HYUNtrHInrLrBoíem - MBTA · PDF fileHYUNtrHInrLrBoíem COPY Offeror: HYUNDAI ... Hyundai Rotem has most recent ... experience of designing the very first U.S. commuter railcar with

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Offeror: HYUNDAI ROTEM COMPANY12, Heolleung-ro, Seocho-gu,, Seoul I37-938, Korea

HYUNDAI ROTEM COMPANY

Proposal for

MBTA NEW ORANGE ANDRED LINE VEHICLES(RFP NO. CAP 27-10)

Part B

TECHNICAL PROPOSAL andSTATEMENTS andCERTI FICATIONS REGARDI NG

ELIGIBILITY

RFP No. CAP 27-10

Proposal for New Orange and Red Line Vehicles Massachusetts Bay Transportation Authority

EXECUTIVE SUMMARY

Date: May 15th, 2014

By: Hyundai Rotem Company

RFP No. CAP 27-10

New Orange and Red Line Vehicles Massachusetts Bay Transportation Authority

Table of Contents

I. INTRODUCTION ..................................................................................................... 3

II. PROJECT ORGANIZATION .................................................................................... 3

III. TECHNICAL APPROACH AND QUALITY ASSURANCE ....................................... 4

IV. MANUFACTURING PLAN AND ECONOMIC IMPACT IN MASS. ........................... 5

V. PAST PERFORMANCES ........................................................................................ 7

VI. DOMESTIC CONTENTS AND M/WBE PARTICIPATION ........................................ 8

ATTACHMENTS 1. Letter of Intent for the Final Assembly Site in Springfield, MA

2. MOU with Local Community College in Springfield, MA

3. The Economic Development Impacts Analysis of MBTA Subway Car

Assembly in Springfield, MA (by UMass Donahue Institute)

4. Design Book (Rendering Images) of the Proposed Vehicles

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RFP No. CAP 27-10


I. INTRODUCTION

Hyundai Rotem Company (“HRC”), with its U.S. affiliate, Hyundai Rotem USA Corporation (“HRU”) (jointly “Hyundai Rotem”), is pleased to submit this proposal in response to the Massachusetts Bay Transportation Authority (“MBTA”) Request for Proposals No. CAP 27-10 (“RFP”) and accompanying Specification No. VE-10-036 (“Contract Specification”) for the furnishing and delivery of Orange Line Cars, Red Line Cars, Capital Spares, Manuals, Diagnostic Test Equipment and Training Aids, including all materials, services and costs for freight and insurance to MBTA Facilities in the greater Boston area.

In the following sections, we summarize the highlights of our proposal for each area together with attachments of detailed information.

As an experienced and long-time partner of the MBTA, Hyundai Rotem is committed to delivering high quality Orange & Red Line Vehicles to the satisfaction of the MBTA’s specification, within the time and budget requirements, by putting the vast expertise it possesses in supplying similar types of vehicles to customers worldwide.

II. PROJECT ORGANIZATION

HRC will be the main contractor with the MBTA, and will be responsible for the total program control, design, system integration, procurement, quality assurance, project quality control, manufacturing of carbody shells and truck frames, completion of the Pilot Cars, and test & commissioning, while HRU will serve as subcontractor to HRC and will be responsible for the project management, local final assembly in Massachusetts, on-site testing & commissioning, and warranty services.

Key project management staff including but not limited to Project Manager, Project Engineer, and Lead Engineers. will be stationed in Project Office located in Boston area within the network of MBTA operation during the Contract period to manage and facilitate the clear communication and project harmony with the MBTA. The project team in Boston will be further supported by experts of Engineering Consulting Group in the U.S. Meanwhile, HRC will carry out the design and system integration in close and clear communications with the project team in Boston and support of the various engineering resources of HRC R&D Center. Procurement of the subsystems from the qualified subcontractors and manufacturing and

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RFP No. CAP 27-10


testing of vehicles will be performed by HRC as well with the support of our design group and quality group.

Hyundai Rotem has most recent experience in establishing and operating of final assembly facility in Pennsylvania, and with that expertise we will establish a fully equipped and well organized Final Assembly facility in Springfield, Massachusetts for the production of vehicles for the MBTA.

III. TECHNICAL APPROACH AND QUALITY ASSURANCE

The proposal summarizes the resources and efforts that Hyundai Rotem will bring in the execution of the New Orange & Red Vehicle Contract for MBTA. The new vehicle represents a leap forward in technology, from the implementation of Crash Energy Management, to efficient IGBT propulsion, modern Vehicle Monitoring System, high reliability, low noise level, light weight design, and much more. Hyundai Rotem has long-term and varied experience in the manufacture of transit vehicles worldwide and for the United States. The new vehicle achieves low weight and adapts high energy efficiency equipment so as to have low energy consumption. Hyundai Rotem’s design approach is to utilize common equipment wherever possible on both the Orange Line and Red Line cars for efficient maintainability. For example, the truck design is identical on both the Orange and Red Line cars, which assures complete interchangeability. Furthermore, Hyundai Rotem has extensive experience in the manufacture of stainless steel carbodies, with a clear understanding of the U.S. industry requirements of in-depth stress analysis and structural testing. Hyundai Rotem also has the experience of designing the very first U.S. commuter railcar with full-scale CEM features that exceed existing ASME RT-2 requirements (ref. SCRRA Bi-level Coaches Project).

In addition to our design and manufacturing experience, Hyundai Rotem is continuously improving its ability to execute projects in U.S. through on-going training of personnel, implementation of more rigorous quality assurance and manufacturing procedures. Hyundai Rotem is employing industry experts whose objective internal review and process evaluation help us to seamlessly improve in every field of the quality and production of all Hyundai Rotem products. Specifically for the MBTA Orange & Red Line Project, Hyundai Rotem has retained the dedicated resource of an experienced U.S. transit vehicle design team (ref. RailX Corp.), with senior engineers having decades of experience in the U.S. transit market. At this

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RFP No. CAP 27-10


time, Hyundai Rotem is implementing production and quality improvements following an extensive audit of its internal manufacturing and quality processes through the on-going projects in the U.S.

As a result of its worldwide experience, Hyundai Rotem has a fully integrated engineering organization that includes: propulsion system, auxiliary power, train control & monitoring systems, carshell and truck designs. In addition, the extensive experience includes integration of all other vehicle systems, such as HVAC, doors, interiors, couplers, brakes, etc. Thus, the Hyundai Rotem engineering organization has a full understanding of modern technologies applied to vehicle systems, and incorporates this knowledge together with U.S. service-proven equipment in order to provide a modern and highly reliable vehicle design.

For the MBTA Orange & Red Line Project, Hyundai Rotem will reinforce an effective approach to executing projects for the U.S. market. Hyundai Rotem will complete detail design activities at its main engineering facility, and implement this with an experienced, dedicated project team located in the Boston area. The Boston project team will include experienced lead engineers and an engineering consulting group, who will have complete understanding of the vehicle design and all systems. Hyundai Rotem will also utilize experts in the fields of: dynamic analyses, CEM, Reliability, and Software management. In addition, Hyundai Rotem’s own specialized engineering group will perform the critical safety, reliability and FEA analyses required by the MBTA Orange & Red Specification.

IV. MANUFACTURING PLAN AND ECONOMIC IMPACT IN MASS.

The manufacturing plan involves the manufacture of the carshell and trucks at Hyundai Rotem’s main facilities in Korea where these activities have been performed for decades, with on-going training and quality improvements. Having manufactured various stainless steel carshells and trucks for the U.S. market, Hyundai Rotem is strongly conditioned to meet the expectation of high level quality, inspection and testing. Hyundai Rotem passes on the same level of expectation to their subcontractors, service providers, and sub-suppliers, wherever applicable.

Hyundai Rotem is prepared to open a new final assembly facility in Springfield, Massachusetts, which will be outfitted to accommodate all of the activities, materials, testing and quality inspections necessary to efficiently complete the final assembly activities.

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RFP No. CAP 27-10


Hyundai Rotem has been in a series of discussions with the landlord of the candidate site as described in the attached letter of intent (ref. Attachment 1, Letter of Intent signed by the landlord for the Final Assembly Site in Springfield, MA). The final assembly facility will be ISO:9001 certified as an extension of HRU Philadelphia Plant which has already been ISO:9001 certified.

As part of our investigation for the facility set-up in Springfield, MA, we have identified potentials of utilizing electric power supplied by renewable and eco-friendly solar power generation. Detail discussions are currently on-going with the relevant local organizations.

The local facility will employ a long-term staff of full-time workers that is composed of the existing local skilled labor pool, technicians from local technical institutions, and the general labor force with training, as necessary. In all cases, Hyundai Rotem will implement an extensive training program that will ensure all workers have the necessary skills and knowledge to produce a quality transit vehicle. The goal is to achieve a diverse workforce that combines the abilities of experienced workers and newly started dynamic workers. Hyundai Rotem has signed a memorandum of understanding with local community colleges for the purpose of collaboration in providing and training of the workforces, as shown in the attachment. (ref. Attachment 2, Memorandum of Understanding with Local Community College in Springfield, MA)

Hyundai Rotem worked with the UMass Donahue Institute to develop an analysis of the economic impact in connection with its plan for investment on the facility in Springfield and production of the Orange and Red Line Cars for the MBTA. The highlights of the analysis result are as follows and the complete report is included in the attachment. (ref. Attachment 3, The Economic Development Impacts Analysis of MBTA Subway Car Assembly in Springfield, MA, prepared by UMass Donahue Institute)

Jobs: During the initial construction at the site, 88 construction jobs are estimated to be created during the assembly of the cars, 410 jobs are estimated to be created.

Economic Activity: The overall total direct, indirect and induced economic activity associated with subway car assembly, project management, and delivery operations will be more than $63 million, annually, on average for the peak 2019-2021 period. During construction at the facility, the economic output is estimated at $13.6 million

State Tax Revenue: During the construction phase, the state tax revenues associated with the

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RFP No. CAP 27-10


building and site preparation are estimated to be $326,321 annually (as computed for 2016). At full production in 2019-2021, Hyundai Rotem’s operations are estimated to generate nearly $2 million in tax revenues for Massachusetts, annually.

Benefit to Springfield: To implement the production at 180 Progress Avenue in Springfield, the Hyundai Rotem plans to invest approximately $15 million in property improvements to the land, building, infrastructure, and telecommunications. Applying the tax rate to the planned investment in physical improvements to the site could result in up to $585,600 in additional property tax collections annually for the City of Springfield.

V. PAST PERFORMANCES

Hyundai Rotem is one of the top manufacturers of this type of transit railcar in the world railway market. Hyundai Rotem has successfully completed over 39,000 rail cars and out of which more than 14,000 EMUs have been delivered. More than 8,000 EMUs with stainless steel carbody out of those EMUs have been successfully delivered. The followings are a snapshot of such projects.

120 Stainless Steel EMUs(SSE) for SEPTA, U.S.; 137 Stainless Steel Bi-level Coaches(SSC) for SCRRA, U.S.; 24 SSC for SFRTA, U.S.; 104 SSE for Seoul Line 9 Co., Korea; 150 SSE for Bangalor Metro Rail Co.; 228 SSE for Attiko Metro, Greece; 440 SSE for Turkish State Railway; 84 SSE for ViaQuatro, Sao Paulo, Brazil; 476 SSE for Delhi Metro Rail Co., India; 96 SSE for Great Wellington Rail Ltd., New Zealand; 40 SSE for Canada Line, Vancouver, Canada; 136 SSE for Mass Transit Railway Co., Hong Kong; and 92 SSE for Istanbul Metro, Turkey

Regarding the vehicle level reliability, Hyundai Rotem has achieved actual vehicle level reliability which exceeded the requirements of New Orange & Red Line Project for the projects of 136 SSE for Mass Transit Rail Co., Hong Kong; 280 SSE for Delhi Metro Rail Co., India; 126 SSE for Attiko Metro, Greece; 96 SSE for Seoul Metro Line 9 Co., Korea; 40 SSE for Canada Line, Vancouver, Canada; 96 SSE for Great Wellington Rail Ltd., New Zealand; and 84 SSE for ViaQuatro, Sao Paulo, Brazil for the past ten (10) years.

As addressed above, Hyundai Rotem is very confident that its capability in transit railcar markets will certainly meet all the customer requirements and bring a great success to the Project.

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RFP No. CAP 27-10


VI. DOMESTIC CONTENTS AND M/WBE PARTICIPATION

Hyundai Rotem is strongly committed to maximizing the U.S. domestic contents and business opportunities with M/WBE companies in implementing the MBTA Orange & Red Line Project.

For U.S. domestic content, propulsion, brake, HVAC, door, and signal system will be the major contributors to provide the domestic content, and ensure Hyundai Rotem’s ability to satisfy the domestic content requirement.

For M/WBE content, Hyundai Rotem will continuously make efforts to increase the participation of M/WBE companies throughout the project implementation.

Attachment. 1. Letter of Intent signed by the landlord for the Final Assembly Site in Springfield, MA 2. Memorandum of Understanding with Local Community College in Springfield, MA

3. The Economic Development Impacts Analysis of MBTA Subway Car Assembly in Springfield, MA, prepared by UMass Donahue Institute

4. Design Book (Rendering Images) of the Proposed Vehicles

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The Economic Development Impacts of MBTA Subway Car Assembly in Springfield, Massachusetts Prepared for Hyundai-Rotem Prepared by UMass Donahue Institute Economic and Public Policy Research May 2014

The Economic Development Impacts of MBTA Subway Car Assembly in Springfield, Massachusetts

Introduction This report was prepared by the Economic and Public Policy Research (EPPR) group at the UMass Donahue Institute (UMDI) for Hyundai-Rotem to assess the economic development impacts of their proposed siting of a subway car assembly plant at 180 Progress Ave, Springfield, Massachusetts. This economic analysis is intended to provide an objective, quantitative overview of the economic impacts and job creation effects if the Hyundai-Rotem planned subway car assembly plan is implemented to build Orange and Red line subway cars for the Massachusetts Bay Transportation Authority (MBTA). The following analysis includes an estimate of the direct and total economic impacts generated by the subway car manufacturing operations, including multiplier effects stemming from construction as well as economic effects generated through assembly and operations. This analysis incorporates detailed budget information provided by Hyundai-Rotem for the facility and operations rather than relying on average industry expenditures or wages. The economic impacts are expressed as the numbers of direct, indirect and induced jobs and economic activity (dollars of labor income, value-added, and output) supported by these expenditures. The analysis, throughout, is based exclusively on expenditures that will stay in Massachusetts, and thus excludes a variety of parts, equipment, and services expected to be sourced from other parts of the United States and globally. The findings are laid out as follows: a) a brief summary of the construction, assembly, and operating costs of the proposed facility and supporting services; b) the economic impacts of facility construction; c) annual economic impacts associated with vehicle assembly, operations, and support services; d) fiscal impacts (tax revenues); and e) a broader discussion of Hyundai-Rotem’s investment in the context of Springfield’s and the Pioneer Valley’s economic development.

UMass Donahue Institute Research and Evaluation Group

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Direct Economic Activity Generated This section of the report details the estimates of direct economic activity that will be generated if the Hyundai-Rotem bid is successful and MBTA subway cars are manufactured in Springfield, Massachusetts.

Overview

Hyundai-Rotem is planning to make significant site and building improvements at a currently vacant property located at 180 Progress Avenue in Springfield. Construction is expected to begin in 2016 with expected completion in 2017. Subway car assembly will begin in 2017, ramping up from 6 cars in the initial year of production to a peak of 96 cars in 2020. The final subway car is expected to be assembled in 2022, bringing the total to 284. Although assembly is completed in 2022, support and warranty activities largely operated out of Boston will continue through 2024.

Direct Economic Activity

Hyundai-Rotem is anticipating that the total spending on direct construction related activity related to the site and building development will be $15 million spread evenly over two years, 2016 and 2017. For the purposes of the economic impact analysis (using IMPLAN) which requires annual-level inputs, a $7.5 million annual value was used as a construction input. The economic impacts stemming from this investment will last two years, with the same economic impacts shown for 2016 also taking place in 2017. Proceeding the construction phase, the other main component of the analysis is the impacts associated with the assembly and delivery of the subway cars. Based on data provided by Hyundai-Rotem, average annual spending for 2019-2021 on leasing, wages, and operations were used as an input to the IMPLAN model. 2019-2021 represents the peak assembly period for the subway cars in Springfield. Associated spending to support the manufacture and delivery of the subway cars ramps up to a $24.8 million annual average (includes only expenditures staying in Massachusetts) for the peak period and then declines through 2024 as the project is completed. Similarly, the associated economic impacts of Hyundai-Rotem’s subway manufacturing will grow through 2019-2021 and then drop. During the peak period, Hyundai-Rotem’s subway manufacturing and support is estimated to employ 203 workers directly on their payroll, including production workers, support staff, logistics specialists, and engineers in Springfield and Boston. Although construction spending was obtained from Hyundai-Rotem, this spending was not associated with a specific job number. As shown in the next section, however, IMPLAN did generate a direct jobs number based on the $7.5 million annual value of construction spending. The Springfield-related expenditures include the building construction and improvements, leasing of the assembly site, wages for production workers, engineers, and other support staff. They also include operating expenses (e.g., water, electricity, natural gas, office supplies, telecommunications, etc.). The Boston operations are focused on the vehicle delivery and warranty-related aspects of the project. The main expenditures for Boston include an office lease, wages for engineers, site workers, and support staff, and operations expenses. Included within the operations and supply costs category (see table summary, below), are subcontractor expenditures related to inland Massachusetts transportation (the transport of finished subway cars by motor carrier), truck final assembly (a modular subassembly of wheels and axles)


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The Economic Development Impacts of MBTA Subway Car Assembly in Springfield, Massachusetts to be performed by a partner within Massachusetts, and consulting (administrative and engineering) and testing services to be contracted out to local providers by Hyundai-Rotem.

Summary of Construction, Full Assembly, and Operations Phases – Spending and Jobs*

Construction (2016) Building/Site Renovation and Facility Investment $7,500,000

Full Assembly and Operations Phase (2019-2021 Average)

Real Estate Leasing $691,667

Total Wages $12,145,667

Operations and Supplies - Cost $11,985,000

Total $24,822,334 Direct Jobs 203

Source: Hyundai-Rotem; data tabulated by UMDI *Note: The data indicate annual levels or annual averages for the indicated time periods.


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Economic Development Impacts and Job Creation

The siting and implementation of a major subway car assembly plant in Springfield will reverberate through the Pioneer Valley and Massachusetts state economy and generate impacts beyond the immediate activity spurred by building/site preparation, manufacturing, and subway car delivery. This section of the study provides estimates of the overall economic impacts and job creation benefits to the Massachusetts economy of siting a Hyundai-Rotem assembly facility in Springfield. The economic impacts presented in this section, as estimated and reported, reflect changes in economic activity – both directly and indirectly in terms of the multiplier effects to the broader economy. The economic impacts and job creation effects were estimated specifically for Massachusetts at the state level. To conduct this analysis, the Minnesota IMPLAN Group’s input-output model has been used to estimate the direct, indirect, and induced effects of the sequestration, in terms of employment, labor income, business sales (output), value added, and state revenue. The results are generated and reported in terms of the following:

• Job impacts represent a change in average annual jobs for the year indicated. • Labor income consists of total employee compensation (wage and salary payments, as well as

health and life insurance benefits, retirement payments and any other non-cash compensation) and proprietary income (payments received by self-employed individuals as income).

• Value added represents total business sales (output) minus the cost of purchasing intermediate products and is roughly equivalent to gross state/domestic product (commonly referred to as GSP or GDP).

• Output is a broader measure that consists of total business or industry sales. • State revenue is the estimated impact on state tax collections attributable to the project. It is

primarily comprised of impacts on sales tax and personal income tax revenues. The total economic impacts as estimated by the IMPLAN model are the sum of direct, indirect, and induced impacts. Direct impacts are only those associated specifically with the assembly facility and the expenditures and jobs spurred by the MBTA subway car contract. Indirect impacts are generated when material, equipment or other intermediate purchases are made (or not made) to support the direct activity, being careful to not include intermediate purchases likely to come from suppliers beyond Massachusetts. Induced impacts are generated by changes in local consumer spending activity resulting from the economic changes shown in the direct and indirect impacts, primarily due to increased labor income. In other words, higher levels of economic activity from the assembly facility as evidenced by the direct and indirect impacts will translate to increased dollars available to consumers for spending. The economic impact analysis includes estimates of the direct, indirect and induced impacts of the project. The economic impact methodology described above is visually presented in the figure below.


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The Economic Development Impacts of MBTA Subway Car Assembly in Springfield, Massachusetts Economic Impact Analysis Methodology

Development Phase: Construction – Site and Building Improvement

The initial development phase of the Hyundai-Rotem facility includes the one-time construction costs associated with site preparation, building renovation, and refurbishment at the 180 Prospect Street site in Springfield. This phase is planned to occur in 2016 and 2017, with an estimated $7.5 million spent each year. The spending during this construction phase results in $13.6 million in economic activity in Massachusetts in 2016, with more than $6 million in indirect and induced effects. This total economic impact will also support a total of 88 full and part-time jobs associated with the construction site and throughout the Massachusetts economy in 2016. Similarly sized economic impacts are expected for 2017 as the construction phase is completed. Direct employment includes construction-related jobs, including both on-site workers and off-site management and administrative staff. Indirect and induced employment includes employees of local suppliers to the construction and start-up phase, and employees of establishments supported by both direct and indirect employees’ household spending on items like real estate, health care, restaurants, entertainment, and retail goods.


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Development Phase: Economic and Employment Impacts of Construction

Sources: Hyundai-Rotem and UMDI IMPLAN analysis.

Full-Operations Phase: Subway Car Assembly and Project Management

The full-operations phase will occur in the 2019-2021 period when up to 96 subway cars are expected to be delivered from the Springfield assembly site to the MBTA on an annual basis. During this phase, Hyundai-Rotem’s Springfield and Boston direct activities, including spending associated with external suppliers1 (e.g., trucking/inland transportation in Massachusetts, real estate leasing, subway truck assembly handled by a partner, etc.) will directly support 264 full and part-time jobs with total labor income of more than $16.1 million. Additionally, Hyundai-Rotem’s spending (including the spending of its direct suppliers) and the household spending of its employees will indirectly support an additional 135 jobs for a total of 410 jobs in Massachusetts. Direct employment includes the production, engineering,

1 Hyundai-Rotem provided estimates of its operations costs and spending with external contractors to support the assembly and delivery of subway cars to the MBTA. These are considered direct activities involved in the production and are thus incorporated into the direct effects component of the economic impact analysis.

CONSTRUCTION 2016

Direct EffectsEmployment 48

Labor Income $3,426,994

Total Value Added $3,193,546

Output $7,500,000

Indirect EffectsEmployment 16



Output $2,704,840

Induced EffectsEmployment 25



Output $3,360,904

TOTAL EFFECTSEmployment 88

Labor Income $5,997,831Total Value Added $7,105,796

Output $13,565,745

State Tax Revenues $326,321


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The Economic Development Impacts of MBTA Subway Car Assembly in Springfield, Massachusetts quality control, logistics, etc. in Springfield, the Boston office operations, and jobs imputed by IMPLAN for the direct activities of external suppliers. Indirect and induced jobs include employees of establishments supported by both direct and indirect employees’ household spending on items like real estate, health care, entertainment, restaurants, and retail goods. The overall total direct, indirect and induced economic activity associated with subway car assembly, project management, and delivery operations will be more than $63 million, annually, on average for the peak 2019-2021 period. The economic impacts for the Hyundai-Rotem subway project will start gradually accruing in 2015 as the initial stages of the project begin and reach their point of maximum impact from 2019 to 2021. Impacts will become smaller as the project ramps down through 2024. As pointed out previously, this analysis is based exclusively on expenditures that will stay in Massachusetts, and thus excludes a variety of parts, equipment, and services expected to be sourced from other parts of the United States and globally.

Full-Operations Phase (2019-2021): Economic and Employment Impacts of Subway Car Assembly and Project Management

Sources: Hyundai-Rotem and UMDI IMPLAN analysis.

ASSEMBLY AND PROJECT MANAGEMENT 2019-2021 (avg.)

Direct EffectsEmployment 264



Output $42,289,662

Indirect EffectsEmployment 21



Output $3,551,230

Induced EffectsEmployment 124



Output $17,221,442

TOTAL EFFECTSEmployment 410

Labor Income $24,506,615Total Value Added $39,202,411

Output $63,062,333

State Tax Revenues $1,961,859


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Fiscal Impacts

During the construction phase, the state tax revenues associated with the building and site preparation are estimated to be $326,321 annually (as computed for 2016). At full production in 2019-2021, Hyundai-Rotem’s operations are estimated to generate nearly $2 million in tax revenues for Massachusetts, annually. Estimated State Tax Revenues

Construction Phase (2016) State Tax Revenue, exclusive of property taxes $326,321 Assembly, Operations, and Management (2019-2021 avg.) State Tax Revenue, exclusive of property taxes $1,961,859

Sources: Hyundai-Rotem and UMDI IMPLAN analysis. Property Value and Fiscal Impacts for Springfield. To implement a major subway car assembly plant at 180 Progress Avenue in Springfield, the Hyundai-Rotem team plans to invest approximately $15 million in property improvements to the land, building, infrastructure, and telecommunications. This would represent a significant increase in value for the parcel which was listed in the City’s tax assessor database at $1,705,800. When applying the City’s industrial/commercial tax rate of $39.04 per $1,000 in value2 that results in the estimated $66,594 annual tax collection (currently). Applying that same tax rate to the planned $15 million in physical improvements to the site could result in up to $585,600 in additional property tax collections annually for the City of Springfield. While Massachusetts exempts the machinery equipment of manufacturers, the $15 million in improvements slated for the site likely would be eligible for real estate or personal property taxation. It is impossible to predict the exact amount and timing of new tax revenue that will be generated by this project (e.g., tax increment financing or tax abatements could be negotiated with the City), but it is anticipated that this project could have a significant positive fiscal impact for the City of Springfield, possibly over $500,000 per year.

2 See http://www3.springfield-ma.gov/finance/assessors.html for more information on Springfield’s property taxes.


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http://www3.springfield-ma.gov/finance/assessors.html


How Will this Project Spur Economic Development in Massachusetts? As quantified above, locating a major subway car assembly plant facility at 180 Progress Ave in Springfield will have a significant economic impact on Massachusetts, and lead to tangible job creation benefits. In addition, this project would fit very nicely into a range of regional and state-level economic development initiatives already underway or identified in strategic plans. More specifically, this project provides both near-term and longer-term opportunities to best leverage this unique industry opportunity for the Commonwealth of Massachusetts based on:

• Well-established and recognized workforce training programs and assets to help deliver the necessary workforce for this project;

• Longer-term opportunities to partner with local suppliers in precision manufacturing; and • Providing a vital economic boost to one of the Commonwealth’s Gateway Cities with a stubbornly

high unemployment rate. Workforce training. Hampden County and the contiguous Pioneer Valley region are widely viewed as having one of the best established systems of workforce training for manufacturing in Massachusetts. Much of this is led by the Hampden County Regional Employment Board (REB) and their President, David Cruise. The REB’s tireless efforts to develop an industry-focused cluster of manufacturing firms (centered on precision machining) has a strong track record of partnering with local businesses, the vocational schools, community colleges, etc. to deliver workforce training in manufacturing. Reflective of this work, the region has received multiple grants and investments in modern equipment for training. For example, Springfield Technical Community College (STCC) received a sizeable grant for equipment which they are using in partnership with Holyoke Community College (HCC) and a consortium of business leaders (organized by the Massachusetts Competitiveness Partnership) to initiate a new training program that will result in guaranteed job placements for people who complete the training. In a related manner, STCC and HCC have partnered on a unique Training Workforce Options (TWO)3 program designed to provide custom training to suit business needs and the Hyundai-Rotem team have already connected with their Executive Director (Bob LePage) to explore how training could be customized to suit the specialized requirements of the subway car assembly facility. Further, the area’s vocational schools (namely Pathfinder in Palmer, Westfield Tech, and Putnam Tech in Springfield) all provide established and recognized manufacturing training programs. Local suppliers and precision machining industry cluster. As implied above, the Pioneer Valley and Hampden REB have created an industry cluster of precision manufacturing firms via a group known as the Precision Manufacturing Regional Alliance Project (PMRAP).4 While the immediate plans of Hyundai-Rotem do not include significant local sourcing of parts, the longer-term success of siting an assembly plant in Springfield could be enhanced by working with local suppliers. As indicated in their Business Impacts Report, the companies in this region serve a variety of markets from defense and aerospace to more recent market opportunities in medical devices and clean energy. In simple terms, this large and vibrant cluster of precision machine shops in the Pioneer Valley is well-suited to adapt and provide locally-sourced parts and equipment as the Hyundai-Rotem facility is implemented.

3 See https://www.stcc.edu/wd/two/ for more information on TWO. 4 See http://www.wmntma.org/new-initiatives/pmrap20/ for more information on PMRAP.


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https://www.stcc.edu/wd/two/

http://www.wmntma.org/new-initiatives/pmrap20/

The Economic Development Impacts of MBTA Subway Car Assembly in Springfield, Massachusetts Springfield economic development conditions – Gateway City. The Hyundai-Rotem subway car assembly project can also contribute more broadly to the Springfield and Pioneer Valley plans for economic development. Manufacturing remains one of the most important industries to Springfield, with much of that industry cluster in the eastern part of the city, near I-291. As noted in the Rebuild Springfield Master Plan:

“The Interstate-291 corridor remains the City’s most promising area for manufacturing and distribution businesses and a few prominent businesses have recently expanded or located in the area. There are still some key, large sites available and a high priority for the City should be filling these spaces with new/expanding businesses.”5

The proposed subway car assembly site at 180 Progress Avenue would fit perfectly into that description of re-using industrial space that currently sits vacant. Further, manufacturing is an acknowledged industry cluster for the entire region, a fact underscored by the strategies outlined in recent regional economic development strategic plans.6 Finally, Springfield is a Gateway City, typified by long-term economic distress across a variety of measures, and a project like this, in concert with other expected city investments (new Union Station, likely MGM casino resort) could, in combination, provide a significant boost towards rejuvenation by reversing economic trends and providing more job opportunities for the city’s residents. For example, Springfield’s unemployment rate as of March 2014 still stood at 10.1% compared to 6.6% statewide and 5.6% for the city of Boston. The Hyundai-Rotem subway car manufacturing project would work as a complement to other initiatives to introduce greater economic opportunity for Springfield.

5 See http://developspringfield.com/pdf/1-CITY%20FINAL-Reduced.pdf (pages 92-93) 6 See http://www.innovateholyoke.com/files/3113/6155/7995/Final-Innov-Econ-Dev-Holyoke-and-PV-Report.pdf (page 4-27)


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http://developspringfield.com/pdf/1-CITY%20FINAL-Reduced.pdf

http://www.innovateholyoke.com/files/3113/6155/7995/Final-Innov-Econ-Dev-Holyoke-and-PV-Report.pdf


About Us The UMass Donahue Institute (UMDI) is the public service outreach and economic development unit of the University of Massachusetts President’s Office. Established in 1971, the UMDI coordinates multi-campus initiatives that link UMass, other public and private higher education, and other external resources with the needs of government agencies, corporations, and nonprofit organizations. UMDI provides significant economic and public policy analysis, organizational development, training, education, financial management education, research, and evaluation to federal and state agencies, nonprofits, industry associations, and corporations. UMDI draws on its unique position within higher education to serve as a bridge between theory, innovation, and real-world applications. The Economic and Public Policy Research (EPPR) group is a leading provider of applied research, helping clients make more informed decisions about strategic economic and public policy issues. EPPR produces in-depth economic impact and industry studies that help clients build credibility, gain visibility, educate constituents, plan economic development initiatives, and prioritize investments. EPPR is known for providing unbiased economic analysis on state-level economic policy issues in Massachusetts and beyond, and has completed a number of economic studies on manufacturing, technology, defense industries, life sciences, telecommunications, health care, and transportation. Their trademark publication is called MassBenchmarks, an economic journal that presents timely information concerning the performance of and prospects for the Massachusetts economy, including economic analyses of key industries that make up the economic base of the state. For more information, visit www.donahue.umassp.edu and www.massbenchmarks.org.


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http://www.donahue.umassp.edu/

http://www.massbenchmarks.org/

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