Port Dallas

When David Dean starts talking about the South Dallas inland port, an excitement creeps into his voice and an animation akin to a Boston Red Sox fan talking about the 2004 World Series takes hold. Sure, he’s a paid transportation consultant and lobbyist, and granted the three-quarter-million-dollar contract his company Dean International, Inc. has with the City of Dallas, Dallas County, and a number of Dallas suburbs has had its share of criticism. But when you talk to him about what is formally named the Inland International Port of Dallas,you’re talking to a true believer, regardless of who signs his paycheck.

TIGHT SHIP: The Allen Group’s Dan McAuliffe (left) and Richard Allen (right) help bring in the goods. photography by Adam Fish

“This is going to have more impact on the North Texas region than Dallas-Ft. Worth International [Airport],” Dean says. “And that may be a little conservative.”

That’s a bold statement. And not entirely over the top, either.

International trade and national logistics have shifted in a profound way. Last century’s models just don’t work anymore. The very flow of trade routes has made a 180-degree turn. East Asian countries increasingly supply the majority of high-quality, low-cost finished goods to American consumers. China is on its way to surpassing Mexico as the largest trading partner the United States has—averaging more than $200 billion in trade per year. The Dallas area stands as the crossroads of east-west and north-south trade. Now it’s just a matter of seizing the momentum and harnessing these forces, Dean says.

“What we have in Dallas is a unique confluence of transportation modes. There are two Class One east-west and north-south rail lines. Five interstates that intersect within 10 miles. You have two major commercial and cargo airports,” Dean says, ticking off his list. “Dallas is the center of the bulls-eye for transportation.”

Specifically, this confluence is making South Dallas—long passed over by real estate development booms that wash over Dallas twice a decade—the focus of some major real estate players, who are taking aim with hundreds of millions in hard investment.

The payoff? Even using conservative economic development estimates from the City of Dallas, the buildout of the inland port could, over the next 20 years, mean up to 35,000 direct new jobs for the region and $5 million a year in new property taxes for the city of Dallas alone—impressive numbers that don’t even begin to measure support jobs, ancillary development, and other positive externalities. Getting goods in and out of town means good times ahead for Dallas.

This is not just idle, hopeful speculation, either. The Allen Group, a development company out of San Diego, Calif., has already sunk three years’ effort and almost $200 million of its own capital into 6,000 acres in the inland port area. Major developers like Duke Realty, Hillwood Development, ProLogis, and Trammell Crow are jockeying for position. At press time, BNSF Railway had the option on several hundred acres of land for its own intermodal facility just west of the existing Union Pacific intermodal facility. The proposed BNSF facility fronts on 8,000 lineal feet of BNSF track. The option term on the land runs through to summer 2008.

Water access, be damned. With tens of thousands of jobs, hundreds of millions of dollars in investment, and billions of dollars’ worth of cargo, Dallas could become one of the world’s biggest, busiest ports.

Which isn’t to say Dallas-Fort Worth isn’t busy already. The area secured its position as a national hub in the 1970s with DFW Airport. The expansion of the 17,000-acre AllianceTexas development as an air cargo and logistic facility in the 1990s, tied closely to the implementation and growth of NAFTA trade, further added to the critical mass.

Dallas economic development director Karl Zavitkovsky says the inland port—the city’s formal name for it may be a bit premature since everything so far is still on paper—is the next step in the growth of Dallas’ pivotal role in international trade. 

“When you look at what’s been achieved at Alliance and look at the assets we have in place in the southern sector, you see what this has the potential for,” he says. “The confluence of resources to be developed and enhanced, the competitive pricing of the land, and the alignment of interests all add up to Dallas being the crossroads.”

What’s more, much of the land designated for the inland port—a proposed zone rather than a formal, defined facility—is spread among several municipal jurisdictions, as well as Dallas County. Historically, such an arrangement has meant headaches and red tape for developers and intense competition among taxing and regulating authorities. But not so here. Zavitkovsky says there has been an unprecedented level of cooperation between the City of Dallas and Dallas County, and among the southern sector municipalities.

Leslie Jutzi, director of government relations for The Allen Group and a former City of Dallas employee, says she has never seen the like. “But then,” she adds, dispelling her own surprise, “everyone understands that this project—both ours and the overall inland port—is something that everyone benefits from.”

“The Golden Polygon” is as good a descriptor as any. The area roughly bounded by Interstate 20 to the north, Interstate 45 to the east, Interstate 35-E to the west, and the proposed Loop 9 alignment to the south is no tidy triangle, circle, or square. But what the Golden Polygon lacks in symmetry, it makes up for in economic horsepower.

Within these uneven borders lie two major north-south rail lines, a Union Pacific intermodal facility that performs about 300,000 lifts a year, Lancaster Executive Airport, and plots with triple freeport inventory tax exemption (city, county, and school business inventory taxes for inventory held less than 175 days). The area also has pending designation as a foreign trade zone, part of the NAFTA trade corridor, and as a Texas enterprise zone.

To grasp the port’s potential, one must understand the shipping and trade industries have come a long way since Brando worked the docks in On the Waterfront. For one thing, the point of origin for consumer goods these days is, more often than not, Asia. Also, a port no longer needs to be at the water’s edge. In some respects, the further inland, the better.

Most of today’s steamships are so big and so laden with goods they literally cannot fit through the Panama Canal, so they end up in seaports in Southern California, or in seaports in Mexico in Guaymas, Lázaro-Cárdenas, Topolobampo, and Manzanillo. And no less than 65 percent of that cargo is bound for final destinations east of Dallas, by way of rail and truck.

Why Dallas? The existing intermodal facilities at the actual seaports in Long Beach, Los Angeles, and to the south in Mexico are themselves becoming landlocked and overly cramped. That is to say, they’ve just about reached growth potential. Separating and sorting out cargo at the seaports increases dwell time for both containers and cargo ships. Dwell time, as any importer or exporter will tell you, is not good. The same principal applies to cargo coming into Houston’s port, as well.

As foreign trade increases, so do the potential problems. International trade with Canada and Mexico, as well as Asia, is growing rapidly and is expected to grow by 85 percent by 2020, according to the city of Dallas’ studies. Cargo traveling south gets backed up at the border awaiting customs inspection.

Almost all of these problems are ameliorated by inland ports. And Dallas’ inland port, specifically.

Dean breaks it down. “Ships aren’t making money when they are docked,” he says. “Containers can be lifted from ship and onto rail in one lift at inland ports, radically reducing dwell time for the ships and the containers.”

Rail carriers and highway officials prefer that setup, too. It’s actually more expensive to move a train 300 miles and offload it than to move it 2,000 miles and do the same. An inland port cuts down on costs and roadway congestion, too. By bringing cargo east to Dallas, every one train takes 200 heavy trucks off highways between the West Coast and North Texas. But getting trains and trucks to run in concert and on schedule for hundreds of thousands of lifts each year is easier said than done.

Dan McAuliffe, vice president of development for The Allen Group, says the company’s plans are to develop at least 60 million square feet of space for what it calls the Dallas Logistics Hub, a major component of the inland port concept. The Hub will be roughly divided up into 65 percent for industrial and transportation development, with the balance going for office, logistics, retail, and other development. The developer hopes the existing UP intermodal yard, which currently handles 360,000 lifts a year but has a maximum capacity of 600,000, can be matched with the construction of a BNSF facility, which talk about town says could be double that capacity.

“So we’re talking a million lifts a year,” Dean says. “Think about that.”

Just by way of rough perspective, the economic benefit to an area per intermodal lift runs anywhere from $400 to $600 at coastal ports. That adds up to a lot of money for the area, which means a lot of developers are eager to follow where others have led.

The allen Group CEO Richard Allen is head of a family business that just a decade and a half ago had been focused on manufacturing and distributing paper cups. But Allen saw the potential for a Dallas port based on what he knew of the evolution in trade routes. He’d been developing industrial and intermodal facilities in Southern Central California since the early 1990s. In September 2004, he decided to take the show to Texas.

Working with Myron Goff, then the largest landowner in Dallas who had some 2,600 acres of land tied up among 25 different partnerships, The Allen Group began buying up large swathes. The first 2,600 acres was under contract by summer 2005. Another 3,400 acres on top of that would follow when The Allen Group realized the city of Dallas was serious about its inland port plans. All total, the land investment alone cost the company around $200 million.

“We wanted to go all in or nothing. We wanted to control it all, because then we could work with Dallas and other developers and plan out the buildout,” Allen says. “Dallas benefits from an accident of location. We saw, with the right foresight, we could maximize that benefit. The City of Dallas—all of the southern sector municipalities—they understand trade and they understand what is going on and what this can mean to them. That made a difference when we made our decision to invest.”

And how serious is his investment? Allen points out that his company, not being a public entity and subject to market demands and whims, is dedicated to the region for the long haul. Unlike REITs and other public firms, The Allen Group can afford to tie up capital in a 20-year deal.

“This is not solely about profit,” Allen says. “Sure, you want to make money. We could flip what we have right now and make a healthy profit. It’s not what we want to do. We’re fortunate enough to be where we do what we do because we enjoy it. We like the idea of creating something that will last. We’re buying into a legacy here.”

That $200 million or so that The Allen Group has invested comes from four partners: Richard Allen, his son, his father, and his brother. They’ve kept it all in the family.

“All of our company’s capital is in this. The vast majority of my net worth is in Dallas now. To say I am personally invested in this is an understatement,” Allen says.

The City of Dallas is so certain this inland port concept will work, it’s already calculating its portion of the benefits. About
25 to 30 percent of the land in the port area is in Dallas. Zavitkovsky says, as Dallas is sort of the “gateway” to the inland port, efforts
will be focused on trying to bring in higher density, more office space, and more mixed-use development to its portion of the project. An estimated 7,000 direct jobs associated with the Logistics Hub alone will be located inside Dallas. This could be the largest single economic stimulus the southern sector has seen in … well, ever. 

“This is going to change the shape of Dallas growth. These are not just simple warehousing jobs. These are jobs that require intense computer skills, robotics, logistical management, and machine skills,” Zavitkovsky says. “This is going to be a major change for South Dallas.”

South Dallas, and the rest of the world.