LVIP didn't exist, you would have had to create an entity like it.

''On the board, we just said, 'There's nobody else to do it.' It's sort of a no-brainer.''

Grover Stainbrook, the longtime LVIP director who oversaw the building of five LVIP parks, said the ambitious plan is monumental for the Lehigh Valley.

''It's going to be a bear of a project, but they have the support from a lot of different areas,'' he said. ''I think they can make this happen.''

So, is the Bethlehem Commerce Center the most significant economic development project in Lehigh Valley history?

We'll have to wait and see. But it's almost guaranteed to amount to some success because the bar is set so low. Any dollars invested, any job created and any reuse are more than what the land is yielding now.

Meanwhile, even before a single acre of that land is resuscitated, the plans have created excitement, hope and action, all necessary ingredients for economic prosperity.

gregory.karp@mcall.com

610-820-6643

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