In 1975, Savannah was ranked the 14th-largest port in the U.S. Between 1975 and 2008, container volume in Savannah has grown at a CAGR of 12.1%. In the midst of the global economic recession, in 2008, total container traffic in Savannah increased to 2.616 million TEUs, up a marginal 0.5% from 2007, but significantly higher than the 3.5% drop in container traffic across North American ports. Today, Savannah is ranked 4th in North America for containerized cargo moving through its port (after Los Angeles/Long Beach, New York/New Jersey and Seattle/Tacoma)150.
Savannah does not have a distance or transit time advantage over its competitors on either the Atlantic or Pacific coasts. A container moving from Shanghai to Savannah takes 30 days to make its journey through the Panama Canal, compared to 16 days for Vancouver and 18 days for Los Angeles. Rotterdam to Savannah transit times are 12 days compared to 11 days for the Rotterdam-New York route or 10 days for the Rotterdam-Montreal route151. Savannah does not have the natural advantages of L.A./Long Beach, New York/New Jersey or Seattle/Tacoma, i.e., a well-populated hinterland. Savannah has a population of only 130,000 people and Georgia has a population of 9.5 million. And yet, Savannah has seen its market share of container traffic more than double, from 2.4% in 1990 to 5.1% in 2008.
The “secret sauce” of Savannah’s success was a proactive and strategic approach to moving on trends in the global shipping and distribution business. The Georgia Ports Authority embarked on a strategy to attract big box retailers’ distribution centres to Savannah in the year 2000. While Home Depot and Pier 1 Imports already operated facilities there, site-selection decisions for distribution centre operators are driven by unique considerations of land availability, labour, local and state incentives, and port proximity.
The Georgia Ports Authority set up a different department that worked with the Savannah Economic Development Agency, private landowners, realtors and trucking and rail companies to assemble a compelling argument for a location close to Savannah152. One such location is the Savannah Port Authority Industrial Park (SPAIP), which is a site specializing in satellite activities such as container and chassis storage and repair, thereby reducing the pressure on the container terminal153. About 10 km from the port terminals are two large logistics zones: the Crossroads Business Park (CBP) owned by the Savannah Economic Development Agency and the Savannah River International Trade Park (SRITP) owned by the Georgia Port Authority. Both parks have a revenue-generation landlord model, where facilities are built by the landlord and leased to tenants.
This type of strategy can help attract customers, since their entry costs are lower. On the other hand, the risk taken by the Savannah Economic Development Agency and the Georgia Ports Authority is higher, since tenants can decide to break their leases and move elsewhere. For instance, in 2008, due to a drop in retail volumes, Wal-Mart decided to break the lease on its 800,000-square-foot distribution centre in CBP and consolidate its activities in Statesboro, about 70 km inland154.
An additional incentive provided to retailers is that both the SPAIP and the CBP are considered, in their entirety, as Free Trade Zones (FTZ). Retailers are able to use this to delay payments on their imports until they leave the FTZ and head for their stores or regional distribution centres.
This strategy was also underpinned by infrastructure investments. Savannah is the only U.S. East Coast port with two Class 1 railroads operating on-terminal. In addition, it is the only port in the U.S. offering two Intermodal Container Transfer Facilities: a clear reflection of how important intermodal rail traffic has become for the movement of goods155.
The strategy has worked so far. Savannah has been able to attract continental distribution centres of household names such as Wal-Mart, Bass Pro Shops, Kmart-Sears, Heineken, Best Buy, Target, IKEA, Hasbro, Petco, Dorel and Avon.
In terms of low-risk investment attraction policies and programs, Georgia has a full complement of programs and policies in place that it markets in a 15-page brochure titled Georgia: Business Incentives. These programs are quite extensive and include:
Georgia has a number of medium-risk policies and programs specific to what it terms “strategic industries”. These include distribution, technology, manufacturing, telecom and processing companies. For these industries, Georgia offers:
We note that while the Port Tax Credit Bonus and Port Tax Credit Bonus for Investment Tax Credits could be construed as high-risk policies, they are not high-risk, because they apply to all companies eligible to receive them and are not negotiated with individual companies.
In addition to the above, Georgia has a number of tax abatements and exemption programs, including sales tax exemptions for materials handling equipment, pollution equipment and manufacturing machinery, and tax-exempt industrial revenue bonds for manufacturing facilities. Other programs include electricity rate discounts, county inventory tax exceptions, a rapidly expanding business tax credit for Georgia companies growing faster than 20% per year and eligibility for the HOPE Scholarship and HOPE Grant (tuition and fees at Georgia public and state technical colleges).