Orange County Partnership - News

  • Source: US Chamber of Commerce

Distribution Centers are Game Changers for Local Economy

Orange County, due to its strategic location, has become a haven for distribution center development. Critics of these projects have argued that these large projects offer little benefit to the local community in terms of jobs, taxes and investment. A recent U.S. Chamber of Commerce study found those arguments have no basis in truth.


Curtis Dubay, Chief Economist with the U.S. Chamber of Commerce, reported earlier this month that a recent U.S. Chamber of Commerce report showed that communities experience significant economic benefits from attracting a new distribution center to their area. Benefits for a municipality from approving a new distribution center include “new jobs, increased incomes and substantial gains in local tax revenue, which can help to better fund government services, like schools, roads, and public safety, in those communities.”


The study concluded that over the 20-year lifespan of a new distribution center in a particular metropolitan statistical area (MSA) the project:


·       Creates and sustains 5,100 new jobs;


·       Expands the labor force by more than 3,500 workers;


·       Increases incomes by $500 million; and


·       Grows salaries and wages by $360 million, equivalent to raises of 1.8% for all workers in the region.


·       Adding to those benefits are tens of millions of dollars in new tax receipts each year, particularly sales and property taxes.


Dubay added that a new distribution center “results in more consumer spending in a Metropolitan Statistical Area (MSA) and leads to more residential and business investment in the area because of the increase in jobs and investment; hence higher revenues from these taxes. Importantly, the new DC results in higher tax receipts because of the growth in an area, not from higher taxes on residents.”


Local residents must understand the difference between a distribution center, which is also known as a “fulfillment center,” and a typical warehouse building. In its report entitled “The Community Economic Impact of New Distribution Centers” the study noted that distribution centers “are not traditional warehouses. These high-tech distribution hubs require the businesses that open them to invest hundreds of millions of dollars. That includes investment in the buildings, as well as the advanced technological, safety, and logistical equipment used in DCs to carry out their complex processes. Warehouses require similar investment for the buildings but not the other infrastructure.”


The study added, “For instance, some DCs have almost 20 miles of conveyor belts to move items through the center. Those conveyor systems alone require ample physical infrastructure and advanced robotics and software technology to move items from one area to the proper areas they are going to safely and swiftly. Warehouses do not use these capabilities to the same extent.”


The study noted that the mix of workers needed at a distribution center is much different than a warehouse due in large part to the training and education needed to operate and manage the technology at the facility.


“The investment needed to operate and maintain a DC with all these advanced capabilities is immense,” the U.S, Chamber of Commerce story concluded.


Outlook for Distribution Center Development


“Distribution Centers are an increasingly integral part of the U.S. economy,” Dubay stated. “As retail evolves from traditional brick-and-mortar stores to include more selling through e-commerce channels, the significance of these technologically advanced engines of commerce will continue to rise. A distribution center connects the local economy directly into an immense global stream of commerce.”


Locally, distribution centers continue to be a key driver of economic growth in Orange County. Conor Eckert, Vice President of Business Attraction for the Orange County Partnership of Goshen, said, “While our focus has shifted toward attracting advanced manufacturing and Life Sciences, we must acknowledge that the distribution sector is a vital for tax base growth, job creation, and new consumer spending norms.”


He said the U.S. Chamber of Commerce study should dispel any misconceptions local taxpayers may have on the nature of the project and the significant investment and benefits such a project will bring to their community.


“When a distribution center is proposed in a community, it’s important to educate local residents on the value of these facilities and their positive tax and labor impacts,” Eckert noted.