Northwest Indiana’s business outlook experienced significant boosts in 2014 such as progress on the Gary/Chicago International Airport expansion and significant setbacks such as a dramatic fall in hourly wages and incomes.
Health care nationally was in the throes of change brought on by the Affordable Care Act, while locally a seminal report was delivered on an academic medical center and trauma care. All of this played out against the backdrop of a surging U.S. economy. The question now is whether Northwest Indiana can capitalize on the national situation to move forward.
Gary/Chicago International Airport expansion
The Gary/Chicago International Airport’s $174 million expansion was kick started in October when a final deal was reached on moving railroad tracks and demolishing a berm that has long blocked the project.
The authority approved the deal with Canadian National on a 4-0 vote and within days celebrated with a gathering of local dignitaries on the part of the runway that has already been completed.
The complex deal with Canadian National was preceded by another that will allow Norfolk Southern and CSX railroads to consolidate their tracks north of the airport, another critical project for the runway expansion.
The airport is now shooting to finish the expansion by June 2015. The airport will then be able to handle larger cargo and passenger jets.
First U.S. MERS case diagnosed in Munster
The first U.S. case of a deadly virus that originated in the Middle East was diagnosed in Northwest Indiana last spring.
The patient, whose identity was not released, was treated at Community Hospital of Munster for Middle East respiratory syndrome, or MERS. The virus had taken the lives of hundreds of Middle Easterners over the previous couple of years.
The Indiana patient, a health care worker, flew April 24 from Saudi Arabia to London and then to Chicago. He rode a bus from Chicago to Highland. The following week, he experienced shortness of breath, coughing and fever and was subsequently admitted to the hospital.
After a full recovery and testing negative for the virus, the man was released about two weeks later. An Illinois man who had come in contact with the Indiana patient also later tested positive for MERS.
NWI vs. Southeast Wisconsin
NAI Hiffman Senior Vice President Kelly Disser kicked off a regionwide discussion Aug. 6 when he compared the pace of development in Northwest Indiana and southeast Wisconsin before a meeting of the Northwest Indiana Forum.
There really is no comparison.
From September 2013 to September 2014, the top five economic development deals announced in Kenosha County, Wis., had resulted in promises of 3,496 new jobs for the region. That compares to a sum total of 989 jobs promised by the top five deals in Northwest Indiana’s three counties of Lake, Porter and LaPorte.
Disser attributed much of the difference to southeast Wisconsin’s nimbleness in responding to developers’ needs in terms of zoning, taxing districts and infrastructure. The availability of green fields and spec buildings at the state border is also a factor.
Whole Foods coming to region
The fast-growing Whole Foods Market started construction on a Schererville store that was expected to open in 2015, and has Valparaiso on its radar for a future location.
The upscale grocery chain had been opening 10 supermarkets a year in the Midwest, and aimed to open a 40,000-square-foot store next summer in the new Shops on Main retail center at Indianapolis Boulevard and Main Street in Schererville. Other stores and restaurants that opened in the new shopping center included Pier One, Gordmans, DSW Designer Shoe Warehouse, Carraba’s and Tomato Bar.
Whole Foods is a best-of-class store whose unique product offerings can draw customers from as far as an hour away, said Nicholas Wibbenmeyer, senior vice president for Regency Centers, which developed Shops on Main along with Highland-based Boyer Properties. The presence of the high-end supermarket, which specializes in organic and natural foods, sparked a lot of interest in the remaining seven acres on the site.
The Texas-based chain is notoriously picky about the demographics of the neighborhoods it opens stores in, and the presence of a Whole Foods should lure more high-end development to Northwest Indiana, Indiana University Northwest assistant professor of economics Micah Pollak said.
Region wages declined
Northwest Indiana residents didn’t make much progress financially in 2014.
On average, wages in Northwest Indiana declined by $1.25 an hour over the course of the year, and the average income fell by $3,000 as a result of lower wages and fewer work hours, said Micah Pollak, Indiana University Northwest assistant professor of economics. It was a local problem: Wages actually rose by 24 cents an hour statewide over the same period, while workers nationally got an average raise of 33 cents per hour.
The average income in the Calumet Region dropped to $40,000 from $43,000, a 6.6 percent decline, while workers nationally made the same amount as they did a year ago. Northwest Indiana residents still earned 6.1 percent more than their downstate counterparts, but the region’s average hourly wage of $23.89 slipped below the national average for the first time since July 2011. Income fell partly because employers cut back on work hours.
Report recommends against academic medical center in NWI
A feasibility study funded by the state to determine whether an academic medical center should be constructed in Northwest Indiana recommended against the idea, reasoning that the region has too many empty hospital beds already.
The consulting firm instead advised that existing hospitals upgrade their trauma care and form a consortium to host medical residents. This would stem the tide of Northwest Indiana residents seeking care at university hospitals in the Chicago area, the firm said.
Several local hospitals have announced their intentions to become trauma centers; Methodist Hospitals’ Northlake campus in Gary earned an “in-progress” Level III trauma designation from the state in August. Area health officials are also working to expand medical education opportunities in the region.
BP went on a hiring spree after $4.2 billion modernization
BP had a hiring surge after getting new equipment online at the modernized BP Whiting Refinery.
The London-based energy giant completed a $4.2 billion modernization project at the refinery that stretches along Lake Michigan’s shoreline through Whiting, Hammond and East Chicago. BP hired 50 full-time operators who will make an hourly starting rate of $26.42 an hour.
The refinery on Lake Michigan’s southern shore employed about 1,900 full-time workers, not including all the contractors who work there on a regular basis. BP looked to replace operators who are retiring, not increase the overall headcount, spokesman Tom Keilman said.
Early in the year, the refinery was ramped up to process 80 percent heavy, high sulfur crude oil from the oil sands region instead of the Texas light crude it used to predominantly process.
Steel mills scale back
Steelmakers cut expenses as they looked to restore profitability that eluded them during the downturn.
U.S. Steel decided not to pursue any further development of carbon alloy facilities at Gary Works, where it had invested an estimated $210 million over the last three years hoping to produce an alternative to traditional coke used in blast furnaces. The steelmaker, which lost money for five straight years, also laid off a number of non-union managers and supervisors, but declined to offer specifics.
ArcelorMittal idled the No. 2 galvanizing line at ArcelorMittal Indiana Harbor West, once the world’s most productive galvanizing line. United Steelworkers Local 1011 notified workers that ArcelorMittal tentatively plans to idle No. 1 aluminizing line at ArcelorMittal Indiana Harbor West, formerly the LTV steel mill, in December 2015 in anticipation of shifting the production to the company’s new AM/NS Calvert plant in Alabama.
The steel giant also told employees it planned to close the electric arc furnace at Indiana Long Carbon Plant No. 4 in March, and buy foreign steel from sister plants instead. ArcelorMittal facilities in Canada and Germany produced billets used for construction projects for $150 to $200 less per unit.
Community Hospital unveils new tower
Community Hospital unveiled a major expansion in July, when it opened the $34 million Parkview Tower.
The tower includes expanded and updated services for its intermediate care, mother/baby, neonatal intensive care, and labor and delivery units.
On the third floor is the new intermediate care unit featuring 32 private rooms. The fourth floor has the mother/baby unit, which includes 25 private rooms, along with a nursery and baby spa. The fifth floor is the neonatal intensive care unit, staffed 24/7 by a medical team from the University of Chicago, who help care for up to 32 sick babies. The sixth floor features labor and delivery, with 12 private suites and two surgical suites for C-sections.
State awaits word on Medicaid expansion
Gov. Mike Pence is still awaiting word on whether the federal government will grant approval for his proposed Medicaid expansion, the Healthy Indiana Plan 2.0.
The 2010 Affordable Care Act, aka Obamacare, expanded Medicaid to all adults earning up to 138 percent of the federal poverty level. But the U.S. Supreme Court later ruled that states could decide whether or not to participate.
Pence has proposed using the state’s Healthy Indiana Plan as the model for the expansion. Under HIP, beneficiaries have to put a set amount of money each month into a health savings account to fund their care. Supporters of the plan say it gives users more accountability and personal responsibility than traditional Medicaid.
After negotiations with Pence, the federal government is deciding whether to grant a waiver for Indiana’s HIP 2.0-version of Medicaid. Traditionally, Medicaid does not require its low-income beneficiaries to pay for their care. HIP 2.0 would expand coverage to an estimated 350,000 Hoosiers.
Community banks consolidate
The number of community banks left in Northwest Indiana shrunk from 10 to eight last year.
Muncie-based First Merchants bought out Munster-based Citizens Financial Bank in a deal valued at $114.7 million. A group of 13 Hammond businessmen had founded Citizens Financial Bank in 1934 with $6,140, and it grew over the years into the fourth biggest bank in Lake County history.
Munster-based Peoples Bank acquired Hammond’s First Federal Savings and Loan Association, which was 1/20th of its size and was looking for a buyer as longtime president and CEO John Freyek neared retirement.
Another Northwest Indiana bank has been on a buying spree. Over the past year, Horizon Bank has expanded into new markets by buying East Lansing, Mich.-based Summit Community Bank for $18.4 million and Indianapolis-based 1st Mortgage of Indiana for an undisclosed sum. Horizon just bought Franklin-based Heartland Community Bank for $19.7 million in 2012
Northwest Indiana was not unique. The total number of banking and thrift charters nationally plunged from about 20,000 in 1980 to 6,812 at the end of 2013, according to the Federal Deposit Insurance Corp. The number of community banks in the United States shrunk by 29 percent over the last decade alone.
NiSource will split
NiSource Inc. announced in September it plans to create a separate company for its burgeoning gas transportation business, while keeping NIPSCO and utilities in six other states under the NiSource umbrella.
NiSource’s plan to split into two companies in 2015 would represent the biggest change at the Fortune 500 company since the $6 billion deal under which it acquired Columbia Energy Group 14 years ago.
Under the plan, NiSource stockholders will maintain their shares in the company and receive shares in the new, publicly traded Columbia Pipeline Group. The deal is still subject to NiSource receiving favorable opinions on tax matters. The board of directors also must give final approval.
NiSource headquarters will remain in Merrillville, and no layoffs are planned as a result of the split, according to the company.
Lear grows, though Ford lays off workers
Ford sold its seventh million Explorer, and demand was so strong that supplier Lear Corp. outgrew its Hammond plant and decided to open a new subassembly factory in Portage.
The Southfield, Mich.-based auto parts supplier filed plans with Portage saying it will invest more than $5.1 million to renovate and equip about a fifth of the space in a 517,000-square-foot building at 6750 Daniel Burnham Drive in the AmeriPlex at the Port business park.
Lear planned to hire 96 new employees and transfer 189 workers to the plant, which will make automotive seating systems. The 285 employees were slated to make an average of $12.28 an hour the first year, far less than what auto workers make under a new contract at the Hammond plant.
Despite another year of strong Explorer sales, Ford laid off 100 short-term supplemental workers in its Hegewisch plant by robocall as sales flagged for the Taurus and Lincoln MKS.
Indiana Toll Road bankruptcy
In September, the private operator of the Indiana Toll Road declared bankruptcy on more than $6 billion in debt, renewing the debate on the wisdom of the state’s 2006 lease of the road.
Indiana Toll Road Concession Co. has since won a federal bankruptcy judge’s approval to put the 75-year lease for the road out to bid, with major international investors and pension funds reported to be interested.
The Indiana Finance Authority has rebuffed all calls to repossess the road, including one from U.S. Sen. Joe Donnelly, who described the bankruptcy as “a mess of epic proportions.” The Finance Authority arranged the 2006 deal that leased the road to a Spanish-Australian investors’ consortium for $3.8 billion.
In the meantime, the counties of Lake and LaPorte have submitted their own preliminary bid for taking over the lease. The counties want to form a nonprofit company that would reinvest Toll Road profits in local road projects.
South Shore expansion
U.S. Rep. Pete Visclosky, D-Ind., resurrected the proposed West Lake Extension of the South Shore Commuter railroad early in 2014 by continuing to push towns and cites to ante up a portion of their proceeds from the new Lake County economic development tax.
In action unmatched since the extension was first proposed decades ago, 16 communities agreed to commit a portion of their tax proceeds to the effort. The Northwest Indiana Regional Development Authority committed to spending $8 million per year on the $570 million project for up to 30 years.
Still, two of the communities called on to contribute the most to the project have hesitated to get involved, with Hammond Mayor Thomas McDermott Jr. calling for a voter referendum on the commuter rail extension.
Nevertheless, the project is moving forward, with an environmental impact study now underway to determine the best route while minimizing environmental impacts along the 9-mile route.
Illiana Expressway gets federal go-ahead
The Illiana Expressway in early December received crucial federal approval, but the election of Bruce Rauner as Illinois governor a month before has proponents jittery about the road’s future.
While the road has been a priority for Illinois Gov. Pat Quinn, Rauner has been largely noncommittal on the project.
In November, a Rauner spokesman said the governor-elect believed the Illiana Expressway had potential for economic development but the state must make sure any potential public-private partnership doesn’t leave taxpayers holding the bag.
Meanwhile, both state departments of transportation continue to prepare to acquire the land needed for the 50-mile toll road as well as initiating the public-private partnership they say is needed to get it built.
Gary/Chicago International Airport privatization
In January, the Gary/Chicago International Airport Authority reached a 40-year deal with Aviation Facilities Company Inc. to be the exclusive developer of property on and around the airport. The authority also voted to approve a 10-year deal with AFCO subsidiary AvPorts to manage and operate the airport.
Both deals were pushed by Gary Mayor Karen Freeman-Wilson, who made finding a private operator and developer for the airport top priorities for her administration.
The privatization deal created controversy, with some community activists rallying against the deal. Then-authority chairman and governor’s appointee Tom Collins Sr. said he believed a better deal could be struck for the city and resigned before the final vote.
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