Ontario Northland Transportation Commission
ECONOMIC AND SOCIAL IMPACT OF ONTARIO NORTHLAND
Final Report
Prepared by
HDR CORPORATION In Association with Dr. Bakhtiar Moazzami
October 13, 2009
Ontario Northland Transportation Commission
ECONOMIC AND SOCIAL IMPACT OF ONTARIO NORTHLAND
Final Report
Prepared by
HDR CORPORATION In Association with Dr. Bakhtiar Moazzami
October 13, 2009
TABLE OF CONTENTS
EXECUTIVE SUMMARY ...... III
1: INTRODUCTION...... 1
2: COMPANY PROFILE ...... 2 2.1 GENERAL COMPANY INFORMATION AND STATISTICS ...... 2 2.2 ONTARIO NORTHLAND‟S ACCOMPLISHMENTS AND RECENT INVESTMENT PROJECTS ...... 5 3: STUDY APPROACH ...... 9 3.1 KEY CONCEPTS IN ECONOMIC IMPACT ASSESSMENT ...... 9 3.1.1 Traditional Approach and Concepts in Economic Impact Analysis ...... 9 3.1.2 Impact on Productivity and Economic Development ...... 10 3.1.3 Other Impacts ...... 12 3.2 IMPACTS EVALUATED IN THIS STUDY ...... 12 3.3 ECONOMIC IMPACTS IN NORTHEASTERN ONTARIO ...... 13 3.3.1 Key Concepts and Principles in Estimation of Regional Economic Impacts ...... 13 3.3.2 General Approaches to Estimation of Local Multipliers ...... 14 3.4 ECONOMIC IMPACTS PROVINCE-WIDE ...... 18 3.4.1 Province-Wide Direct Effects ...... 18 3.4.2 Province-Wide Indirect Effects ...... 19 3.4.3 Province-Wide Induced Effects ...... 20 3.5 ECONOMIC DEVELOPMENT IMPACTS ...... 22 3.6 QUALITY OF LIFE IMPACTS ...... 24 4: DATA AND IMPLEMENTATION ...... 25 4.1 DATA ON ONTARIO NORTHLAND‟S OPERATIONS ...... 25 4.2 SURVEY OF EMPLOYEES AND PENSIONERS ...... 25 4.3 SURVEY OF CUSTOMERS ...... 26 4.4 SURVEY OF MAYORS AND ECONOMIC DEVELOPMENT OFFICERS ...... 28 4.5 SURVEY OF TOURIST OPERATORS ...... 29 4.6 SURVEY OF ONTARIO NORTHLAND SENIOR EXECUTIVES ...... 31 4.7 CALCULATIONS OF IMPACTS IN NORTHEASTERN ONTARIO...... 31 4.8 DATA AND ASSUMPTIONS FOR CALCULATIONS OF ECONOMIC IMPACTS PROVINCE-WIDE 34 5: STUDY RESULTS ...... 40 5.1 RESULTS OF THE SURVEY OF EMPLOYEES ...... 40 5.2 RESULTS OF THE SURVEY OF PENSIONERS ...... 42 5.3 RESULTS OF THE SURVEY OF CUSTOMERS ...... 45 5.4 RESULTS OF THE SURVEY OF MAYORS AND ECONOMIC DEVELOPMENT OFFICERS ...... 52 5.5 RESULTS OF THE SURVEY OF TOURIST OPERATORS ...... 57 5.6 SURVEY RESULTS OF ONTARIO NORTHLAND SENIOR EXECUTIVES ...... 60
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5.7 ECONOMIC IMPACTS WITHIN NORTHEASTERN ONTARIO ...... 64 5.7.1 Estimated Income Multipliers ...... 64 5.7.2 Estimated Employment Multipliers ...... 65 5.7.3 Total Impact of Ontario Northland in Northeastern Ontario ...... 66 5.7.4 Relative Magnitude of Ontario Northland Multipliers ...... 67 5.7.5 Relative Importance of Ontario Northland in Northeastern Ontario ...... 67 5.8 ECONOMIC IMPACTS PROVINCE-WIDE ...... 71 5.9 INDUCED ECONOMIC DEVELOPMENT IMPACTS ...... 73 5.9.1 Transportation and Telecommunications Connectivity, Economic Wellbeing, and “Liveable” Communities ...... 74 5.9.2 Impact of Ontario Northland on the Overall Profile and Performance of the Regional Economy ...... 79 5.9.3 Ontario Northland and Socio-Economic Profile of Communities Directly Affected by the Company ...... 80 5.10 QUALITY OF LIFE IMPACTS ...... 83 6: SUMMARY OF STUDY FINDINGS AND CONCLUSIONS ...... 87
7: OPPORTUNITIES TO MOVE FORWARD ...... 91
8: ABOUT THE STUDY AUTHORS ...... 93
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EXECUTIVE SUMMARY
STUDY PURPOSE AND APPROACH
The purpose of this study is to quantitatively and qualitatively inventory, measure, and evaluate the economic and social impact of Ontario Northland in its area of service. The specific impacts considered and evaluated include:
1) Jobs, income and related impacts in Northeastern Ontario and province-wide that are attributable to Ontario Northland either directly, or indirectly through supplier-purchasing relationships and re-spending of employee wages and salaries; 2) Community, business and economic development impacts in Northeastern Ontario due to Ontario Northland presence in the region and availability of its services; and, 3) Quality of life impacts in Northeastern Ontario due to Ontario Northland presence in the region and availability of its services.
The first category of impacts represents the traditional metrics evaluated in economic impact studies that quantify the effects of the various rounds of expenditures and economic activity that takes place throughout the economy as a result of some initial expenditure or business activity. These metrics are commonly referred to as “direct impacts,” “indirect impacts,” and “induced impacts” and can be defined as follows:
Direct impacts are the immediate economic outcomes occurring as the result of activity related to operations or project being evaluated, including business output or revenues, jobs, employment income, value added (or GDP), and tax revenues. Direct impacts are jobs at Ontario Northland, its revenues, payroll, etc.
Indirect impacts are the “spin-off” economic activities that result from expenditures on purchases of production inputs, goods and services necessary for the direct activity such as expenditures by Ontario Northland on operations and maintenance and capital projects. These purchases allow for production activities and employment at the supplier firms generating further rounds of economic activity down the production chain.
Induced impacts are the economic activities that result from re-spending of employment wages and salaries earned from direct and indirect employment on consumer goods and services, and are measured in similar terms as business output or revenues, jobs, employment income, value added (or GDP), and tax revenues.
The sum of the direct, indirect and induced effects is referred to as the total economic impacts. Indirect and induced impacts are often referred to as “multiplier effects”, as they increase the overall economic impacts of the original activity and expenditure by some factor often expressed as output, GDP, jobs, etc. per $1 of initial expenditure or revenues.
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The second category of impacts represents the “forward linkages effects”, or effects on Ontario Northland‟s customers and the local economies where the company provide services. This category of impacts captures the effects that can be achieved by service users such as the reduction in operating business costs, improvements in productivity, efficiency, market reach, and competitiveness. All of these effects can lead to an increase in output and employment of service users thus further increasing economic impact over and above the direct, indirect, and induced impacts and contribute to regional economic development.
The third category of impacts represents the effects of Ontario Northland‟s presence in the region that improve various aspects of people‟s daily life and make the region a more attractive and “liveable” area.
STUDY METHODOLOGY
All impacts were analyzed and evaluated using rigorous methodologies widely accepted and recommended by the economic literature and practice for similar types of evaluations.
Specifically, the direct, indirect, and induced impacts within Northeastern Ontario were estimated using regional science and economic base approaches. These approaches allow estimation of employment and income multipliers specific to Ontario Northland based on the economic structure of the local economy, the patterns of Ontario Northland‟s operational and capital expenditures, and the patterns of consumer expenditures of Ontario Northland‟s employees and pensioners. To accomplish this, a detailed analysis of Ontario Northland‟s operational and capital expenditures by category and geographic location as well as a survey of Ontario Northland‟s employees and pensioners on their household expenditures were undertaken
The direct, indirect, and induced impacts within the entire province of Ontario are estimated using input-output modeling techniques and multipliers from Statistics Canada‟s inter-provincial input-output model. These techniques allow estimation of province-wide indirect and induced effects of Ontario Northland operations based on company operating revenue. Therefore, to estimate these impacts, a detailed analysis on Ontario Northland‟s operating revenues by business line and capital expenditures by category were conducted.
Finally, community, business and economic development impacts, and quality of life impacts are assessed qualitatively on the basis of data and evidence coming from several sources such as surveys of stakeholders, related socio-economic data for the region from Statistics Canada, and company information. The surveys conducted to inform this assessment included surveys of a sample of customers, mayors and economic development officers of various Northeastern Ontario communities, tourist operators, Ontario Northland‟s senior executives, employees, and pensioners.
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ECONOMIC IMPACTS OF ONTARIO NORTHLAND IN NORTHEASTERN ONTARIO
Summary Figure 1 shows the estimated economic impact of Ontario Northland in Northeastern Ontario. The figure shows that the total value added (or GDP) attributable to Ontario Northland across Northeastern Ontario amounts to $209.4 million, and total number of jobs attributable to Ontario Northland amounts to 2,140.
The figure also shows the breakdown of both impact metrics by the category of expenditures driving the economic impacts. The largest expenditure type contributing to GDP was capital and operating expenditures, whereas the largest expenditure type contributing to jobs were wages and salaries. Pension benefits had a relatively small share in total economic impacts. Wages and salaries have a high employment income because they include the direct jobs at Ontario Northland in addition to induced jobs generated as a result of re-spending of employee salaries on consumer goods and services. On the other hand, pension benefits generate only induced impacts (through re-spending on consumer goods and services) and thus have a relative small share in total impacts
Summary Figure 1: Estimated Impacts of Ontario Northland in Northeastern Ontario
ECONOMIC IMPACTS IN NORTHEASTERN ONTARIO: VALUE ADDED (GDP), AND JOBS, BY CONTRIBUTING EXPENDITURE CATEGORY
TOTAL GDP: 209.4 TOTAL JOBS: 2,140 100%
90% 416
80% $102.7 208 70%
60%
50% $21.8 40% 1,516 30%
20% $84.9
10%
0% TOTAL VALUE-ADDED, $ MILLION EMPLOYMENT, NUMBER OF JOBS
Wages and Salaries Pension Benefits Capital and Other Expenditures
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Summary Figure 2 shows the estimated aggregate multipliers of Ontario Northland.
Summary Figure 2: Multipliers of Ontario Northland in Northeastern Ontario MULTIPLIER TYPE VALUE Total employment (number of direct, indirect, and induced jobs) per $1 M of direct expenditures of Ontario Northland 13.2 Total GDP (direct, indirect, and induced) per $1 of direct expenditures of Ontario Northland $1.29 Total number of jobs (direct, indirect and induced) attributable to Ontario Northland per 1 direct job at Ontario Northland 2.01
Summary Figure 2 shows that for each $1 million of Ontario Northland expenditures (on operations, capital projects, wages and salaries, and pension benefits), there are 13.2 jobs and $1.29 million of value added created across Northeastern Ontario.
The figure also shows that for each direct job at Ontario Northland, there are overall about 2 jobs across Northeastern Ontario attributable to Ontario Northland. In other words, for each job at Ontario Northland, there is another job somewhere in the region that exists because of Ontario Northland.
Summary Figure 3 shows the estimated impact of Ontario Northland in Northeastern Ontario in relation to the entire economy of the region. The figure shows that Ontario Northland contributes about 1.0% to the entire economy of Northeastern Ontario (about 1% of GDP and 0.9% of employment). In the absence of Ontario Northland, its employment and the business supplier opportunities that the company generates, total GDP in the region would likely decline in the short to medium term by about 1.0%. This impact is similar in magnitude to the effects of the current worldwide economic downturn on the Canadian economy. For example, Statistics Canada has reported at the time of writing this report that the total Canadian GDP fell by 1% in December 2008 and by 0.8% in the entire fourth quarter of 2008.
Summary Figure 3: Contribution of Ontario Northland to Regional Economy METRIC OF RELATIVE IMPACT VALUE Total GDP Attributable to Ontario Northland as Percentage of Total GDP in Northeastern Ontario 1.0% Total Employment Attributable to Ontario Northland as Percentage of Total Employment in Northeastern Ontario 0.9%
Contribution of Ontario Northland to the regional and local economy is even more pronounced at the community level and in communities with large employment in Ontario Northland. Summary Figure 4 shows the total income (direct, indirect and induced) generated by Ontario Northland as a percentage of total income in a community. Summary Figure 4 shows that Ontario Northland‟s contribution to the local income ranges from about 2% in Kirkland Lake to over 10% in Cochrane and nearly 50% in Englehart. The figure thus demonstrates that Ontario Northland
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accounts for a significant share of the total regional income in many communities in Northeastern Ontario.
Summary Figure 4: Contribution of Ontario Northland to Selected Local Economies
INCOME DUE TO ONTARIO NORTHLAND AS PERCENTAGE OF TOTAL INCOME IN COMMUNITY
50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Englehart Cochrane Temagami North Bay New Liskeard Kirkland Lake
ECONOMIC IMPACTS OF ONTARIO NORTHLAND ACROSS THE ENTIRE PROVINCE OF ONTARIO
Summary Figure 5 shows the estimated impact of Ontario Northland in the entire province of Ontario in terms of business output, employment income, and jobs. The figure demonstrates that economic impacts of Ontario Northland in the entire province include the following:
$374.6 million of gross business output (revenues), including $160.2 of direct output, $114.7 million of indirect output, and $99.6 million of induced output; 2,785 jobs, including 1,060 direct jobs, 662 indirect jobs, and 1,063 induced jobs; and $164.5 million employment income, including $86.7 million of direct employment income, $36.6 indirect, and $41.1 induced.
Summary Figure 5 demonstrates that the impact of Ontario Northland goes beyond the area where it directly operates in Northern Ontario providing jobs and generating economic value in the rest of the province as well.
Summary Figure 6 shows the estimated tax revenue impacts of Ontario Northland. As the table demonstrates, the total impact amounted to $94.8 million, including $38.6 million in federal revenues, $43.8 million in provincial revenues, and $12.4 of local and municipal revenues.
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Summary Figure 5: Estimated Impacts of Ontario Northland in the Entire Province of Ontario PROVINCIAL ECONOMIC IMPACTS: OUTPUT, GDP, EMPLOYMENT INCOME, JOBS BY TYPE OF IMPACT
TOTAL OUTPUT: $396.3 TOTAL GDP: $218.9 TOTAL EMPL. INCOME: $162.1 TOTAL JOBS: 2,747 100%
90% $98.0 $40.4 $65.8 80% 1047
70% $35.0 60% $110.3 $54.3
50% 641
40%
30% $86.7 $187.9 $98.8 20% 1,060
10%
0% OUTPUT, $ MILLION GDP, $ MILLION EMPLOYMENT INCOME, $ EMPLOYMENT, NUMBER OF MILLION JOBS
DIRECT IMPACT INDIRECT IMPACT INDUCED IMPACT
Summary Figure 6: Tax Revenue Attributable to Ontario Northland TAX REVENUE BY LEVEL OF GOVERNMENT, $ MILLION Local/ Municipal $12.4 13% Federal $38.6 41%
Provincial $43.8 Total Revenue: $94.8 46%
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Summary Figure 7 shows the estimated implied multipliers of Ontario Northland operations in the province of Ontario. The figure implies that for each $1 of direct output of Ontario Northland, the following impacts are generated in the entire province:
$2.11 of business output; 14.62 jobs (per $1 million of expenditures or revenues); $1.16 of GDP; and $0.86 of employment income.
The figure also shows that for each 1 direct job at Ontario Northland, a total of nearly 2.6 jobs (including jobs at Ontario Northland), or 1.6 additional jobs (over and beyond jobs at Ontario Northland) are generated in various industries across the province.
Summary Figure 7: Multipliers of Ontario Northland in All of Ontario MULTIPLIER TYPE VALUE Total output effect per $1 of direct output of Ontario Northland $2.11 Total employment (number of jobs) per $1 M of direct output of Ontario Northland 14.62 Total employment income per $1 of direct output of Ontario Northland $0.86 Total GDP per $1 of direct output of Ontario Northland $1.16 Total number of jobs (direct, indirect, and induced) created per 1 Ontario Northland job 2.59
ECONOMIC DEVELOPMENT IMPACTS OF ONTARIO NORTHLAND IN NORTHEASTERN ONTARIO
The analysis of data and evidence coming from several sources, including responses to the survey of employees, pensioners, customers, mayors and economic development officers, senior executives of the company, Ontario Northland ridership statistics, and other socio-economic data led to the following conclusions as to the impact of Ontario Northland on community, business, and economic development in the region.
Freight rail services play an extremely important role in the regional economy by providing competitive well priced transportation options for many companies‟ products improving thus their economic viability, in particular in industries such as mining, forestry, sawmills, and wood products manufacturing. Given a relatively large local employment in the above resource-based industries (up to about 27% of labour force, depending on the community), a large share of local employment could be at risk of down-sizing and lay-offs should Ontario Northland rail services be not available, or substantially reduced. The specific benefits of Ontario Northland rail services to individual companies include: Access to more markets; Possibility to remain competitive in more markets; Reduction in direct costs; and,
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Rationalization of logistics and plant operations. Bus parcel services allow local businesses to send packages throughout the region in a timely manner; for example hospitals use the service to send time-sensitive patient samples that have to be examined within a certain time limit. Ontera telecommunication services help put people and businesses in Northeastern Ontario on equal communication footing compared to all other people and businesses in North America. The services allow the businesses to remain competitive. Broadband internet is nowadays increasingly considered as an important element of infrastructure and studies show that access to the service enhances economic growth and performance, entrepreneurship, marketing, workforce skills development, and linking innovation to the marketplace. Ontera is thus providing important contributions to the regional business and community development, in particular by providing services to small and remote areas that are difficult to serve due to large distances and small population densities. Passenger transportation services bring in many tourists to the region, help increase the tourism exposure of the region, and support local tourism industry. Transportation connectivity improves the regional economic wellbeing; the communities that are linked to Ontario Northland rail services tend to have higher average earnings than most other communities in Northeastern Ontario. Availability and proximity to services provided by Ontario Northland (rail, telecommunications, and bus parcel) are considered important factors in business location decision and staying in business. Many local communities refer to Ontario Northland and services provided by Ontario Northland in their promotional information packages intended to attract new business investment and residents.
QUALITY OF LIFE IMPACTS OF ONTARIO NORTHLAND IN NORTHEASTERN ONTARIO
Summary Figure 8 and Summary Figure 9 summarize the responses of the survey of Ontario Northland employees and pensioners regarding the impact of Ontario Northland on the quality of life in Northeastern Ontario. Summary Figure 8 demonstrates of the 350 survey respondents 75% agreed with the proposed opinion that Ontario Northland definitely improved the quality of life in Northeastern Ontario and 19% believed that the company somewhat improved the quality of life in the region. Summary Figure 9 shows that the key drivers of this impact included (with over 50% of respondents agreeing): high quality employment opportunities, tourism exposure of the region, intercity passenger transportation, provision of high quality and reasonably priced services, and apprenticeship opportunities for young people.
The employment opportunities offered by Ontario Northland ranked highest as the most often indicated factor influencing the positive impact. This result is likely driven by the type of experience that employees acquire at Ontario Northland as well as very competitive salaries and resulting high household incomes. However, the respondents also seem to appreciate the notions of improved connectivity of the region to the rest of the province and availability of services similar to those accessible to residents in larger urban areas.
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Summary Figure 8: Opinions of Ontario Northland Employees and Pensioners Regarding Company Impact on Quality of Life in Northeastern Ontario
IMPACT OF ONTARIO NORTHLAND ON QUALITY OF LIFE
Do not know No impact 4% 2% Somewhat improved 19%
Definitely improved 75%
Summary Figure 9: Opinions of Ontario Northland Employees and Pensioners Regarding Factors Affecting Positive Impact of Ontario Northland on Quality of Life
FACTORS INFLUENCING POSITIVE IMPACT OF ONTARIO NORTHLAND, PERCENT RESPONDENTS ANSWERING "YES"
Other factors
Provision of important services locally High quality and reasonably priced services
Tourism exposure
Apprenticeship opportunities for young people
Volunteer work of employees
Contributions to local non-profit and charitable organizations
Donations to local charities
Sponsorship of community events
High quality employment opportunities Lowering price of gas and other products
Intercity passenger transportation
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0%
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Respondents to the survey of mayors and economic development officers also expressed a strong agreement with the suggestion that Ontario Northland has improved the quality of life in their communities (with seven out of ten respondents indicating that Ontario Northland definitely has improved the quality of life, and two indicating that Ontario Northland has somewhat improved the quality of life in their communities). Three out of four tourist operators stated that Ontario Northland has somewhat improved the quality of life in their community, and one operator stated that it has definitely improved the quality of life in the area. According to survey respondents, the key reasons for that impact included services provided by Ontario Northland and tourism exposure. Sponsorship of community events, high quality employment opportunities, and provision of important services locally were also indicated as some of the important reasons.
Other messages and comments regarding the impact of Ontario Northland on the quality of life that were articulated by survey respondents include the following:
Ontario Northland helps to convey a message that Northern Ontario has sustainable industry and skilled trades. Passenger transportation services (rail and motor coach) provide reasonably priced and convenient transportation options to residents of Northeastern Ontario for transportation between local communities to visit families, friends, or for medical appointments and trips between school/college and home. The services are particularly important to college students, people who do not have access to a car, or want to avoid driving in certain weather conditions such as in winter. Ontera telecommunication services help connect remote areas of Northeastern Ontario to the rest of the province and adopt novel uses of technologies that improve quality of life in a community such as electronic access to medical practitioners and specialists, or distance education. Ontario Northland provides affordable and high-quality communication services and passenger transportation services that also cover many remote areas of Northeastern Ontario. Private companies would likely not provide these services in the absence of Ontario Northland due to low profitability. Ontario Northland strives to further expand services to underserviced and remote areas so as to improve the level of service, respond to customer needs, as well as refurbish and renew their equipment.
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1: INTRODUCTION
HDR|Decision Economics and Dr. B.Moazzami of Lakehead University were commissioned by Ontario Northland to conduct a study of the economic and social impact of the company in its area of service in Northeastern Ontario and in the entire province of Ontario.
The objective of the study is to quantitatively and qualitatively inventory, measure and evaluate the economic and social impacts of Ontario Northland in its service area in Northeastern Ontario and province-wide.
This study identifies thus a comprehensive range of economic and social impacts in their various forms of manifestation and conducts a structured analysis and assessment of these impacts using rigorous methodologies widely accepted and recommended by the economic literature and practice for similar type evaluations. The impacts considered are assessed quantitatively to the extent possible within the scope of the study.
This report documents study methodology and results. The report is organized as follows:
Section 2 presents the corporate profile of Ontario Northland. Section 3 presents the study approach, the various economic and social impacts to be evaluated and outlines the methodology adopted for this evaluation. Section 4 discusses the various data and assumptions adopted for the analysis, including the surveys that were conducted within this study. Section 5 presents the results of the study including impacts that were assessed in quantitative and qualitative terms. Section 6 provides a summary of study findings. Section 7 provides comments regarding opportunities for Ontario Northland to move forward. Section 8 provides brief biographical notes about the authors of the study.
The appendices (provided as a separate volume) present the surveys that were distributed to Ontario Northland employees, pensioners, senior executives, a sample of customers, as well as a sample of mayors and economic development officers in communities across Eastern Ontario and tourist operators in the region. In addition, the appendices provide additional corporate data that was used in the study to estimate the various impacts.
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2: COMPANY PROFILE
This section presents a general profile of Ontario Northland and other information about the company‟s projects and statistics that could provide a reader with some specific information and help in understanding the company‟s operations.
2.1 General Company Information and Statistics
The Ontario Northland Transportation Commission (Ontario Northland) is an operational enterprise of the Province of Ontario. It was established in 1902 to help expand the development of Northeastern Ontario, and is a recognized leader in promoting sustainable economic growth by establishing and operating transportation and telecommunication links throughout northern Ontario. Ontario Northland is headquartered in North Bay and operates primarily in northeastern Ontario.
Ontario Northland‟s non-commercial, or provincially-mandated services, include:
The Northlander (passenger train service between Cochrane and Toronto); and, The Polar Bear Express (passenger train service between Cochrane and Moosonee, offering special excursion packages during the summer months).
Commercial services include:
The Dream Catcher Express (fall excursion train between North Bay and Temagami); Ontera telecommunication services; Rail freight and contract services; Refurbishment services; and, Scheduled, charter and rental motor coach services, and Bus Parcel Express.
Figure 1 shows a map of Ontario that illustrates the area of service of Ontera. As the map shows, the area of service extends from North Bay, Huntsville, St. Ste Marie, Wawa, and Marathon in the south up north to James Bay and Hudson Bay areas.
Figure 2 shows Ontario Northland‟s passenger services routes (rail and motor coach services). As the map shows, the passenger rail service connects the residents of northern communities including Moosonee, Cochrane, Matheson, Temiskaming Shores, Cobalt, Temagami, and North Bay with southern part of Ontario and with Toronto.
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Figure 1: Ontera’s Area of Service
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Figure 2: Ontario Northland’s Passenger Transportation Services Routes
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Ontario Northland states its vision and mission as follows:
Vision: At Ontario Northland, our vision is to be a recognized leader in creating prosperity in the North by providing innovative, competitive transportation and telecommunication solutions. Our values include customer focus, integrity, teamwork, and employee involvement.
Mission: We will achieve our vision of connected communities and a prosperous North by partnering with the Province, communities, and business to deliver a high standard of safe, reliable, and environmentally-responsible transportation and telecommunications services. With our dedicated and skilled workforce, we will deliver on our mandate and provincial commitment to create value through economic development, financial return, and superior service.
Ontario Northland employs more than 1,000 individuals, who work in five divisions (Corporate Services, Ontera, Passenger Services, Rail and Refurbishment), and across Ontario Northland‟s territory in northern Ontario and northwestern Quebec. In addition, each summer Ontario Northland employs many summer students to work in various areas, including on the Polar Bear Express summer excursion train. For example, in 2006, 58 students were hired to work over the summer months. In 2006, Ontario Northland‟s payroll totaled $58.4 million.
In addition, Ontario Northland has 1,295 retired employees who collect company pension benefits each year. 85% of these retirees continue to live in Northern Ontario. The pension payments totaled $28.8 million in 2006.
2.2 Ontario Northland’s Accomplishments and Recent Investment Projects
Some of Ontario Northland‟s recent accomplishments and investment projects are outlined and discussed below.
Ontera
25,000 Northern Ontario Telecommunications Customers Ontera currently provides northern-based telecommunications services and solutions to in excess of 25,000 customers living in communities throughout northern Ontario.
Smart Systems for Health Agency (SSHA) SSHA, Hydro One Telecom (HOT) and Ontera, which are all operational enterprises of the Government of Ontario, have joined together in a unique agency-to-agency procurement model to meet the telecommunications needs of SSHA and the medical community of Ontario. Ontera has been contracted to provide connectivity and network management for Local Health Integration Network (LHIN) 13, a geographical unit within northeastern Ontario, comprising 71
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health services provider sites requiring a high bandwidth and dedicated private fibre-based network.
Softswitch Telecommunications Technology System Ontera is in the process of implementing a new softswitch telecommunications technology system that will enable the company to offer local telephone services to residential, business and other carrier markets over an IP-based (Internet Protocol) services platform. The project will result in Ontera installing the softswitch hardware in two of northern Ontario‟s largest urban centres. It will also allow Ontera to offer customers advanced voice services with improved quality and efficiency, at a lower cost.
Integrated Network Project (INP) This project is an important partnership with the Government of Ontario, whereby Telus and Ontera have been selected to provide telecommunications connectivity and network management to approximately 230 government service sites across northeastern Ontario. Ontera‟s core network is being further enhanced to provide full carrier class capabilities for this project. These state-of-the-art enhancements will benefit future projects and all of northern Ontario as Ontera increasingly becomes the digital gateway to the north.
Bear Island Connectivity Ontera has recently completed a contract with FedNor, on behalf of Keewaytinook Okimakanak (K-Net Services), to provide fibre optic connectivity to the Temagami First Nations‟ health centre located on Bear Island. The project initially provides access to broadband solutions that will improve the delivery of health and wellness programs that will benefit the entire community of six hundred residents. The project involved running 10 km of submarine cable underwater in order to connect the Island with the mainland. Future plans involve connecting more buildings to lever educational and administrative programs.
Collège Boréal Contract In 2006, Ontera renewed an extensive contract with Collège Boréal to provide Wide Area Network (WAN) and Local Area Network (LAN) data services to seven of the College‟s campuses in northern Ontario and another seven in southern Ontario. The deal goes beyond the provision of traditional products and services, as Ontera offers the College enhanced reach, speed, bandwidth and reliability for its advanced educational requirements and offerings.
Next Generation Network Ontera has undertaken a $4 million project to upgrade the core network to Multiprotocol Label Switching (MPLS) infrastructure that will facilitate converged Internet Protocol (IP) services like data, voice and video, on the same transport. The Next Generation Network project will enable Ontera to provide its customers in northern Ontario with on-demand telecommunications services, such as Internet Access, IP Telephony and Wide Area Networks, much more quickly and cost effectively.
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Cisco Premier Certification In March 2006 Ontera announced that it had achieved Premier Certification from Cisco Systems®. The Cisco® Channel Partner program provides Ontera with the resource framework to develop an expertise to sell, plan, design, implement and operate Cisco networking solutions. To earn Premier Certification, Ontera was required to meet or surpass the stringent personnel, training, customer satisfaction, specialization, and post-sales support requirements set forth by Cisco.
Passenger Services
More Than 340,000 Passengers Each Year In 2006, more than 340,000 passengers traveled aboard either one of Ontario Northland‟s 25 highway motor coaches or on one of four passenger trains. Ridership on motor coaches remained relatively steady in 2006. On the other hand, traffic on the Little Bear train (Cochrane to Moosonee) increased by 7%, and traffic on the Northlander train (Cochrane to Toronto) increased by 6%. Traffic on the Polar Bear Express train, a tourist train traveling between Cochrane and Moosonee during the summer months, continued to decline, with 8,500 passengers traveling in 2006 (a decrease of 18%).
Improvements to Service Between Moosonee and Cochrane Following significant community consultation, improvements to the train service between Moosonee and Cochrane were introduced in June 2007. Specifically, passenger and freight train service were separated and a single passenger train, called the Polar Bear Express, was created to provide service between the two communities (a combination of the Little Bear and Polar Bear Express trains). The new Polar Bear Express provides more frequent service: six return trips a week in the summer and five return trips a week during the remainder of the year. In addition, new policies and procedures, designed to improve service levels, have been introduced. Freight service is now provided twice weekly.
Improvements in Customer Service In 2006, Ontario Northland initiated a program to improve the levels of customer service offered throughout the Passenger Services Division. The program will be provided to front line employees, establishing and refreshing policies with a focus on excellence in service.
New Motor Coach Maintenance and Administration Facility In 2006, a new $2.3 million Motor Coach Maintenance and Administration Facility opened in North Bay. This 14,000 ft2 building houses more than 75 Passenger Services Division employees. With this new facility, Ontario Northland is now able to perform full maintenance on all motor coaches and offer maintenance services to partners within the motor coach industry.
Dream Catcher Express The Dream Catcher Express was launched in the fall of 2005 as an exciting train excursion between North Bay and Temagami. In partnership with local community leaders and hospitality operators, the Dream Catcher Express offers passengers a variety of unique experiences including
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the romance of rail travel, vibrant fall colours and a sampling of aboriginal culture. The train was enthusiastically received by travelers and has successfully operated in each of the last three years.
Rail Services
53,000 Carloads; 700 Miles of Track; 27 Engines The rail freight operations carry more than 53,000 carloads each year, throughout the 700 mile rail system which spans from Moosonee in the north to North Bay in the south, from Calstock (just west of Hearst) in the west to Rouyn-Noranda, Quebec in the east. Ontario Northland has a fleet of 27 engines to service both passenger and freight services.
Improved Customer Service Over the last two years, Ontario Northland has implemented automated systems to enhance the levels of service offered to rail freight customers. The RMI system has introduced a greater level of electronic communication for moving and managing the shipments. It has enhanced the operating, customer interaction and revenue settlement processes, allowing more accurate and timely shipping information to clients so that they may react in the face of an increasingly competitive marketplace.
Movement of a One Million Pound Ontario Hydro Transformer In the winter of 2007, Ontario Northland made its largest single move ever – from both a size and a revenue perspective. In cooperation with CN, the Rail Division helped Ontario Hydro move their one million pound (500 ton) transformer from Pickering to Fraserdale, Ontario (north of Cochrane, en route to Moosonee). This was an extremely specialized move and required the use of a rail car featuring multiple axles to appropriately spread the weight of the transformer, in addition to work on the track and bridges to ensure that the infrastructure could withstand the load.
Committed to Apprenticeship Training Opportunities Ontario Northland currently employs 28 apprentices who work in North Bay (18), Cochrane (9) and Hearst (1). The apprentice specialties include blacksmiths, diesel mechanics (machinists), electricians, pipefitters, and railway car mechanics. In April 2005, Ontario Northland was recognized by the Ministry of Training, Colleges and University (MTCU) with a 2004 Provincial Apprenticeship Employer Recognition Award for Excellence in Apprenticeship Training. Nominated by Canadore College, this provincial award recognizes employers that are building an economy based on high skills and high standards through their support of the apprenticeship training system.
New Shop in Cochrane In December 2004, Ontario Northland opened a new shop in Cochrane. The $1.5 million, 10,000 ft2 building is a multi-use maintenance facility that has improved working conditions in Cochrane and given the improved maintenance capabilities for the passenger fleet.
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3: STUDY APPROACH
This section describes in detail the methodology adopted in this study. It defines first key concepts and economic impact analysis and terms/effects referred to in the study. Then, it explains how the various effects are estimated or assessed.
3.1 Key Concepts in Economic Impact Assessment
3.1.1 Traditional Approach and Concepts in Economic Impact Analysis
Economic impact analysis is the study of the effect of a change in the demand for goods and services on the level of economic activity in a given geographic area. This change in economic activity is typically measured by business output (sales), value added (gross regional product), employment (number of jobs), and labour income (earnings).
The change in demand can be the result of decisions made by the government, firms, or households, for example a new investment project, or an increase in the number of tourists coming to the area. When a company, an organization, or individuals, make changes in their expenditures, a series of changes in incomes and expenditures of economic agents is induced. For example, a new investment in infrastructure increases demand for certain goods and services. Experiencing higher demand and income, producers of these goods and services increase their private consumption as well as increasing orders for inputs necessary to produce the increased goods and services. These changes in turn generate additional revenues and incomes for other businesses providing inputs to the production process. Experiencing higher demand and income for businesses providing inputs, they too place new orders with their suppliers and those suppliers place new orders with their suppliers, and so on. It is quite apparent that the sum of all these changes is larger than the initial change in the expenditures, or the initial investment.
Frequently, various stakeholders are interested in the economic impact (or the contribution to the local economy) of certain local companies, their current operations, and/or investment projects.
Traditionally, economic impact analysis involves the estimation of three distinct types of expenditure and production activity that capture the various rounds of expenditures and economic activity described briefly above. They are commonly referred to as “direct impacts,” “indirect impacts,” and “induced impacts” and can be defined as follows:
Direct impacts refer to immediate economic outcomes occurring as the result of activity related to operations or project being evaluated (such as operations of a local company, or its investment projects). These immediate outcomes include business output or revenues/ sales, employment of workers, their employment earnings, value added, and tax revenues.
Indirect impacts refer to the “spin-off” economic activities that result from purchases of production inputs, goods and services, by those businesses that generated the direct effects described in the previous bullet. These purchases of production inputs allow for
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production activities and employment at the supplier firms. The spending by these supplier firms for goods and services necessary for the production of their products or services creates output of other firms further down the production chain, thus bringing about additional business output, employment, and earnings.
Induced impacts represent the increase in business output, employment, and earnings over and above the direct and indirect impacts, generated by re-spending of employment income from direct and indirect employment.. Induced impacts are thus changes in output, employment, and earnings that are the result of personal (household) spending for goods and services by employees of the business that generated the direct effect and employees of all other firms comprising the indirect impact.
The total economic impact is the sum of the direct, indirect and induced effects of the company or the project being evaluated.
Indirect and induced impacts are often referred to as “multiplier effects,” since they increase the overall economic impacts of the original activity and expenditure that initiated all subsequent rounds of spending and effects described above.
Multipliers typically are expressed in terms of output, jobs, or employment income per $1 of the initial investment (or expenditure, or business revenue). For example, an output multiplier is the increase in business output for all industries per one dollar of initial expenditure. A multiplier of 2.10 for an industry means that an investment or expenditure of $1 for products of a company in that industry (or an increase of $1 in revenues in this company) increases business revenues across the entire economy by $2.10.
It should be noted that the magnitude of multipliers depends on the geographic area within which the impact is estimated. Typically, the smaller the geographic area, the smaller the multiplier will be. For example, local or regional multipliers will usually be smaller than provincial multipliers. This is because the multipliers are determined by the geographic location of purchases at subsequent rounds of spending. The smaller the geographic area (and less active, less diversified in terms of economic structure), the smaller the proportion of production inputs and consumer goods that could be provided from within that area. The expenditures that “leak out” of the local geographic area reduce the magnitude of the multiplier.
3.1.2 Impact on Productivity and Economic Development
The practice of economics recognizes that economic impacts of an organization and its expenditures may well go beyond and above jobs and outputs generated directly through the operational activities and indirectly through the supplier relationships down the production chain described earlier.
The literature on the topic indicates that improved transportation infrastructure reduces transportation costs by providing a more direct route (which reduces vehicle hours and vehicle operating costs) as well as by alleviating capacity bottleneck and increasing reliability of deliveries.
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In addition, rail transportation is usually less expensive compared to highway transportation as the rail freight rate is typically lower than the truck freight rate. Although rail transportation may not be as fast as truck transportation, the cost advantage may still outweigh longer delivery times for some industries, in particular for transportation of bulky low-unit value commodities not prone to spoilage or similar problems that may require fast delivery times to deal with.
Lower costs and more efficient transportation have a range of operational implications for businesses, including the following:1
(1) Increase in market reach and access. Lower transportation costs allow shippers to source from less expensive, but possibly more distant, suppliers that better satisfy the production requirements. (2) Reduction in inventory costs. Lower transportation costs and more reliable transit times allow businesses to reduce shipment size and opt for smaller more frequent shipments in order to reduce the need for carrying emergency and buffer inventories and to reduce inventory costs. (3) Rationalization of production structure, number of plants, warehouses, etc. Lower transportation costs will allow relocation of existing plants to lower cost areas, increase scale economies, and manufacture the same products at a lower costs. (4) Rationalization of vehicle fleet cost. Reduction in average transit times will allow shippers to get more turns from the existing fleet of vehicles.
The savings in transportation, warehousing, and logistics costs can then be re-invested in the production process and allow price reductions thereby making the businesses more competitive. This, in turn, will allow the businesses to increase sales and employment and possibly service levels at a minimal cost.
In other words, the literature recognizes that transportation is a cost of doing business and locations that can effectively lower this cost may develop a competitive advantage over regions unable to offer a similar savings in business costs. The economic effects arising potentially from investment in transportation may not be fully realized because of many factors such as labor cost, or availability of local municipal services or land. However, transportation appears as a necessary (although not sufficient) condition for generating economic development.2 The lack of or insufficient transportation infrastructure and transportation links to key markets and distribution centers are often assessed as one of the underlying reasons for poor (or below potential) economic performance of local economies.3
1 For an overview of the impact of transportation on economic productivity and efficiency see “Economic Effects of Transportation: The Freight Story”, a report by ICF Consulting and HLB Decision Economics, January 2002. 2 For a more detailed discussion and literature references see “Handbook of Economic Development”, Chapter 2, Transportation Investment and Economic Development, New York State Department of Transportation, September 2001. 3For example, Maine Department of Transportation in cooperation with representatives of US states and Canadian provinces as well Transport Canada is currently completing a study that examines the relationship between sufficiency of transportation and economic conditions across the region of central Maine and the northern tier of New Hampshire, Vermont and New York State, as well as along the adjacent Canadian provinces of Nova Scotia, Prince Edward Island, New Brunswick, Québec and Ontario. Insufficient transportation infrastructure and services
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In the US economic impact assessment practice, the “Guide to Quantifying the Economic Impacts of Federal Investments in Large-Scale Freight Transportation Projects” fully recognizes all of the above effects and encourages the inclusion of these effects in the analysis and evaluation of transportation projects of potential financial interest to federal transportation agencies.4
Another category of economic development impacts attributable to transportation infrastructure is improved accessibility to tourists and thus increased number of tourists coming to the affected area. Tourists then spend money on a range of goods and services including accommodation, food, entertainment, etc. creating demand and business and employment opportunities in the area that they visit.
3.1.3 Other Impacts
Economic impact assessment studies may also include other impacts that address a wide range of issues and effects, frequently difficult to quantify, but affecting various aspects of the local economies and local population.
Depending on the specific industry and specific project or infrastructure being analyzed, the impacts in question may include various types of economic externalities such as increased/reduced noise, emissions, visual effects, impacts on local municipal infrastructure, health effects, education effects, access to goods and services that would not be available otherwise, or impacts on quality of life.
3.2 Impacts Evaluated in this Study
This study will estimate and assess the following impacts of Ontario Northland:
1) Direct, indirect and induced economic impacts in Northeastern Ontario in terms of: a. Value added, or GDP, and b. Employment. 2) Direct, indirect and induced economic impacts province-wide (i.e. in all of Ontario) in terms of: a. Business output/ revenue; b. GDP; c. Employment and employment income; and, d. Tax revenue. 3) Community, business economic development impacts in Northeastern Ontario; and, 4) Quality of life impacts in Northeastern Ontario.
(lack of east-west highway connectivity, insufficient rail service) are identified as one of the factors inhibiting the growth in the region, lower productivity and lower overall economic performance compared to competitor regions. For details see http://canamconnections.com/. 4 See “Guide to Quantifying the Economic Impacts of Federal Investments in Large-Scale Freight Transportation Projects”, report prepared for Office of the Secretary of Transportation, US Department of Transportation, August 2006.
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The methodological components corresponding to each of the above effects are discussed in more detail in the sub-sections below.
3.3 Economic Impacts in Northeastern Ontario
3.3.1 Key Concepts and Principles in Estimation of Regional Economic Impacts
In order to estimate the impact of Ontario Northland on the local economy within Northeastern Ontario, it is necessary to consider how the company spends its budget and how the money circulates in the local economy.
Suppose that the total operational budget of Ontario Northland is X dollars. Assume that fraction ai of X is spent in the local economy in Northeastern Ontario on goods and services produced in sector i, with i = 1, 2,3,...n. The local expenditures increase the demand for local goods and services generating additional revenues aiX for the local businesses in industry i. These revenues will then be used to purchase inputs necessary to produce good i. Some inputs will have to be imported from other communities and only a fraction of the company expenditures, say bi, will appear as local income. The immediate impact of expenditures by Ontario Northland, as measured in terms of local income, will thus be equal to:
b1 a1X + b2 a2X +... + bn anX = X. bi . ai = m1 X (1)
where m1 = bi ai
In equation (1), m1 is the proportion of company expenditures that stay in the local economy. The income expressed in equation (1) induces a second round of spending generating additional incomes for the local businesses which in turn induce the next round of spending.
Let us assume that the propensity to spend locally, or the proportion of income spent in the local economy, is stable in all rounds of spending and that it is the same proportion, m2, for all industries, employees, pensioners and residents of the affected communities. The dollar amount of the second round of spending remaining in the local economy will then be equal to m2(m1 X); the dollar amount of the third round of spending remaining in the local economy will be 2 m2(m2m1X), and the dollar amount of the fourth round of spending will be m2(m2 m1X), and so on.
The total impact on the local economy of the operating budget of X dollars can be expressed as:
2 Y = X + m1 X + m1m2X + m1m2 X + ... = X.{(1+m1 – m2)/(1-m2)} = X. K
Where Y is local income and K = {(1+m1 – m2)/(1-m2)}.
K is referred to as the regional multiplier. Estimated K will be multiplier specific to Ontario Northland.
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As mentioned above, m2 is the propensity to spend locally and is based on the characteristics of the entire community. m2 measures the proportion of each dollar of consumption paid to local factors of production in subsequent rounds of the multiplier process. It is defined as: m2 = p. G where p is the proportion of each dollar of consumption expenditures for the entire community which remains in the community. G is the portion of household income for the entire community which is spent on consumption.
Note that if m1 = m2, the multiplier is defined as 1/(1-m2), which is the simplest version of the standard multiplier used in many economic impact studies and estimation of local or regional multipliers.
The implementation of the above theoretical principles will require estimation of m1, and m2, as well as establishing the operational budget X that is the source of effects in the local economy. This study will consider four types of expenditure streams related to the operations of Ontario Northland and estimate their impacts:
1. Wages and salaries paid to the employees; 2. Pension benefits paid to the pensioners; 3. Capital expenditures and investments made by the company; and, 4. Operational input and supplies expenditures such as fuel, utilities and energy, insurance, office supplies, etc.
3.3.2 General Approaches to Estimation of Local Multipliers
Estimation of m1
Estimation of m1 requires values for the proportions ai and bi for each sector or industry where the expenditures related to Ontario Northland (outlined above) operations take place.
The values of the proportions ai can be obtained from a direct survey of operational and capital expenditures by Ontario Northland and a survey of consumer expenditures by employees and pensioners.
Specifically, operational and capital expenditures of Ontario Northland extracted from corporate accounts were thus classified into types that could be matched to NAICS industrial sectors, and broken down by the amount spent in Northeastern Ontario and the amount spent elsewhere. The annual sectoral and geographic distribution of consumption spending by employees and pensioners in various communities will be obtained through a survey of household expenditures. A survey questionnaire will be mailed to all employees and pensioners. A copy of the questionnaire is presented in Appendix A.
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The values of ai's for each local industry can then be calculated based on the percentage of expenditures by Ontario Northland, their employees and pensioners that is made locally.
Estimation of bi's is more challenging. The best source of bi's would be a survey of local businesses to determine the sources of their inputs and supplies. Such a survey is, however, prohibitively expensive. Various studies have used payroll to sales ratio as a proxy for bi (see for example Rioux and Schofield (1990), Wilson and Raymond (1973)). Following these earlier studies, this study employs payroll to sales ratio to obtain estimates of bi's.
Payroll by sector is estimated using 2006 Census data on earnings and employment by industry for each community and region under investigation. Sales by sector are estimated by estimating Gross Regional Products (GRP) by industry for each community. Gross Regional Product is, in turn, estimated based on provincial GDP and regional share of provincial employment in each industry.
Use of GRP as a proxy for sales underestimates the value of sales. On the other hand, to the extent that non-labour income is part of local value-added, labour income underestimates local value-added. For the purpose of this study, it is assumed that these two factors cancel each other out.
Estimation of m2
The value of m2 can be estimated using the economic base method. The economic base method divides the local economy into two sectors: (1) the basic sector, and (2) the service sector.5
The basic, or base, sector is comprised of industries whose output is exported to other communities, or whose ultimate markets lie outside of the region. Quasi-base sectors are sectors supported by funds from outside the region. They include federal and provincial public administration, health care, tourism and education. Local input suppliers to the exporting industries are also included in the base. For example, if firm A sells its entire output locally to firm B and the latter exports all it produces, firm A is part of the base sector because its ultimate market is outside the region.
The service sector, also referred to as non-base sector, consists of that portion of total economic activity in which the ultimate market is local, or whose output is consumed solely in the local economy. Examples of non-base industries include the retail sector, local banking and financial services. These sectors depend on income and wealth generated in the base and quasi-base sectors, and can expand only if new income is generated in the base and quasi-base sectors.
This breakdown of the local economy reflects the distinct sources of demand facing the two sectors.
5 See Tiebout (1962). Some of the empirical studies employing the economic base model are Rioux and Schofield (1990), Davis (1975), and Mulligan and Gibson (1984). Each of these studies contains a brief discussion of the economic base model.
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Assuming that income is proportional to employment, the proportion of income spent locally is equal to the ratio of non-basic or service employment (SE) to total employment (TE). If it is also assumed that average and marginal propensities to spend locally are equal, then m2 can be approximated by the ratio of SE to TE in the community.
Therefore, to estimate m2, we have to identify base and non-base employment in the various communities under investigation.
Methods of Identifying Base and Non-Base Sectors
1. Judgment Method In this approach, basic regional employment is assumed to consist of all jobs in agriculture, mining, manufacturing, transportation and non-local government. Service employment then consists of construction, communication, utilities, trade, and local government. If the economy is sufficiently simplistic and the analyst sufficiently knowledgeable about the firm‟s ultimate market, identification of base and non-base activity can be reasonably accurate. If the researcher has sufficient knowledge of the local economy, he or she can remove portions of sectors from the economic base. For example, agriculture supplying only the local market should be removed from the base. Similarly, small manufacturing firms can also be removed from the base if their final demand comes from the local market.
2. Survey Method In a more complex regional economy the analyst must turn to more complex means. One obvious alternative is to ascertain total employment of various regional establishments and identify the division of sales to markets within and outside the region. Employment in each firm is then allocated to the base and non-base sectors corresponding with the firm‟s division of sales. The problem with this method, aside from sampling problems and errors, is potential confusion between immediate purchasers and ultimate markets. This problem generally intensifies with a larger economy, since technical linkages between establishments usually become more complex as the economy expands. In a complex economic climate, firms usually do not have detailed information about their markets beyond their immediate wholesalers.
3. Location Quotient Method One common approach to identifying a region‟s economic base is the location quotient index (LQ). This index is a simple ratio of an industry‟s share of local employment relative to the industry‟s share of national employment:
LQi = (Ri/TE)/(Ni/N) where Ri and Ni are regional and national (or provincial) employment in sector “i”, respectively, and TE and N are the regional and national (provincial) employment totals.
In essence, this index indicates the regional importance of the industry relative to its national or provincial importance. When the value of the index is one, local production
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per capita is equal to the provincial production per capita. Therefore, local production is just sufficient to satisfy local consumption. Thus, the locality neither exports nor imports the good or service in question. An index value greater than one indicates exports of that good or service from the region. An index value smaller than one indicates that local production is not enough to satisfy local demand, leading to importation of the good or service. It is possible to eliminate overlap in the LQ index by subtracting the local economy from the national or provincial economies. The subtraction is necessary to prevent a downward bias in the resulting quotients, particularly for specialized industries.
Total basic employment and service employment can be thus calculated as:
BE = R {(Ri/TE) – (Ni/N)} for all (Ri/TE) > (Ni/N)
And
SE = TE – BE
This study adopts the location quotient method.
Employment Multiplier
To estimate the employment multiplier, we follow the procedure suggested by Davis (1986). The employment multiplier Me for each community is estimated using the following formula:
Me = (1 + k(My – 1))/W (2) where My is the income multiplier and W is the average annual earnings in the community. The factor k is the average ratio of wages and salaries to total local value-added in the community.6
Equation (2) can be disaggregated as follows:
Me = (1/W) + k(My – 1)/W
The first term, (1/W) represents a dollar of wages and salaries divided by the average earnings in the community. It shows the direct employment impact of a dollar of wages and salaries. The indirect and induced impacts are estimated by the second term. (My – 1) shows the local value- added generated by the initial flow of income into the community. This local value-added is transformed into wages and salaries by the factor k. Finally, dividing by average wages and salaries in the community, the local value-added is transformed into employment. The employment multiplier shown in equation (2) represents the employment generated per dollar of wages and salaries paid to employees in the community.
6 Factor k is equivalent to proportions bi discussed earlier in this section.
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3.4 Economic Impacts Province-Wide
As in the case of economic impacts within Northeastern Ontario, economic impacts at the provincial level are also estimated using input-output techniques and approaches. However, instead of developing a methodology that would be tracking and summarizing the expenditures and incomes that stay within the province and are further re-spent in the province, this study adopts a methodology based on multipliers from the inter-provincial input-output model developed and maintained by Statistics Canada. The inter-provincial input-output model captures flows of goods and services between the various industries across each province and Canada, and the multipliers provide an aggregate measure of the average effect of an industry on all other industries. The specific effects estimated are described in some detail below.
3.4.1 Province-Wide Direct Effects
The direct effects of Ontario Northland in the entire province are estimated as province-wide revenue or operational budget (revenues plus subsidies if any) by business line, total employment, employment income, and GDP. In addition, direct effects are generated by expenditures on capital projects made within Ontario, as well as employment, employment income and GDP that could be attributed to the initial capital expenditure.
Province-wide revenues of Ontario Northland, its employment, employment income, and capital expenditures estimates are based on the annual reports and additional data extracted from corporate accounts. All direct GDP, direct employment and direct employment income due to capital expenditures are estimated using provincial direct input-output multipliers and ratios.
Multipliers and ratios for output, employment, and employment income are available for a wide range of industries defined at various levels of NAICS classification. Therefore, revenues for all business lines of Ontario Northland and its capital expenditures have to be classified into industrial sectors consistent with NAICS industrial codes and corresponding to an industry in the Inter-Provincial Input- Output Model.
The sum of impacts (by type) due to operations and capital expenditures represents then total direct impact. This methodology is illustrated graphically in Figure 3.
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Figure 3: Estimation of Province-Wide Direct Impacts of Ontario Northland’s
Ontario Northland’s Ontario Northland’s revenues/ operational Ontario Northland’s Ontario Northland’s capital expenditures in budget employment payroll Ontario By business line-industry By category-industry
Direct output due to Direct output due to Direct employment due to Direct employment operations capital expenditures operations income due to operations Ratios for By industry By industry direct effects:
GDP per $1 of output Employment per $1M of output By industry Employment income per $1 of output GDP per $1 of output Direct GDP due to operations By industry
Direct employment Direct employment due to Direct GDP due to capital income due to capital capital expenditures expenditures expenditures
Total direct employment Total direct output Total direct employment Total direct GDP income
3.4.2 Province-Wide Indirect Effects
The indirect effects are estimated using provincial indirect multipliers. There are indirect input- output multipliers for output, employment, and employment income. In other words, multiplying the direct output of an industry or establishment by indirect output multiplier will give the value of indirect output across all industries in the province that is attributable to that industry or establishment. Multiplying the same value of direct output by indirect employment multiplier will give the number of indirect jobs across the province that are attributable to the industry or establishment being analyzed. Finally, multiplying the value of direct output by indirect employment income multiplier will give employment income of all indirect employees across the province. The sum of indirect effects attributable to each of the business lines and capital expenditures will represent total indirect effects province-wide. The methodology is illustrated graphically in Figure 4.
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Figure 4: Estimation of Province-Wide Indirect Effect of Ontario Northland
Total direct output due to Ontario Northland’s operations and capital Indirect expenditures multipliers: By industry
Indirect output per $1 of direct output Indirect employment per $1M of direct output Indirect employment income per $1 of direct output Indirect GDP per $1 of direct output
By industry
Total indirect Total indirect Total indirect output Total indirect GDP employment employment income
3.4.3 Province-Wide Induced Effects
Statistics Canada‟s Inter-Provincial Input-Output Model does not simulate induced economic impacts and does not generate induced multipliers. Therefore, a different approach is needed to determine induced effects.
The approach utilized here is based on the notion that induced impacts are driven by re-spending of employment wages and salaries. Estimates of total direct and indirect employment income combined with assumptions regarding taxes, savings rate, household expenditure pattern (i.e. shares of expenditures by category) can be used to determine where/on what the employment income is spent. These amounts of expenditures by category are classified into industrial sectors and interpreted as the direct output of industries directly affected by consumer expenditures. Therefore, the indirect multipliers are applied to each direct output to calculate the impacts through the supply chain that occur due to the re-spending of direct and indirect employment income. This effect is augmented to account for further effects of re-spending of wages of employees from the first round of induced spending by applying the industrial average direct and indirect multipliers to those wages and salaries. This methodology is illustrated in Figure 5.
It should be noted that multipliers for the retail trade industry have to be adjusted to reflect the fact that the multipliers from the Input-Output model are for the retail industry revenues net of the costs of goods and services that the industry is selling (i.e. for the gross retail margin). This can be done by multiplying the expenditures taking place in the retail sector by the retail margin.
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Figure 5: Estimation of Induced Province-Wide Impact
Estimated direct and Estimated direct and Average tax per indirect employment indirect employment employee income
Total tax payments
Total disposable Average spending income rate
Household spending profile Total consumer expenditures
Total effects multipliers Consumer expenditures Total effects multipliers (direct plus indirect) By category/ industry (direct plus indirect) Average across By industry industries
Direct output due to consumer expenditures By category/ industry
Total consumer TOTAL EFFECTS MULTIPLIERS: Indirect output due to expenditures due to Total output per $1 of output consumer further re-spending of Total employment per $1M of output expenditures salaries Total employment income per $1 of output Total GDP per $1 of output
Induced output Induced output (2) (1)
Induced Induced Induced Induced Induced GDP Induced GDP employment employment employment employment (2) (1) income (2) (2) (1) income (1)
Total induced Total induced Total induced output Total induced GDP employment employment income
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In summary, the approach for estimation of induced impacts involves the following steps:
1. Estimate total disposable employment income attributable to direct and indirect activity; 2. Estimate total consumption expenditure; 3. Allocate total consumption expenditure estimated in step (2) to expenditure categories (such food, clothing, housing, etc.); 4. Multiply each expenditure item from step (3) (i.e. expenditure by category) by total multipliers relevant for the given expenditure category (or industry to which the expenditure category corresponds, for example: food bought in stores would be multiplied by multipliers for the retail industry); 5. Multiply the result for employment income from (4) by average consumer spending rate to obtain output due to further re-spending of salaries and wages; 6. Multiply the result from (5) by average total effects multipliers (an industrial average); and, 7. Sum all effects by category (output, employment, employment income, GDP) across all expenditure categories to obtain total induced effects.
3.5 Economic Development Impacts
The methodology adopted for the assessment of economic development impacts involves an analysis of multiple lines of evidence and data sources in order to identify the extent and scope for induced economic development, increased competitiveness, and higher standard of living effects that could be attributable to Ontario Northland‟s operations.
The general hypothesis tested is that Ontario Northland‟s operations increase transportation and telecommunications connectivity within the region and connectivity with other regions. The benefits arising from this connectivity may manifest themselves in various forms including those mentioned below.
Direct transportation cost savings to shippers; Better and faster access to markets where products are being sold or where production inputs and supplies are purchased; Increased competitiveness of local companies; Increased output or investment; Increased employment and employment income; Decisions by shippers to locate (or stay) in Northeastern Ontario; Tourism attraction and contribution to local tourism industry activity; and, Reduced prices of goods and services in the local economy.
It should be noted that some benefit categories listed above may overlap with others and not necessarily represent distinct benefits. However, they provide an indication how the initial benefit (i.e. improved transportation connections) ripples through the economy and has far- reaching implications.
The lines of evidence to be adopted and discussed include the following:
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1. Analysis of economic profiles of communities within Northeastern Ontario and comparison with similar communities elsewhere in Ontario which lack connectivity.
The statistical data on employment structure and income in communities served by Ontario Northland is analyzed and compared with data for similar communities that lack connectivity to identify differences in key socio-economic indicators. Dependency ratios are also calculated for each community to assess the degree to which an area depends on Ontario Northland.
2. Analysis of Ontario Northland‟s activities and operational data by business lines to identify the scope for potential induced economic development and competitiveness effects.
3. Survey of large customers on services purchased from Ontario Northland and their role in everyday operations.
The survey of customers is asking respondents questions to probe why they selected Ontario Northland over other competitors (if any), whether the services provided by Ontario Northland are cheaper, or of better quality and service. In addition, the survey is asking whether the presence of Ontario Northland has been an important factor in locational decisions and whether they would stay in their current location if Ontario Northland was not present in their communities.
4. Survey/interviews of a sample of mayors or economic development officers in Northeastern Ontario‟s communities on subjectively perceived role of Ontario Northland in the local economies.
The survey of mayors and economic development officers is asking respondents questions to collect opinions about the quality of service and rates offered by Ontario Northland and whether the presence of the company has been a significant factor in attracting new businesses and residents to the local communities, or providing incentives for existing businesses and residents in their current locations.
5. Survey of tourist operators in Northeastern Ontario on subjectively perceived role of Ontario Northland in attracting tourists to their service area and impacting their own operations.
The survey of tourist operators is asking respondents which services offered by Ontario Northland are available in their area of service, whether they have improved the attractiveness of the area to tourists, and whether their operations would be possible in the absence of Ontario Northland.
6. Survey/interviews of Ontario Northland senior executives to collect their perspectives and subjective opinions on company operations, what distinguishes the company in its area of
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service, their view of the relative importance of Ontario Northland in the region, view of the socio-economic impacts of Ontario Northland on various communities in the region.
Senior company executives are asked to provide their views and opinions as to the quality and characteristics of services provided by the company, how it compares to competitors and other options available in the region and how they contribute to the local economies. Although responses to such survey are likely to be highly subjective, they can still be used to gather factual information and in combination with other surveys and other information may enable to develop a more complete picture of a company‟s impact.
3.6 Quality of Life Impacts
As the previous sub-task, this task will involve an analysis of multiple lines of evidence and data sources in order to identify the extent to which Ontario Northland‟s operations improve various aspects of quality of life in Northeastern Ontario including:
Standards of living (adequate/ high incomes); Access to services/ amenities of daily living; Access to health care; Access to education and information; or, Access to passenger transportation services.
The lines of evidence to be adopted here will include the same sources as for the previous methodological component but with a focus on quality of life issues and other difficult to quantify effects that describe the general living conditions and attractiveness of a region.
In particular, all survey instruments (i.e. survey of employees, survey of pensioners, survey of customers, survey of mayors and economic development officers, survey of tourist operators, and survey of senior executives) have been expanded to include questions designed to identify quality of life effects that could be attributable to Ontario Northland operations. Specifically, the respondents are asked to express their opinion to what extent Ontario Northland has improved the quality of life in the local communities. Respondents who said that Ontario Northland did improve the quality of life in their communities are then being asked to identify the key factors influencing the positive impact. Employees and pensioners are also being asked to provide information about their volunteer activities in their community.
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4: DATA AND IMPLEMENTATION
This section describes the data used in this study as well as operational steps and procedures involved in the implementation of the methodology described in the previous section and the development of the model of economic impact.
4.1 Data on Ontario Northland’s Operations
Data on company‟s operations and capital projects is the key input in any economic impact assessment as the impact is driven by the magnitude of operations and expenditures that take place in a given area. The specific data on Ontario Northland‟s operations that is examined and used in the impact assessment include the following:
Operational revenues by business line; Operation and maintenance expenditures by location of purchase (Northeastern Ontario, vs. outside the region); Capital/investment expenditures by location of purchase (Northeastern Ontario, vs. outside the region); Number of employees and payroll; Number of pensioners and pension benefits; Ridership statistics; Freight shipments statistics; and, Telecommunication statistics.
The above data on Ontario Northland‟s operations was compiled by the study team from annual reports, or extracted from corporate accounts by Ontario Northland and provided to the study team for further analysis. Appendix F provides a summary of the key data that was used in this assessment.
4.2 Survey of Employees and Pensioners
Survey of employees has been designed to collect the following type of information:
Household expenditures on various categories of goods and services and their geographic distribution; Volunteer activities; and, Opinions regarding contributions of Ontario Northland to quality of life in the region and factors driving the positive impact.
The final draft of the survey instrument is provided in Appendix A.
Survey of employees was distributed to all employees together with the pay-stub. All employees were informed in advance about the study and encouraged to respond to the survey. Employees
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were asked to return completed surveys through an internal mail system to the corporate office which will then pass all of the surveys to the HDR study team.
Survey of pensioners was distributed to all pensioners residing in Northeastern Ontario with the regular pension benefits statement. The survey form also contained an information sheet about the study and its purpose. In order to encourage responses, the survey offered cash prizes (three prizes worth $50 each) that will be drawn from among all completed responses. (Respondents were asked to provide their names and contact phone number if they are interested in participating in the draw for the prizes). The respondents also obtained with the survey form a pre-paid self-addressed envelope to use for mailing their response directly to the HDR study team.
Both surveys explained to respondents that all responses are confidential and any results will be released only in aggregate combined with other responses.
4.3 Survey of Customers
Survey of customers has been designed to collect the following type of information:
Ontario Northland‟s services used; Reasons for selecting Ontario Northland (if service alternatives are available); Subjectively perceived impact of Ontario Northland on company operations including productivity, profitability, access to markets, etc.; and, Impact of Ontario Northland on company location decisions.
The table below summarizes the survey questions and the inferences expected from them.
Table 1: Design of Survey of Customers and Expected Survey Inferences SURVEY QUESTION EXPECTED INFERENCES Question 1: Basic information about your company Basic statistical and identification information (Respondent indicates Company name, number of that could help in understanding and employees, address, name and contact info of persons differentiating impact depending on customer who responds to the survey). size, industry, or other characteristics. Question 2: Types of services used and generating Which one of the following services provided by Ontario potential impacts. Northland does your company use on a regular basis? (Respondent selects from the list provided) Question 3: Presence of competition for services offered Is there any other provider of the services you are using by Ontario Northland. from Ontario Northland in your area, or, are there alternatives to the services provided by Ontario Northland in your area?
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Table 1 (continued) SURVEY QUESTION EXPECTED INFERENCES Question 4: Analysis of advantages, cost savings, or Why have you chosen Ontario Northland over other other benefits that Ontario Northland offers providers or other alternatives? (Please indicate all factors compared to competitors. Identification of that apply to your situation and explain in some detail) factors that make Ontario Northland more attractive. Question 5: Assessment of Ontario Northland’s impact on Have the presence of Ontario Northland & their services competitiveness or bottom line of individual improved your company’s profitability? businesses. Identification of the aspects or Question 6: manifestations of improved competitiveness Have the presence of Ontario Northland & their services and bottom line. improved your company’s productivity? Question 7: Have the presence of Ontario Northland & their services improved the quality of the products or services your company provides? Question 8: Have the presence of Ontario Northland & their services improved your company’s access to key markets for products you offer for sale and/ or markets where you purchase key production inputs? Question 9: Identification of other impacts and benefits Are there any other benefits to your company attributable attributable to services obtained from Ontario (directly or indirectly) to the presence of Ontario Northland Northland. in Northeastern Ontario and the services it offers to businesses and the general public? Question 10: Assessment of the potential impact of Ontario Has the presence of the services Ontario Northland Northland on location decisions. Identification provides been an important factor for your company in of instances/ examples where a company locating to the place of your current operations or staying operates in Northeastern Ontario largely in business in that location longer than you would have? because of the presence of Ontario Question 11: Northland. Would the company have located elsewhere if it was not for the services provided by Ontario Northland? Question 12: Identification of impacts and benefits Can you give us some examples and a quantitative attributable to services obtained from Ontario estimate of how Ontario Northland services have affected Northland and their quantitative measures. the operations of your company and its bottom line?
Respondents were asked to email the completed survey directly to the study team. Non- responsive stakeholders were contacted by phone to encourage participation in the survey.
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4.4 Survey of Mayors and Economic Development Officers
Survey of mayors and economic development officers has been designed to collect the following type of information:
Ontario Northland‟s services available in the community; Presence of competition and alternatives to Ontario Northland‟s services; Impact of Ontario Northland on attractiveness of local communities to businesses and individuals and location decisions; Impact of Ontario Northland on community structure and existence in its current form; and, Impact of Ontario Northland on the quality of life in the local area.
The table below summarizes the survey questions and the inferences expected from them.
Table 2: Design of the Survey of Mayors and Economic Development Officers and Expected Inferences SURVEY QUESTION EXPECTED INFERENCES Question 1: Basic statistical and identification information. Information about your community Question 2: Types of services available in a community Which of the following services provided by Ontario Northland are and generating potential impacts. available in your community? (indicate as many as apply) Question 3: Presence of competition for services offered Is there any other provider of the services you checked in by Ontario Northland Q.2. in your community (i.e. other than Ontario Northland) or are there other service alternatives? Question 4: Opinions regarding advantages, cost savings, How do the services provided by Ontario Northland compare other benefits offered by Ontario Northland, to those offered by other providers or to other alternatives? factors that make Ontario Northland a better service provider; overall rating of services. Question 5: Opinions regarding Ontario Northland’s Have the services provided by Ontario Northland improved impact on community attractiveness or the attractiveness of your community to residents, local competitiveness to businesses and companies, or investors? individuals. Assessment of the extent to which key hypothesized aspects of impact, Question 6: service provision and procurement Have the employment opportunities and the procurement opportunities, improve the attractiveness and opportunities generated by Ontario Northland improved the competitiveness of local communities. attractiveness of your community to residents, local companies, or investors?
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Table 2(continued) SURVEY QUESTION EXPECTED INFERENCES Question 7: Identification of examples of businesses that Are there businesses in your community or the nearby depend on Ontario Northland through buyer- areas that depend on Ontario Northland services for supplier relationships. transportation of their products and/ or production supplies, or other aspects of their operations? Question 8: Are there businesses in your community or the nearby areas that depend on Ontario Northland as the key customer of their products or services? Question 9: Assessment of the potential impact/ Have you used the name of Ontario Northland and the services effectiveness of the impact of Ontario provided by the company in promotional materials or actions Northland on location decisions of companies intended to attract investors, new residents, or tourists to your and individuals community? Question 10: Opinions as to the impact of Ontario Would your community exist in its current size, structure and/or Northland on location decisions of companies economic condition in the absence of Ontario Northland? and individuals, and economic structure of local economies. Question 11: Opinions regarding the impact of Ontario How has the presence of Ontario Northland affected the quality Northland the quality of life and identification of life in your community? of key factors driving the positive impact. If you answered that Ontario Northland definitely or somewhat improved the quality of life in your community, what are the factors influencing this positive impact?
Respondents were asked to email the completed survey directly to the study team. Non- responsive stakeholders were contacted by phone to encourage participation in the survey.
4.5 Survey of Tourist Operators
Survey of tourist operators has been designed to collect the following type of information:
Ontario Northland‟s services available in the service area of interviewed operators; Presence of competition and alternatives to Ontario Northland‟s services; Impact of Ontario Northland on accessibility and attractiveness of Northeastern Ontario to tourists; Impact of Ontario Northland on community structure and existence in its current form; and, Impact of Ontario Northland on the quality of life in the local area.
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The specific format and questions in this survey are similar to the survey of mayors and economic development officers and survey of customers. The table below summarizes the survey questions and the inferences expected for m them.
Table 3: Design of Survey of Tourist Operators and Expected Inferences SURVEY QUESTION EXPECTED INFERENCES Question 1: Basic statistical and identification information that Information about your operations could help in understanding and differentiating impact depending on the characteristics of an operator. Question 2: Types of services available in a community and Which of the following services provided by Ontario Northland generating potential impacts relevant to various affects your business? (indicate as many as apply) tourist operators.
Question 3: Presence of competition for services offered by Is there any other provider of the services you checked in Q.2. Ontario Northland in your area of service (i.e. other than Ontario Northland), or are there alternatives to the services provided by Ontario Northland in your area? Please explain Question 4: Opinions regarding advantages, cost savings, or How do the services provided by Ontario Northland compare to other benefits that Ontario Northland offers. those offered by other providers or to other service alternatives? Question 5: Opinions regarding the effect of Ontario Northland Have the services provided by Ontario Northland improved the on tourism exposure and access of the region. attractiveness of your area to tourists (i.e. attracted more tourists to your area)? What (in your opinion and experience) percentage of tourists who come to your area is due to the presence of Ontario Northland? Question 6: Assessment of Ontario Northland’s overall impact Would your business exist in its current size and structure in on individual operators. the absence of Ontario Northland?
Question 7: Impact of Ontario Northland the quality of life and How has the presence of Ontario Northland affected the quality identification of key factors driving of the positive of life in your area of service? impact.
If you answered that Ontario Northland definitely or somewhat improved the quality of life in your community, what are the factors influencing this positive impact?
As with the surveys of customers and mayors/economic development officers, the final version of this survey was distributed through email to a sample of tourist operators identified by Ontario
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Northland. If an email address was not available for an operator, a copy of the survey was sent by regular mail. Non-responsive operators were contacted by phone to encourage participation.
4.6 Survey of Ontario Northland Senior Executives
Ontario Northland senior executives were also interviewed in a structured format with many of the questions drawn from the other surveys. The table below provides a design of the survey.
Table 4: Design of Survey of Senior Executives and Expected Inferences SURVEY QUESTION EXPECTED INFERENCES Question 1: Company views and factual information regarding Can you tell us about the features/characteristics of services key features of services, attractiveness compared provided by Ontario Northland that distinguishes the company to competitors, and service achievements or in its area of service in terms such as: commitments. a. Price/Rates b. B. Quality of service c. Adoption of new technologies Question 2: Company views and factual information regarding Are you aware of competition/ alternatives that Ontario extent of competition in the region. Northland faces across NEO for its various services? What are the alternatives and who are the major competitors? (Please explain your answer)
Question 3: Company subjective opinion about the value it Do you think that Ontario Northland services are a better provides to its clients. option/ provide a better value for customers than other available alternatives? Please explain your answer. Question 4: Views and awareness regarding the role of Do you think that Ontario Northland services improved the Ontario Northland services in business operations quality of service/ products offered by your customers, or made of local customers, including impact on economic it possible to provide certain products/ services which would not viability, attractiveness, productivity or better be possible in the absence of Ontario Northland in NEO? service to their own customers. Please explain your answer/ give examples
In addition, the senior executives obtained a copy of the survey of mayors and economic development officers with questions 4 to 8 and 11 which were re-phrased so that they apply to Northeastern Ontario in general, rather, than to a community.
4.7 Calculations of Impacts in Northeastern Ontario
As noted in Section 3 on study approach, to estimate the income multiplier, we need to estimate the values of m1 and m2 for various regions. M1 refers to the proportion of spending that appears at the first round of spending as local value-added, and m2 is the average propensity to consume locally.
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Estimation of m1
Estimation of the proportion of companies‟ wages, salaries and pension benefits that remain in the local economy, requires values for the proportions ai and bi for each economic sector i of the local economy. As noted earlier, ai can be viewed as the proportion of total Ontario Northland- related payments that remain in the local economy at the first round of spending. The value of bi equals the local value-added in each category of expenditures.
The survey of Ontario Northland‟s employees and pensioners provided detailed information on the distribution of consumer expenditures by category and geographic location as well as “leakages”, or money that is not re-spent in the regional economy, in the form of income taxes and personal savings. This information provided then the basis for calculation of the values of 7 ai's. ai's are in its essence the proportions of expenditures by category that are made locally.
As discussed earlier, bi‟s are estimated based on the payroll to sales ratio in each economic sector. Based on detailed 2006 Census data, we estimated payroll by sector using earnings and employment by industry for each community and region under investigation. Sales by sector are then calculated based on the local employment and employment-to-sales ratios (by industry) from the provincial input-output model from Statistics Canada.
The resulting estimates of m1 coefficients are shown in the table below.
Table 5: Estimated m1 Coefficients by Geographic Location Region m1 NEO 0.193 North Bay 0.175 Other Smaller Communities Cochrane 0.148 Englehart 0.119 Hearst 0.137 Kapuskasing 0.144 Kirkland lake 0.145 Temagami 0.122 Temiskaming Shores 0.147 Timmins 0.146 Other Communities Combined 0.138
In estimating m1 for individual communities, we have assumed that the household spending patterns are identical in all smaller communities and therefore we combined all surveys related to those communities to estimate the proportion of spending on various expenditure categories.
7 It should be noted that this study assumed that there are negligible feedback effects through increased government spending in a region because of expanded income tax revenues.
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As discussed before, m1 shows the proportion of wages, salaries and pension benefits that materializes at the first round of spending as local value-added. Some of the household income immediately leaks out in the form of income taxes and savings. Similarly, some of the earnings are leaked out of the local economies when households purchase imported goods and services. Finally, some of the inputs to the locally produced goods are imported from other regions. Therefore, only a portion of the expenditures on those goods and services stay in the local communities in the form of wages, profits, rents, commissions, etc. Table 5 shows that the proportion of income that translates into local value-added at the first round of spending varies from 0.119% in Englehart to 0.193% in Northeastern Ontario. The larger the economy, the larger the proportion of household spending that is retained as local value-added.
Estimation of m2
To estimate the multipliers, we also need to estimate the average propensity to consume locally (m2). This is the value corresponding to m1 at subsequent rounds of spending in the local economy as a whole. This coefficient (m2) measures the proportion of each dollar of consumption paid to local factors of production in subsequent rounds of the multiplier process and depends on the characteristics of the entire community. Following the methodology outlined previously, m2 was estimated for all communities where Ontario Northland has operational presence. This is given in the table below.
Table 6: Estimated m2 Coefficients by Geographic Location Region m2 Northeastern Ontario 0.5912 North Bay 0.5516 Smaller Communities Cochrane 0.4581 Englehart 0.4072 Hearst 0.4933 Kapuskasing 0.4601 Kirkland Lake 0.4314 Temagami 0.3928 Temiskaming Shores 0.5456 Timmins 0.5513 Average for Smaller Communities 0.4675
Table 6 shows that the proportion of spending that translates into local value-added in subsequent rounds of spending varies from 0.3928 in Temagami to 0.5912 in Northeastern Ontario. It is clear that the larger the industrial base of an economy, the larger is the proportion of spending that translates into local value-added in that economy.
Coefficients m1 and m2 for operational and capital expenditures were estimated in a similar manner using data on the geographic distribution of corporate expenditures. All expenses were classified into purchases from various industries. As in the case of salaries and pension benefits,
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all expenditures outside Northeastern Ontario were treated as leakages from the regional economy.
It should be noted that the data for operational and capital expenditures was less detailed and only available in the breakdown for Northeastern Ontario, rest of Ontario, rest of Canada, US and elsewhere. Therefore, the coefficients m1 and m2 and the resulting multipliers could be calculated only for those levels of geography (rather than at the community level).
Employment multiplier
As discussed before, the employment multiplier can be written as:
Me = (1/W*) + k(LVA)/W where My is the income multiplier and W* is the average annual earnings Ontario Northland employees and W is the average annual earnings in the region. The factor k is the average ratio of wages and salaries to total local value-added in the community. The first term on the right hand side of the above equation (1/W*), represents a dollar of wages and salaries divided by the average earnings of Ontario Northland employees. It shows the direct employment impact of a dollar of wages and salaries. The indirect and induced impacts are estimated by the second term on the right hand side of the above equation. LVA shows the local value-added generated by the initial flow of income into the community. This local value-added is transformed into wages and salaries by the factor k. Finally, dividing by average wages and salaries in the community, the local value-added is transformed into employment. The employment multiplier shown above represents the employment generated per dollar of wages and salaries paid to employees in the community.
To estimate the employment multipliers, we need to estimate k and calculate the average earnings in the region. For this, we employed detailed 2006 Census data to estimate the total value of wages and salaries in Northeastern Ontario. Then, the factor k was estimated by dividing total wages and salaries by the total value added in Northeastern Ontario and other communities.
4.8 Data and Assumptions for Calculations of Economic Impacts Province-Wide
Consumer expenditures pattern and their classification into industrial sectors
Induced impacts attributable to indirect employment are estimated based on spending patterns of an average Ontario household reported in Statistics Canada publication “Spending Patterns in Canada”, 2006 Edition. The average consumption expenditures by category reported in Statistics Canada survey were converted into the percentage spending. Each category of expenditures was then classified into an industrial sector consistent with industrial sectors in Statistics Canada‟s Interprovincial Input-Output model. This was necessary in order to identify the industries for which input-output multipliers would be required in order to estimate the induced impacts.
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Table 7 below shows the breakdown of expenditures from indirect wages and salaries adopted in this study for estimation of induced impacts province-wide and their input-output industrial classification.
Table 7: Spending Patterns of Average Ontario Household and Employee/Pensioner Household and Classification into Input-Output Industrial Sectors PERCENT PERCENT SHARE OF SHARE OF INPUT-OUTPUT INDUSTRY CATEGORY OF TOTAL TOTAL CORRESPONDING TO HOUSEHOLD EXPENDITURES EXPENDITURES EXPENDITURE CATEGORY AND EXPENDITURES EMPLOYEES ALL OF USED IN ANALYSIS AND ONTARIO PENSIONERS Food 13.9% 14.8% Retail Trade Shelter 28.8% 13.7% Finance, Insurance, Real Estate Household Operations Telecommunications (Except purchase of phone Broadcasting and equipment) 11.01% 11.01% Telecommunications Child Care outside home 1.90% 1.90% 610 Educational Services Domestic and other custodila services 1.57% 1.57% Other Services Pet expenses-veterinarial Other Professional, Scientific and and other expenses 1.60% 1.60% Technical Services Misceleaneous supplies 9.78% 9.78% Retail Trade Household Furnishings and Equipment 4.2% Retail Trade Clothing 6.0% 4.0% Retail Trade Composite (Average of Retail Trade, Other Services, and Finance, Private Transportation 16.2% 3.1% Insurance & Real Estate) Transit and Ground Passenger Public Transportation 2.1% 19.5% Transportation Health Care 3.1% 0.3% Health Care Services Personal Care 2.3% 1.1% Other Services Recreation 8.0% 2.1% Arts, Entertainment and Recreation Education 2.7% 5.9% Educational Services Tobacco and Alcohol 2.6% 3.9% Retail Trade Other 3.2% 1.8% Retail Trade
Classification of Ontario Northland’s activities and capital expenditures into industrial sectors
Table 8 below shows the classification of Ontario Northland‟s operational activities and capital expenditures into industries from Statistics Canada‟s inter-provincial input-output.
It should be noted that for some categories of capital expenditures shown in Table 8 (such as vehicles and transportation equipment) a higher level of industrial aggregation had to be used, for example the entire aggregated manufacturing industry, rather than, manufacturing of motor vehicles. This is because direct effects data for the lower aggregation level industry (i.e.
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manufacturing of motor vehicles) are not released making impossible the calculation of indirect multipliers.
Table 8: Classification of Ontario Northland’s Activities and Capital Expenditures into Input-Output model Industries INPUT-OUTPUT INDUSTRY CORRESPONDING TO ACTIVITY TYPES AND EXPENDITURE ACTIVITY/EXPENDITURE CATEGORY AND USED IN CATEGORIES ANALYSIS Operations by Business Line Rail Services Rail Transportation Telecommunications (Ontera) Broadcasting and Telecommunications Motor Coach Services Transit and Ground Passenger Transportation Refurbishment Support Activities for Transportation Marine Services Water Transportation Other finance, insurance and real estate and Rental Properties management of companies and enterprises Administration Administration Support Services Total Corporate Administration Support Services Capital Expenditures Computer and telecommunications equipment Computer and electronic product manufacturing Publishing industries, information services and data Software processing services Manufacturing (including manufacturing for motor Vehicles and transportation equipment vehicle manufacturing) Passenger rail equipment and refurbishment Railroad rolling stock manufacturing of passenger coaches Renovation, repairs and other construction Construction Metal components/materials for railroad Fabricated metal product manufacturing construction Wooden components/materials for railroad Wood product manufacturing construction Other materials for railroad construction Non-metallic mineral mining and quarrying Ferry vessel components Manufacturing
Input-Output Multipliers
Table 9 shows indirect provincial multipliers for Ontario Northland‟s operations and capital expenditures, and Table 10 shows provincial total multipliers for consumption expenditures. It should be noted that multipliers for the retail trade industry were adjusted by the retail gross margin rate as the original multipliers for this industry from the Input-Output model are for the retail industry revenues net of the costs of goods and services that the industry is selling. It was assumed that the average gross retail margin is equal to 30%.8 It should also be noted that this approach results likely in some underestimation of the true impacts as the effects on the
8 The aassumption of the gross retail margin of 30% is based on the study "Behind the Store Front", by Jacobson Consulting Inc., a study prepared for Retail Council of Canada and Industry Canada. Selected study chapters are available on the website of the Retail Council of Canada at http://www.retailcouncil.org/storeops/behindthestorefront/sector_margins.asp. The original multipliers for the retail trade industry were adjusted by multiplying them by the factor R/(1+R) where R equals the assumed retail margin.
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manufacturing of goods and services that the retail sector is selling are not taken into account under this approach.9
The input-output multipliers consisted of a set of multipliers for direct output, direct employment and direct labour income effects as well as multipliers for total (i.e. direct and indirect effects combined) output, total employment, and total employment income effects. The indirect multipliers needed for the estimation of indirect economic impacts were thus calculated as the difference between multipliers for total effects and direct effects for each category of output, employment, and employment income. Note that the direct output multiplier is by definition equal to one. Therefore, the indirect output multiplier is thus equal to total multiplier minus 1. Table 9 shows the resulting multipliers.
Table 9: Provincial Input-Output Multipliers for Indirect Impacts Attributable to Ontario Northland’s Operational Activities and Capital Expenditures INDIRECT MULTIPLIERS EMPLOYMENT OUTPUT EMPLOYMENT GDP INCOME ACTIVITY TYPES (PER $1 OF (PER $1M OF (PER $1 OF (PER $1 OF DIRECT DIRECT DIRECT DIRECT OUTPUT) OUTPUT) OUTPUT) OUTPUT) Operations by Business Line Rail Services 0.485 3.214 0.163 0.237 Telecommunications (Ontera) 0.385 2.580 0.122 0.205 Motor Coach Services 0.56 4.42 0.20 0.30 Refurbishment 0.641 3.288 0.171 0.247 Marine Services 0.564 3.936 0.181 0.282 Rental Properties 0.701 4.906 0.250 0.374 Administration 0.352 2.654 0.122 0.198 Total Corporate 0.352 2.654 0.122 0.198 Capital Expenditures by Type Computer and telecommunications equipment 0.299 2.237 0.111 0.162 Software 0.446 3.285 0.146 0.235 Vehicles and transportation equipment 0.484 2.642 0.131 0.211 Passenger rail equipment and refurbishment of passenger coaches 0.641 3.288 0.171 0.247 Renovation, repairs and other construction 0.539 3.364 0.183 0.262 Metal components/materials for railroad construction 0.493 2.447 0.133 0.217 Wooden components/materials for railroad construction 0.688 3.593 0.195 0.308 Other materials for railroad construction 0.422 2.567 0.134 0.223 Ferry vessel components 0.484 2.642 0.131 0.211
9 Accounting for the effects on the manufacturing and services sector due to sales at retail stores is potentially a very challenging task as it would require knowledge or data on where the various goods and services that people buy in retail stores are originally manufactured. Such data was not available at the time of writing this report.
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The multipliers shown in Table 9 are expressed in terms of indirect effects – output, employment, employment income, and GDP – per $1 of revenue or expenditure made by Ontario Northland (per $1 million of revenue/expenditure of Ontario Northland for employment impacts). For example, each dollar of revenues or expenditures of the rail services division generates $0.48 of indirect output, $0.16 indirect employment income, $0.24 GDP, and each $1 million of revenues or expenditures in this division generates 3.2 indirect jobs.
Table 10: Estimated Induced Multipliers Impacts of Re-spending of Wages and Salaries
TOTAL MULTIPLIERS (DIRECT AND INDIRECT) OUTPUT EMPLOYMENT INCOME GDP CATEGORY OF EXPENDITURE (PER $1 OF (PER $1M OF (PER $1 OF (PER $1 OF DIRECT DIRECT DIRECT DIRECT OUTPUT) OUTPUT) OUTPUT) OUTPUT) Food 0.55 7.99 0.251 0.36 Shelter 1.60 8.54 0.542 1.13 Household Operations 0.55 7.99 0.251 0.36 Telecommunications (Except purchase of phone equipment) 1.61 9.01 0.453 0.99 Child Care outside home 1.80 36.63 1.058 1.35 Domestic and other custodial services 1.79 33.64 0.871 1.21 Pet expenses-veterinarian and other expenses 1.88 21.50 0.937 1.20 Miscellaneous supplies 0.55 7.99 0.251 0.36 Household Furnishings and Equipment 0.55 7.99 0.251 0.36 Clothing 0.55 7.99 0.251 0.36 Private Transportation 1.33 16.99 0.56 0.91 Public Transportation 2.23 29.08 1.38 1.34 Health Care 1.76 24.54 0.977 1.25 Personal Care 1.79 33.64 0.871 1.21 Recreation 1.94 26.71 0.792 1.13 Education 1.80 36.63 1.058 1.35 Tobacco and Alcohol 0.55 7.99 0.251 0.36 Other 0.55 7.99 0.251 0.36
The multipliers shown in Table 10 are expressed in terms of total induced effects – output, employment, employment income, and GDP – per $1 of expenditure by category. For example, each dollar of expenditures for food generates $1.83 of induced output effects, $0.836 of induced employment income, $1.21 GDP, and each $1 million of food expenditures generates 26.62 direct and indirect jobs.
At the time when this project began, the latest input-output multipliers from Statistics Canada provincial input-output model were based on 2004 data. In the actual calculation of impacts, the original 2004 input-output multipliers were adjusted to 2007 year conditions by dividing the employment-output ratio by the inflation index between year 2004 and 2007. This is to adjust for
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the effect of inflation, as over time with inflationary increases in the value of output, fewer employees can be expected to generate the same nominal amount of output of $1 million.10
Other Data and Assumptions
Other data collected to date for the analysis conducted within this study includes the following:
Federal, provincial, and local/municipal tax revenues; Total employment province-wide and in all of Canada; Provincial employment by industry; Provincial total income, disposable income, and savings rate; Consumer price index for Ontario; and, Community socio-economic profile data (population, population growth, employment by industry, unemployment, participation rate, average income, etc.), by community in Northeastern Ontario.
It should also be noted that for the purpose of calculating the direct output and GDP as well as all indirect impacts, Ontario Northland revenues from operations (as reported in annual reports) were adjusted upwards by adding provincial subsidies and losses from operations as well as an adjustment for operational surplus.11 This is because the input-output multipliers appear to be based on industry averages that display operating surpluses larger than zero. Therefore applying multipliers to raw data on Ontario Northland revenues (disregarding the existence of operational losses) could result in underestimation of the true impact. Appendix F provides the details of the assumptions that were made and the data used.
10 It should be noted that adjustments to the other multipliers (i.e. multipliers for output, employment income and GDP) are not necessary assuming that all sectors of the economy and employee salary are affected by the same inflation rate. 11 The adjustment for operational surplus reflects the average industry operating surplus per $1 dollar of industry output as reflected in provincial input-output multipliers. The specific rate amounted to 21% and was based on the selection of industries relevant for Ontario Northland operations (Rail transportation, broadcasting and telecommunications, ground passenger transportation, railroad rolling stock manufacturing, and transportation and warehousing).
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5: STUDY RESULTS
This section presents the study results including the results of the surveys conducted and the results of the analysis pertaining to all types of impacts evaluated within this study.
5.1 Results of the Survey of Employees
The HDR study team received 250 returned employee surveys. 5 surveys were incomplete and could not be analyzed. The number of completed surveys amounted thus to 245. Assuming current Ontario Northland employment of 1,060 this implies a response rate of about 23%.12
Table 11 shows the geographic distribution of survey respondents. Almost 60% of the respondents reside in North Bay. This corresponds well to the percentage of actual employment based in North Bay. Over 12% of respondents reside in Timmins, another 11% in Cochrane, and over 6% in Englehart. A comparison with the actual distribution of employees by geographic location indicates that the survey response rates are consistent with the distribution of actual employment across Northeastern Ontario.
Table 11: Employee Survey Responses by Geographic Area of Residence Number of Percentage of Percentage of Geographic Area of Residence Survey Actual Responses Responses Employment North Bay 141 57.6% 56.7% Timmins 31 12.7% 7.4% Cochrane 28 11.4% 14.2% Englehart 16 6.5% 8.6% Temiskaming Shores 10 4.1% 4.7% Sault Ste. Marie 2 0.8% 0.1% Sudbury 1 0.4% 1.2% Kirkland Lake 3 1.2% 2.2% Unknown 13 5.3% Total 245 100.0%
Table 12 shows the selected characteristics of respondents. As the table demonstrates, the average annual household income exceeded $86,000. As it is shown later in Section 5.9 presenting the community profiles across Northeastern Ontario, this is significantly higher than the median household income in the region and even in all of Ontario.13 The average expenditures on goods and services in Northeastern Ontario amounted to $52,781. The average
12 In HDR‟s experience, response rates to mail-out surveys range typically between 20% and 30%. Therefore, the response to this survey can be considered as being within the range of expectations. 13 For example, according to the 2006 Census the median household income in North Bay amounted to $46,628 and that in all of Ontario to $60,455.
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property tax payments by employee households amounted to $2,249 annually. The average propensity to spend in Northeastern Ontario amounted to 0.78. In other words, out of each $1 of household after-tax income, $0.78 were being spent on goods and services (including property taxes) in Northeastern Ontario.
The average number of years worked at Ontario Northland was 15. The average monthly hours of volunteer work amounted to about 8.9, and during the hockey season volunteering hours related to hockey amounted to an average of over 13 hours per month. Respondents volunteered working in their local community organizations such as local schools, churches, hockey and other sports teams, chamber of commerce, Big Brother organizations, Heart and Stroke Foundation, Rotary Club, General Hospital Foundation, Kiwanis, Children Aid Foundation, Arts Center, Airport Corporation and other. Employees volunteered as coaches and assistant coaches, mentors, board members, councillors, providing help with fundraising and other administrative functions.
About 54% of respondents had a relative working at Ontario Northland, and about 90% plan to stay in Northeastern Ontario after retirement.
Table 12: Selected Characteristics of Respondents to Employee Survey Respondent Characteristic Survey Results General Household/ Respondent Characteristics (Question 1) Average household income $86,090 Average property taxes paid $2,249 Average income taxes paid $18,493 Average household spending including taxes $74,827 Average household spending on local good & services in NEO $52,781 Average propensity to spend in NEO (proportion of income (after income tax) spent in NEO, including property taxes) 0.78 Household composition (% of respondents): Single adult 13.1% Household composition (% of respondents): Two adults without children 29.8% Household composition (% of respondents): Two adults with children 53.5% Average number of years worked at Ontario Northland 15 Relative working at Ontario Northland (% reporting) 53.5% Plan to stay in NEO after retirement (% reporting) 89.8% Volunteer Activities (Question 2) Percentage Volunteering 47.76% Average No. of Hours of Volunteering per month 8.90 Maximum hours of volunteering reported (per month) 48 Average hours of volunteering in the hockey season (related to hockey), per months 13.6 Average hours of other volunteering (not related to hockey), per month 8.23
Table 13 summarizes responses for the question regarding the impact of Ontario Northland on the quality of life in Northeastern Ontario. The table demonstrates that over 94% of respondents agreed with the proposed opinion that Ontario Northland definitely or somewhat improved the
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quality of life in the region. The key drivers of this impact included (in the order of perceived importance): high quality employment opportunities, tourism exposure of the region, intercity passenger transportation, provision of high quality and reasonably priced services, apprenticeship opportunities for young people, and provision of important services locally by an easy to reach company that understands local customers and their needs. Other factors were indicated by respondents less frequently (with less than 50% of respondents selecting one of the factors in question).
Table 13: Opinions of Employees Regarding Impact of Ontario Northland on Quality of Life in Northeastern Ontario Number of Percent Survey Question on Quality of Life Impacts Respondents Respondents Agreeing Agreeing Overall Impact of Ontario Northland on quality of life
Definitely improved 194 79.2% Somewhat improved 37 15.1% No impact 5 2.0% Do not know 6 2.5% Factors influencing positive impact 1. Intercity passenger transportation and improvements in personal mobility, access to family and friends outside the area 159 64.9% 2. Causing the price of gas and other products be lower 54 22.0% 3. High quality employment opportunities 211 86.1% 4. Sponsorship of community events 81 33.1% 5. Donations to local charities 70 28.6% 6. Contributions in kind to work and programs of local non-profit and charitable organizations 55 22.5% 7. Volunteer work of employees 94 38.4% 8. Apprenticeship opportunities for young people 140 57.1% 9. Tourism exposure 171 69.8% 10. Provision of high quality and reasonably priced services 144 58.8% 11. Provision of important services locally by an easy to reach company that understands local customers and their needs 128 52.2% 12. Other factors 12 4.9%
5.2 Results of the Survey of Pensioners
The number of pensioner surveys distributed amounted to 1,092. As of November 14, 2008, the HDR study team received 134 returned surveys. 23 surveys were incomplete and could not be analyzed. The number of completed surveys amounted thus to 111 implying a response rate of just over 10%.
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Table 14 shows the geographic distribution of survey respondents. Almost 48% of the respondents reside in North Bay, almost 19% in Englehart, and another 7.2% in Temiskaming Shores. A comparison with the actual geographic distribution of pensioner residences indicates that the survey response rates are somewhat under-represented for North Bay and Englehart. As a result, smaller geographic areas and places of pensioner residential location have a larger representation in the survey.
Table 14: Pensioner Survey Responses by Geographic Area of Residence Percentage of Actual Number of Percentage Residential Distribution of Geographic Area of Residence Survey of Survey Pensioners in Northeastern Responses Responses Ontario North Bay 53 47.6% 57.6% Englehart 21 18.9% 11.5% Temiskaming Shores 8 7.2% 5.4% Timmins 7 6.3% 6.8% Kirkland Lake 5 4.5% 4.8% New Liskeard 4 3.6% 5.4% Cochrane 4 3.6% 8.1% Moosonee 1 0.9% 1.6% Unknown 8 7.2% Total 111 100.0%
Table 15 shows the selected characteristics of the respondents. As the table demonstrates, the average annual household income exceeded $49,000 and the average household spending on goods and services in Northeastern Ontario amounted to $36,467. The average property tax payments by employee households amounted to $2,249 annually. The average propensity to spend out of after-tax income in Northeastern Ontario amounted to 0.90. In other words, out of each $1 of household after-tax income, $0.90 were being spent on goods and services (including property taxes) in Northeastern Ontario.
The average number of years worked at Ontario Northland amounted to 33. Over 68% of respondents had a relative working at Ontario Northland.
The average number of hours of volunteer work amounted to 128 per year or over 10 hours per month. Pensioners most frequently volunteered in local activities and organizations such as Big Brothers, West Ferris Community Brunch, North Bay Sky Hawks Hockey, Minor Hockey, Temiskaming Amateur Radio, and at local schools.
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Table 15: Selected Characteristics of Respondents to Pensioner Survey Respondent Characteristic Survey Results Average Household Income ($) $49,369 Average property taxes paid ($) $1,860 Average income taxes paid ($) $8,953 Average Household Spending including taxes ($) $47,541 Average household spending on local good & services in NEO 36,467. Average propensity to spend in NEO (proportion of income spent in NEO) 0.90 Household composition (% of respondents): Single adult 26.1% Household composition (% of respondents): Two adults without children 63.1% Household composition (% of respondents): Two adults with children 8.1% Number of years worked in Ontario Northland 33 Hours of volunteer work per year 128 Relative working at Ontario Northland (% reporting) 68.5%
Table 16 summarizes responses for the question regarding the impact of Ontario Northland on the quality of life in Northeastern Ontario. The table demonstrates that over 87% of respondents agreed that Ontario Northland definitely or somewhat improved the quality of life in the region. The key drivers of this impact included (in the order of perceived importance): high quality employment opportunities, tourism exposure of the region, intercity passenger transportation, and apprenticeship opportunities for young people. Other factors were indicated by respondents less frequently (with less than 50% of respondents selecting one of the factors in question).
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Table 16: Opinions of Pensioners Regarding Impact of Ontario Northland on Quality of Life in Northeastern Ontario Number of Percent Survey Question on Quality of Life Impacts Respondents Respondents Agreeing Agreeing
Overall Impact of Ontario Northland on Quality of Life
Definitely improved 66 59.5% Somewhat improved 31 27.9% No impact 3 2.7% Do not know 8 7.2% Factors influencing positive impact 1. Intercity passenger transportation and improvements in personal mobility, access to family and friends outside the area 66 59.5% 2. Causing the price of gas and other products be lower 24 21.6% 3. High quality employment opportunities 74 66.7% 4. Sponsorship of community events 47 42.3% 5. Donations to local charities 32 28.8% 6. Contributions in kind to work and programs of local non-profit and charitable organizations 24 21.6% 7. Volunteer work of employees 43 38.7% 8. Apprenticeship opportunities for young people 61 55.0% 9. Tourism exposure 67 60.4% 10. Provision of high quality and reasonably priced services 48 43.2% 11. Provision of important services locally by an easy to reach company that understands local customers and their needs 37 33.3% 12. Other factors 3 2.7%
5.3 Results of the Survey of Customers
Survey questionnaires were sent to 47 customers followed by an e-mail and telephone call to remind about the survey and encourage a response. Table 17 shows the sectoral distribution of surveys sent to various customers and the response rate.
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Table 17: Distribution of Surveys of Customer and Response Rate Number of Industry Sector or Primary Number of Surveys Response Rate Surveys Customer Class Distributed (%) Returned Ontera’s Customers 33 5 15.2% Forestry 5 4 80.0% Mining 3 2 66.7% Manufacturing 2 2 100.0% Services 4 4 100.0% Total 47 17 36.2%
Overall, 16 completed surveys were received. This represents an overall response rate of 34%. As shown in Table 17, the response rates differed substantially by industry sector or customer class. The response rate for Ontera customers was very low at 15.2%.14 Excluding the Ontera customers, the response rate increases to 85.7%.
Table 18 summarizes the responses of the customers to various questions in the survey. More detailed discussion of the various questions follows the table
14 The response rate reported is based on two mailings of the survey to Ontera customers. A second mailing of surveys was initiated in order to increase the response rate.
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Table 18: Summary of Responses to Survey of Customers Ontera Question Number and Content Forestry Mining Manufacturing Service Customers Total 1 Customers responded 4 2 2 4 5 11 Number of employees 1395 935 72 97* 798 3,297 Services used (number of 2 respondents indicating use) ……Northlander 1 1 1 Polar Bear Express 2 1 2 …….Motor Coach 1 1 1 Ontera 2 5 7 Rail freight 4 2 2 3 11 ……Bus parcel 1 1 1 Any other provider? (Number of respondents indicating another provider 3 present) 2 1 1 1 4 9 Reason for choosing ON (Number of respondents 4 agreeing) Better quality of service 1 1 3 4 Commitment to customer service 3 3 Friendly local 1 1 Less expensive 2 2 3 6 Better other condition 0 Other factors 2 1 1 4 Improved profitability? (Number of respondents 5 agreeing) 2 2 2 1 7 Improved productivity (Number of respondents 6 agreeing 0 1 1 4 6 Improved quality (Number of 7 respondents agreeing 1 1 0 1 4 7 Improved access to key markets (Number of 8 respondents agreeing) 3 2 1 1 1 8 Other benefits (Number of 9 respondents agreeing) 2 0 1 1 2 6 Factor in choice of locating there (Number of respondents 10 agreeing) 4 0 0 3 7 No/do Would you have located not 11 elsewhere if not for ON know 0 0 0 NOTES REGARDING NUMBER OF EMPLOYEES: The number of employees in the table is based on employment numbers reported by survey respondent and likely refer to the location of the respondent. One of the service-related firms did not indicate the number of its employees. Employment figures reported by individual companies were as follows. Forestry companies: 400, 270, 225 and 500 employees. Mining companies: 285 and 650+ employees. Manufacturing firms: 22 and 50 employees. Services companies: 75, 10, and 12 employees. Ontera‟s customers: 120, 480, 3, 175, and 20.
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Question 1 Table 18 shows that four companies that responded to the survey represented the forestry sector, two companies were from the mining industry, another two companies were from the manufacturing sector, and three companies represented various services. Ontera customers represented a mix of industries including health services, municipal services, education, and social services. Overall, the companies that responded to the survey have employment of about 3,300 (at the locations where surveys were completed). Forestry and mining companies are the largest sectors (and with the largest average employment) and total employment of 1,125 and 935, respectively.
Question 2 All forestry, mining, manufacturing, and service companies that responded to the survey used Ontario Northland‟s rail freight services. Two service companies also used Ontera services in addition to primary Ontera customers. One service company also used the Polar Bear Express, Bus parcel express and motor coach services. Other services provided by Ontario Northland were used only by one to two respondents.
Question 3 and Question 4 Nine companies, or over 80%, stated that there is another service provider that they can use at the present time. This includes 4 out of 5 Ontera customers and 5 out of 10 rail services users. For forestry companies, an alternative is truck transportation. However, respondents report that rail is generally cheaper, in particular for long-haul destinations. One of the companies stated that “For a shipment to Los Angeles, rail is 2.5 times cheaper than truck. However, rail requires larger shipments.” The same company also mentioned that they use rail services because of “Mill logistics, can load at night and during off-peak hours. This is an important factor for internal logistics. Also some customers request shipments by rail in order to receive better rates.” Another forest company stated that they use Ontario Northland because it is the friendly, local, easy-to-reach company that understands local customers and their needs. They also mentioned that they use Ontario Northland because “More equipment is available.” 3 out of 5 Ontera customers also indicated that Ontera services are less expensive and are of better quality. One respondent stated that competition would be almost twice as costly. The respondents seemed to be very satisfied with the quality of service, appreciated the enhanced connectivity between their various locations and minimal interruptions to service. One Ontera customer (a hospital) that is using the bus parcel service reported that this service allows them to send time-sensitive patient samples that have to be examined within a certain time limit.
One mining company stated that Canadian National (CN) provides an alternative to Ontario Northland. They also mentioned that CN offers 6 days of service while Ontario Northland offers services for only 5 days a week. However, they use Ontario Northland because “routing makes more sense”. One of the manufacturing firms also stated that CN is an alternative service provider. They mentioned they use Ontario Northland because of its location being closer to them. Finally, one retailer mentioned air as a potential alternative to rail but stated that the alternative would be too costly.
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Question 5 Seven respondents stated that the presence of Ontario Northland and its services has improved their company‟s profitability. One forest company stated that, “the presence of Ontario Northland allows us to be competitive in certain markets and have access to more markets. Without rail service we would have to look for other markets. It has allowed some mills to stay in business in these difficult economic times.” Another forestry company states that, “The presence of rail service opens us to the North American market.”
Both mining companies in the survey stated that the presence of Ontario Northland has improved their profitability. One of the respondents mentioned that “It is the only economic way of shipping our product.” The other one states that, “Possibly ONTC is the only rail competition to CN Rail. ONTC allows us to choose the best routing for our customers. Shorter transit time.”
Both manufacturing firms in the survey mentioned that the presence Ontario Northland and its services have improved their company‟s profitability. One of the firms states that “CN and CP do the linehaul of our products. The rates that we have with CN and CP include the switching charge which is the primary service that the ONR performs for us. However, the ONTC has a relatively flexible switching schedule that enables the North Bay facility to operate with lower inventories. We have also been able to store excess cars with the ONR. The ONR has been very helpful with siding maintenance.” The other manufacturing firm states that, “Without ONR the cost to deliver our product to market would be considerably more expensive.”
One retail firm states that, “Ontario Northland is the only low cost freight service available.” Another one states that, “No other competitor to compare with. Reduction of freight service has negatively impacted our profitability due to only two deliveries of fresh produce, bread, etc. compared to the previous three deliveries.”
Question 6 One mining company and one manufacturing company stated that the presence of Ontario Northland has improved their productivity. The mining firm states that Ontario Northland is the only economic way of shipping their products. The manufacturing firm states that, “Ontario Northland has a relatively flexible switching schedule that enables the North Bay facility to operate with lower inventories. We have also been able to store excess cars with the ONR. The ONR has been very helpful with siding maintenance.” 4 out of 5 Ontera customers also felt that the service improved their productivity.
A few companies answered specifically “No” to this question and pointed out some service deficiencies that caused them organizational problems and costs. One of the forest companies stated that “In the last 18 months we struggled with getting empties to our facility so we can load our product.” The retailers commented that “If frequency of TOFC rail service improved, our productivity would improve. OTP is also critical to productivity.” “In the past year there have been many late trains due to equipment break downs and repairs to tracks, etc. We schedule one week in advance and are forced to pay overtime when the train is late. The cost of transferring goods to smaller transport trucks that fit on your flat car adds to the cost that is passed on to the
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consumer and every time you handle fresh product you shorten its shelf life - for example strawberries.”
Question 7 One forestry company, one mining company, one service company, and four Ontera customers answered “Yes” to the question whether Ontario Northland services improved the quality of their products or services.
In general, the services provided by Ontario Northland do not seem to have an effect on the quality of product offering in forestry, mining, or manufacturing, and some respondents made the specific distinction between quality and profitability and market reach (Question 5). One mining company stated that rail service provided by Ontario Northland is the only economic way of shipping their product. One forestry firm stated that “Reduced trains is a negative, however, the promptness of how ONR handles other things is a positive. Therefore, I responded both Yes and No.” Another forestry firm that responded No to this question states that, “Quality is the same. However, it allows us to meet customers‟ requirements, lower price to customers. This also helps the final customer to stay competitive. One wholesaler states that, “It assists in getting products to the customers in a timely manner.” One retailer that also used the Internet services and responded “do not know” to this question states that, “In some instances the Internet has helped in offering new or expanded service. This has led to frustration by our customers when the service is down. Between 4 pm and 5 pm, we have regular slow downs in service. Once you have high speed it is expected 24/7, and the store is the target not necessarily the service provider. People are quick to forget what it was like before debit cards, ATM‟s and instant access to the Internet.” One of the forest companies that responded No to this question states that, “No new equipment has been purchased in the last 25 years. Example, the current equipment has warped walls and missing door seal, doors are hard to close. There have been many derailments and cars that were scrapped have not been replaced.” One of the retailers who responded No to this question states that, “ONR‟s frequency of TOFC service to Moosonee has not improved.”
Question 8 Three forestry firms, two mining companies, one manufacturing company, one service company, and one Ontera customer responded that the presence of Ontario Northland and their services have improved their access to key markets for their final products and purchase of inputs. One forestry firm states that, “They allow us to rail to some of our customers.” Another forestry company states that, “It allows us to stay competitive in certain markets and compete with other producers who may be located closer to those markets.” Another forestry firm mentions that, “The farther you go, the cheaper rail costs get. We can ship all over North America only because of rail service.” One of the mining companies mentions that, “Again, it allows us to choose the best routing to better service our clients.” One manufacturer states that, “The ONR provides us with vital transportation link to our key markets and without the ONR, the cost to deliver our product to market would make us uncompetitive.” One wholesaler mentions that, “It is the only freight service available.” One retailer who answered No to this question mentions that, „The service was much better when we had additional deliveries.”
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Question 9 Six respondents mentioned other benefits from having access to Ontario Northland services. One manufacturer mentions that, “The safe shipping of our product is extremely important to us and our ability to transport large volumes by rail using Ontario Northland is very valuable.” One forestry company mentions that, “Railroad jobs inject money into the local economy.” Another forestry firm mentions, “More personable service and lower ancillary charges.” One retailer who answered “do not know” to this question, states that, “The tourist train in the past has always helped our business – last year there was a marked decrease due to the late arrivals because of repair work on the tracks. Once the pattern of tourist destinations is broken, it will be extremely difficult and costly to re-establish.”
Question 10 and Question 11 All forestry companies and three Ontera customers stated that the presence of Ontario Northland has been an important factor for their company‟s locating to the current location or staying in business. However, they did not agree with the statement that they would have located elsewhere if not for Ontario Northland service. Although the latter answer somewhat contradicts the former, the issue may be that at the present time companies would not move to another location if Ontario Northland‟s services became unavailable. However, they consider the availability and proximity of these services as important and would consider them in future location decisions.
General Comments The table below provides general comments offered by survey respondents.
Table 19: General Customer Comments 1. Ontario Northland helps coordinate logistics and helps us to stay competitive. In some markets 25% of shipments are by rail (forestry). 2. Three-day demurrage cap has affected ancillary charges positively, however, the railcars are not provided as requested creating inflated numbers at the mill. The mill and ONR would benefit from getting railcars to us as requested. I view the ONR/CN/CP as a cooperative in getting us the needed cars. One company cannot blame the other and wash their hands. Our product either goes by rail or truck, therefore, rail lines all suffer if there is an issue with rail (forestry). 3. Rail service is very important for the survival of our company (forestry). 4. We believe ONR could improve service to Moosonee by: 1) increasing TOFC service from Cochrane to Moosonee to at least three trains per week. 2) Promptly change all TOFC cars to cars that can handle 53‟ vans. 3). Undertake van loading, unloading and securing in Cochrane and Moosonee (retail). 5. ONR is the only land-based service available to bring products and people to Moosonee. Passenger service, however, is deteriorating with the lack of upgrading as was promised on the coaches servicing Moosonee. Passenger service would have a difficult time to survive if there was a comparable alternative available (wholesale). 6. Elimination of third delivery and additional passenger services has resulted in more out- shopping. It seems odd that cars and trucks can be hauled with a passenger train and a piggy back van cannot. In addition, if your flatcars could accommodate regular-sized transport trailers, we could lower our handling time and the cost (retail).
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Table 19 (continued) 7. Sometimes it becomes frustrating when no one is available at the Matheson office to either answer the phone or be at the station for other inquiries. It is also frustrating because there is no link between the train in Cochrane to the ONR bus in Matheson or Timmins. Therefore, we have women who are fleeing abusive relationships and have to either stay in Cochrane for the night (at their own expense) or we will taxi them to the shelter (which is a very big expense). I would be nice to have a bus that links directly to the train to transport women to either Timmins or Matheson. There is also a long wait between the am bus and the pm bus to return to Matheson. Would be nice if there was an afternoon bus to and from Matheson. 8. The ONR bus lines have certainly assisted us with making services easier to access for women and children.
5.4 Results of the Survey of Mayors and Economic Development Officers
Survey of mayors and economic development officers was distributed by emails to 17 local municipalities in Northeastern Ontario. This was then followed up by phone calls and additional e-mails. Ten completed surveys were received. In addition, there were two returned surveys in which respondents stated that their communities do not have a tourism industry or access to the services provided by Ontario Northland and, thus the survey does not really apply to them.
Table 20 presents a high-level summary of responses to the survey. This is followed by a more detailed discussion of responses.
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Table 20: Summary of Responses to the Survey of Mayors and Economic Development Officers Do not No. Survey Question Yes No Better Same Worse Total Know 2 Services Available a. Northlander 8 8 b. Polar Bear Express 1 1 c. Dream Catcher 3 3
d. Ontera 10 10 e. Rail freight 8 8 f. Scheduled, charter, rental motor coach 10 10 g. Bus parcel express 10 10 3 Other providers 8 1 1 10 Comparison of Ontario Northland 4 Services to other providers a. Quality of service 1 5 2 8 b. Customer service 2 5 1 8 c. Price 1 2 1 4 8 d. Other condition 3 5 8
5 Improved attractiveness 3 4 3 10 Employment and procurement 6 opportunities 3 5 2 10 7 Dependency on transportation 9 1 10 8 Dependency as a customer 2 4 4 10 9 Promotional role 8 1 1 10 10 Community existence 3 4 3 10 11 Definitely improved quality of life 7 7 Somewhat improved quality of life 2 2 No impact 0 Do not know 0 1. Intercity passenger transportation 8 8 2. Causing price of gas and other products 1 1 3. High quality of employment 5 5 4. Sponsorship of community events 6 6 5. Donations to local charities 2 2 6. Contributions in kind 2 2 7. Volunteer work 7 7 8. Apprenticeship opportunities 4 4 9. Tourism exposure of the region 8 8 10. Provision of high quality and reasonably priced services 8 8 11. Provision of important services 5 5 12. Other factors 2 2 NOTE: Shading in the table indicates that the given category of answer was not used in the question.
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Question 2 Table 20 shows that Ontera, scheduled, charter and rental motor coach and bus parcel express services are available in all communities that responded to the survey. Northlander passenger train and rail freight and contract services are available in 80% of the communities. The Dream Catcher and the Polar Express services are available in 30% and 10% of the communities, respectively.
Question 3 There are other providers of similar services in 80% of the communities. (Two respondents mentioned there are no other suppliers of the services Ontario Northland provides in their communities.) Some of the competitors active in the surveyed communities are:
1. Telecommunication services: Bell, Rogers, Cogeco, Northern Telephone; 2. Rail services: Ottawa Valley Railway, CN; 3. Scheduled bus service: Greyhound'; 4. Chartered and rental motor coach services: Tisdale Bus Lines, Lacroix; and, 5. Bus parcel express: Greyhound, Purolator, Muskoka Delivery, FedEx, Gabbani Transportation, Express and Priority Posts, UPS,
Question 4 Most respondents rank Ontario Northland‟s services as similar to, or better, than the alternatives in terms of quality of service and customer service. In terms of price comparison, only one respondent found Ontario Northland prices to be higher than its competitors. Overall, it appears that Ontario Northland ranks similar to or better than its competitors in terms of quality of service, customer service, price and other conditions. One respondent commented that Ontario Northland has an important role in Northeastern Ontario as a vehicle of economic development and provider of reliable service.
Question 5 In response to the question of whether services provided by Ontario Northland have improved the attractiveness of the local communities, 30% of the respondents said yes, 40% said no and the other 30% did not know. One respondent commented that Ontario Northland‟s presence complements other industry sectors and demonstrates to existing and potential investors the viability of North Bay. Another indicated that a lot of investors look at what types of services are offered, and the proximity of those services. One respondent expressed a disappointment regarding inconvenient scheduling of passenger rail service and recent bus service cuts and emphasized the importance of these services to local residents.
Question 6 In response to the question of whether Ontario Northland‟s employment and procurement opportunities have improved the attractiveness of the local communities, 30% answered yes, 50% said no and 20% did not know. In comments, respondents were indicating high concentration of skilled trades within Ontario Northland, attraction of new people to the region and retention of young people in the area. The respondents also recognized the importance of local purchasing by Ontario Northland in supporting local business community. One respondent also expressed some sentiment indicating that “Ontario Northland has been in our community
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since the inception of the town and most of the families living here have either worked themselves on the Railroad, have family members working there or came from descendents of railroaders.”
Question 7 and Question 8 Almost all, except one, respondents stated that there are businesses in their communities that depend on Ontario Northland services. Two communities stated that they are also dependent on Ontario Northland as a customer for the products or services provided by local businesses. In written comments, respondents indicated that many local companies, in particular in forestry and mining sectors, are large users of rail services. However, smaller companies also use Ontario Northland‟s services on a regular basis. Bus parcel service and motor coach are also perceived as important, convenient, and widely used services to local businesses and residents. One respondent gave the example of Nipissing University and Canadore College with student population of over 7000. Many students are from outside the area and frequently use the bus service. There are also instances of local businesses that have Ontario Northland as a key customer.
Question 9 Eight out of ten respondents stated that they use Ontario Northland and its services in their promotional materials or actions intended to attract investors, new residents and tourists. The services provided by Ontario Northland are listed in community profiles, pamphlets, or tourism brochures. There were also comments that Ontario Northland helps demonstrate to existing and potential investors that Northern Ontario has sustainable industry with skilled trades, and that the region is more than mining, tourism and forestry.
Question 10 Four out of ten respondents stated that their community would not have existed in its current size, structure and economic condition in the absence of Ontario Northland. 30% mentioned they did not know and 30% believed their community would have been the same in the absence of Ontario Northland. One respondent commented that without Ontario Northland, unemployment levels would be much higher, in particular in North Bay and area, property values would be impacted, and investment in the North would be questioned. Travel and delivery of goods within Ontario would be affected. One respondent stated that “If trucking costs became prohibitive and rail services no longer available, our main industry could potentially collapse.” Another respondent provided a similar comment indicating that shipment of products to distant customers may not be viable without rail transportation and business would be more difficult.
Question 11 All respondents believe that the presence of Ontario Northland has improved the quality of life in their communities. The following factors are selected as the top reasons (percent respondents agreeing shown in brackets).
1. Intercity passenger transportation (80%); 2. Tourism exposure of the region (80%); 3. Provision of high quality and reasonably priced services (80%);
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4. Provision of high quality and reasonably priced services (70%); 5. Sponsorship of community events (60%); 6. High quality of employment (50%); and, 7. Provision of important services (50%).
Additional comments are presented in the able below.
Table 21: Comments Regarding Impact of Ontario Northland on Quality of Life in Northeastern Ontario 1. The ONR has provided meaningful, quality employment for the area. The ONR sponsors the Santa Xpress each year and is a huge hit and greatly appreciated by families. The IPM Train is a perfect example of partnership to ensure great exposure for tourism, business and investment opportunity. The ONR provides accessible transportation between communities and delivery options. A same day return would be helpful but not always feasible. The ONR has always been active in the community and one specific example is in regards to Emergency Planning. The ONR has assisted with our emergency management program by keeping us informed of the products they carry and meeting our compliance requirements by assisting with mock exercises and training. 2. As previously noted, ONTC in Northeastern Ontario not only demonstrates the Province of Ontario‟s commitment to the North, this Corporation is a vital tool for local communities to promote their services and capabilities. ONTC‟s original role was to develop and promote the North. At that time the North was really a frontier with minimal services. Today the North is not a frontier, however, given today‟s global competitive markets, this development role is as important as it was in the beginning. Having over 500 employees in North Bay, the payroll alone has a positive impact on the quality of life of the community. Providing passenger transportation services supports the college and university as well as providing the community with efficient timely access to the North and South. Bus charter services provide a competitive service which moves thousands of students, teams and tourists to their destination. ONTC employees are key community volunteers for various community events. The work of these volunteers has a positive impact on our youth and allows service clubs to be active in the community. Without these resources the community would suffer beyond the economic realm. 3. Citizens of Hearst although distant, have the ability to travel freely to larger centres for social outings, vacationing and access to health and social services. Freight service is key factor in the viability of local industry, and thus an element of great importance in creation of employment. 4. Since the services are an hour away, it does not have a direct impact on our community but it does help in attracting investors for new projects. A lot of investors look at what types of services are offered, and the proximity of those services. Visitors or residents coming in or out of our community also have access to your services within an hour‟s drive. Having multiple ways to travel is always beneficial to a community. 5. It is a service that is taken for granted and that is not overly appreciated unless it suddenly disappears. 6. ONTC definitely has had an impact on our community, but unfortunately that impact is diminishing as result of a service that is not as well marketed as its competitors and because of the removal of the rail line in 1989. Being able to provide transportation to citizens, delivery of goods and providing limited employment opportunities has naturally improved the quality of life in the City of Timmins.
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Table 21 (continued) 7. In Northern Ontario the bus and rail service is key to the lifestyle of the residents. Winter travel is difficult and there are many people who do not operate a vehicle during this time. 8. We don‟t know what the ridership numbers are, but we do know that our population is aging and as it ages, the availability of alternate modes of transportation becomes more and more important, especially for health appointments. Also, many citizens do not like to drive long distances especially in the winter. To increase ridership, ONTC needs to market its services in a more effective way.
5.5 Results of the Survey of Tourist Operators
The survey was distributed by mail to 17 tourist operators in Northeastern Ontario. The mail-out was followed up with phone calls to encourage participation. Four completed surveys were returned. Table 22 shows the high-level summary of responses to various survey questions. This is followed by a brief discussion after the table.
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Table 22: Summary of Responses to Survey of Tourist Operators Do not No. Survey Questions Yes No Know 2 ON Services available in service area a. Northlander 4 b. Polar Bear Express 4 c. Dream Catcher Express d. Ontera 2 e. Rail freight 1 f. Refurbishment services 1 g. Scheduled charter and rental motor coach 1 h. Bus parcel express 1 3 Other Provider of the service 4 4 No other provider NA NA 5 Attractiveness 4 % of tourists 3 1 6 Existence without ON 2 2 7 Quality of life Definitely improved 1 Somewhat improved 3 no impact 1. Intercity passenger transportation 4 2. Causing price of gas and other products 1 3. High quality of employment 3 4. Sponsorship of community events 2 5. Donations to local charities 1 6. Contributions in kind 3 7. Volunteer work 1 8. Apprenticeship opportunities 3 9. Tourism exposure of the region 3 10. Provision of high quality and reasonably priced services 1 11. Provision of important services 2 12. Other factors
Question 2 and Question 3 Table 22 shows that all four operators depend on Northlander and Polar Bear Express; two use Ontera and one uses each of the other four services outlined above (e to h). All four tourist operators indicated that there is no other supplier of the services Ontario Northland provides.
Question 4 There are no other service providers or competitors. One tourist operator mentioned that “Customer service could be improved. No one answers the phone (voice mail is always activated)”.
Question 5 All operators believed that Ontario Northland has improved the attractiveness of the area to tourists. One mentioned that about 80% of their business is due to the presence of Ontario
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Northland. Another stated that 85% of their business is due to Ontario Northland and another one reported 75% of its business is dependent on Ontario Northland. One respondent commented: “Do not keep track. We get business 12 months a year. We get lots of repeat customers living in Moosonee area.”
Question 6 Two of the operators stated that their business would not exist in its current size and structure in the absence of Ontario Northland. Two others said they do not know. One of the operators mentioned that, “Tourists play a big role during the summer season. The business would not be as busy during the summer without Ontario Northland.” One of the operators who stated “do not know” mentions that, “Ontario Northland has been a vital component to the size and growth of my business (re the Polar Bear Express).”
Question 7 On the quality of life question, three operators stated that Ontario Northland has somewhat improved the quality of life in their community. One operator stated that it has definitely improved the quality of life in the area. In terms of ranking the reasons for quality of life improvement, the intercity passenger transportation ranks first followed by high quality of service, contribution in-kind, apprenticeship opportunities and tourism exposure.
As an example of how Ontario Northland has affected the area or business, one operator states that, “They do in Polar Bear Express. But lately, tourism is stale and Polar Bear Express has been 2 or more hours late every night during the summer arriving at 1 am, 2 am, and 3am. Unacceptable. Everything was closed, restaurants, etc., No one there to receive the customers. Passenger service management was nowhere to be seen or heard. They are located in North Bay, Ontario. They appear to be unconcerned about Cochrane. They are moving more people in Cochrane than North Bay. They should be moving their passenger department to Cochrane, a must.” Other comments are stated in table below.
Table 23: General Comments of Tourist Operators 1. The Polar Bear Express is a vital tourist attraction that must continuously try to improve itself and market itself as a total unique experience. 2. Ontario Northland provides jobs and is a very important community partner. Through its famous “Polar Bear Express” train ride, numerous people throughout the world have visited Northern Ontario and enjoyed what it has to offer. Customer satisfaction and train time reliability is an important factor in retaining interest and developing growth in the tourist industry. 3. Business corporate people travel from the south (Toronto) to Cochrane for business. The Polar Bear Express is a very popular destination and is reasonably priced. Ontario Northland is good to have for Cochrane. 4. The polar bear habitat actually compliments ONTC products. It has been in existence for 40 years and has branded the area during those years. 5. They bring tourist to the area, market and brand the region and provide a tourism product and services that are crucial to the area. 6. Customer service could be improved. No one answers the phones (voice mail is always activated). Prices are okay.
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5.6 Survey Results of Ontario Northland Senior Executives
Four senior executives of Ontario Northland were interviewed and surveyed to obtain company specific views. Table 24 shows the high-level summary of responses to various survey questions. This is followed by other comments received.
Table 24: Results of the Survey of Senior Executives NUMBER OF QUESTION CONTENT: “YES” NUMBER ANSWERS 1 Special features/characteristics of services a. Price/rates being cheaper 3 b. Quality of service better 3 c. Adoption of new technology 3 2 Presence of competition/alternative service provider 2 3 Better option/value for customers 3 4 ON has improved quality of life 3 5 Services compared to alternatives Better quality 3 Better customer service 3 Price being cheaper 3 6 ON has affected the quality of life in NEO 3 7 Employment opportunities 3 8 Businesses in NEO dependent on ON services 3 9 Businesses dependent on ON as a customer 3 10 ON affected quality of life in NEO Definitely improved quality of life 3 1. Intercity passenger transportation 3 2. Causing the price of gas and other products be lower 1 3. High quality employment opportunities 3 4. Sponsorship of community events 2 5. Donations to local charities 2 6. Contributions in kind... 7. Volunteer work of employees 3 8. Apprenticeship opportunities 2 9. Tourism exposure 3 10. Provision of high quality and reasonably priced services 3 11. Provision of important services.... 3 12. Other factors
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Question 1 a) Price /rates: 1. Ontario Northland offers both bus and rail passenger transportation throughout NEO connecting through Sudbury and North Bay to Toronto. Passenger rail transportation (Northlander, Polar Bear Express) is heavily subsidized allowing the residents access to convenient affordable travel. Motor Coach service is offered to most communities between Timmins/Cochrane and Hearst at a price which is lower than would be offered by the private sector. Greyhound Canada has recently reduced service from Thunder Bay to Hearst and these reductions will continue as the industry faces decreased ridership within the Province. Our bus parcel express rates are significantly lower than any other delivery/courier options. Package tours on the PBX are sold at competitive rates.
2. ON Rail offers competitive freight rates needed to reach distant markets which is not feasible with truck transportation and offers equal access to Canada‟s largest railways, CN and CP.
b) Quality of service 1. Through the motor coach department, Ontario Northland offers a high level of service with convenient schedules, highly trained professional drivers and safe and reliable equipment. Our bus parcel express is an inexpensive and convenient method of shipping parcels throughout our territory. Our Northlander service is comfortable and convenient, but we do experience challenges in on-time performance during the winter months due to aging equipment and track issues. Passengers with mobility challenges will often choose the Northlander, regardless of on-time performance, as the train offers passengers more leg room, the ability to get up and move around and get to a snack car. For the residents of Moosonee, Moose Factory and the coastal communities, the Polar Bear Express is the only affordable option for travel to the south. 2. Train service schedules are designed to minimize transit times yet are flexible when rush shipments are required to keep a customer‟s plant operational when in critical shutdown status. 3. Ontera provides higher level of service compared to alternatives since we have local people on the ground to provide customer support and maintain our infrastructure. We have been providing services to areas that would not have otherwise received internet services.
c) Adoption of new technology 1. Ontario Northland has been working to replace our passenger rail equipment for both the Northlander and PBX service. We also replace or refurbish our highway motor coaches regularly. 2. ON Rail has upgraded its revenue car fleet with higher capacity cars, newer mainline locomotives, and implemented modern information technology to better serve its customers.
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3. We are constantly upgrading and incorporating new technologies to ensure that customers and businesses in NEO are not disadvantaged compared to businesses and customers in other regions. We in fact want to ensure that businesses in NEO have a competitive edge compared to others in the rest of Canada and North America.
Question 2 1. In terms of public transportation, Ontario Northland is the only provider in NEO. Our major competitor is the personal vehicle. Our PBX package tour product competes with all tourist attractions within the region. It is considered an “anchor” attraction and also an important partner within the industry. The Polar Bear Express commuter train is the ONLY land transportation option for the residents of Moosonee, Moose Factory and the coastal communities. 2. ON Rail‟s primary competitor is truck transport and CN Rail to a limited degree with traffic originating at or near our interchange junctions. 3. We have increased competition in NEO and caused prices to come down significantly resulting in direct benefits to the customers. In fact, we invest in infrastructure that brings high quality service to remote areas that would not have otherwise been serviced. At the same time, our competitors have access to our infrastructure.
Question 3 1. Ontario Northland provides motor coach services to communities between Timmins and Hearst as well as several small communities between Timmins and Sudbury and Cochrane and North Bay. It is my opinion that this service would not exist if it was provided by the private sector. The routes are not profitable and with declining population in this region, it is not expected that they will be. Ontario Northland takes profits made in southern Ontario and “cross-subsidizes” the northern routes. The Northlander also provides good value for transportation to Toronto. Many residents are reluctant to travel from NEO in the winter months and without public transportation, their travel would be significantly restricted. Ontario Northland promotes its Polar Bear Express and Dream Catcher Express packages at the Ontario Motor Coach Association trade show, Rendezvous Canada and other smaller trade shows. As a tourism partner, we also cross-promote our partner attractions such as the Polar Bear Habitat in Cochrane, Kirkland Lake Hockey Hall of Fame and the various attractions in Timmins. 2. Yes, ON rail offers better options to customers, particularly over longer distances. One rail car typically has the payload capacity of 2 or 3 truckloads, and rail has been shown to emit six times less greenhouse gases (GHG) than heavy trucks. 3. We provide telecommunication services to remote areas where there are no other providers.
Question 4 1. Again, intercity motor coach and passenger rail travel would not exist without Ontario Northland. 2. Yes, ON Rail has an extensive history and will continue to be an industrial development catalyst in NEO. In 1999, ON Rail funded a $20 million project constructing 18 miles of
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track into Agrium‟s Kapuskasing Phosphate operation and now transports in excess of 1.0 million tons of phosphate annually. 3. We provide remote communities in NEO with world class telecommunication services.
Question 7: 1. The passenger service division provides significant employment opportunities throughout NEO. 2. Local companies would see a significant reduction in business from ON Rail if it were part of a larger railway company, as large corporations typically consolidate their requirements for goods and services at head office. 3. We provide training programs to local population in order to develop technical expertise in various NEO communities.
Question 8: 1. Several small businesses use our bus parcel express service to move documents and packages between the communities of NEO. Ontario Northland often carries blood products between the medical centers of NEO. Employees travel to and from work sites via our public transportation modes. 2. The Xstrata smelter operations at Kidd & Noranda would not have a viable cost effective method to ship 1.0 million tons of sulphuric acid without access to rail transportation. Similarly, Agrium‟s Phosphate operation transports over 1.0 million tons of phosphate to their fertilizer plant in Redwater, AB which is 1500 rail miles away.
Question 9: 1. Lacriox Bus Lines of Hearst Ontario operates our Northlander shuttle between Cochrane and Hearst. 2. We purchase variety of products and services including safety supplies from our local cable and construction companies.
Other Comments of Senior Executives Services provided by Ontario Northland helps most of the major forestry and mining companies (Tembec, Abitibi, Spruce Falls paper, Grant Forest product, etc.) to lower cost. Similarly, the Xstrata smelter operations and Agrium‟s Phosphate operation need a rail service for their products. Therefore, economic impact of those forestry and mining companies are also supported by ON.
ON has given various businesses in NEO the ability to ship their products in many ways. In other words, many of these companies use their rail service which is independent and then have a choice between CP and CN and can negotiate a lower price with them. If they were on CN or CP from the beginning, they would not have had that choice.
ON listens to the concerns of NEO residents and is responsive to the concerns and welfare of people in NEO. They are investing in new fibre optic technology to make sure there are no interruptions.
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ON wants to develop to new areas, northern regions including James Bay and Hudson Bay. The area north of 50 parallel is the area of significant mining and energy potentials and ON is strategically positioned to help such development. ON is ready to help new development in the area. If there are mining developments that require rail services, they will be the ones providing those services to ensure that resource development becomes viable. ON takes social and economic welfare of the north into account when deciding to provide those services. Ideally, ON should be in a position to help all Northern Ontario communities. On provides the only connection to the Arctic Ocean in Ontario. There is a significant potential for resource development in the James Bay area and ON is well positioned to play an important role in that development.
Passenger Services (PS) will continue to work closely with the Rail Services Division to refurbish the Polar Bear Express passenger coaches and the Northlander equipment. These upgrades are being made with accessibility and passenger comfort in mind. We survey our passengers regularly to ensure we are meeting their needs and responding to their feedback. We will continue to look for opportunities to become leaders in the tourism industry in Northeastern Ontario.
Ontera wants to expand their infrastructure to underserviced areas in NEO and constantly improve their technologies to make NEO an IT resource centre that gives area businesses a competitive edge compared to those in other parts of Canada and US. Ontera also links hospitals in remote areas to main centres therefore providing electronic access to specialists.
5.7 Economic Impacts within Northeastern Ontario
This section reports the economic impact results within Northeastern Ontario. Since for the estimation of regional and local impacts multipliers have to be developed and estimated first, this section reports first results pertaining to the magnitude of the multipliers. This is then followed by aggregate results of the total impact and a discussion interpreting the results and relative importance of Ontario Northland in Northeastern Ontario.
5.7.1 Estimated Income Multipliers
Table 25 shows the estimated income (or value added, or gross domestic product (GDP)) multipliers by type of expenditures (wages and salaries, pension benefits, and operational and capital expenditures) and region in Northeastern Ontario.
Table 25: Estimated Income Multipliers by Region and Type of Expenditure MULTIPLIERS $ OF VALUE ADDED PER $1 OF EXPENDITURES REGION OPERATIONAL WAGES AND PENSION AND CAPITAL SALARIES BENEFITS EXPENDITURES Northeastern Ontario 1.472 0.870 1.300 North Bay 1.391 0.767 NA Average other communities 1.260 0.589 NA
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Table 25 shows that, for example, $1 of wages and salaries paid by Ontario Northland to employees in Northeastern Ontario generates $1.47 of value added across the region. The multiplier for North Bay and other smaller communities is smaller because of larger “leakages” or amounts of money that are spent outside of the community at various rounds of spending.
It is well known that multipliers associated with pension benefits are smaller than those for wages and salaries since there is no direct value added generated at the initial round of spending. Wages and salaries are direct payments for services (value added) produced by the employees. This is not the case for pension benefits. Pension benefits start creating value added or income when recipients spend their income on goods and services. Therefore, multipliers for pension benefits had to be slightly modified to correct for this different nature.15 Table 25 shows that for each $1 of pension benefits paid, $0.87 of value added is generated in Northeastern Ontario.
The income multipliers shown in the table also suggest that each dollar of capital and other expenditures by Ontario Northland generates $1.30 of value-added in Northeastern Ontario. Note that this multiplier is smaller than the one estimated for wages, salaries because a portion of the capital and other expenditures leaks out of the regional economy (i.e. is spent outside of Northeastern Ontario).
5.7.2 Estimated Employment Multipliers
Table 26 shows the employment multipliers estimated using the formula discussed earlier in this report. For example, the table shows that for each $ 1 million of wages and salaries paid out by Ontario Northland, there are over 25 jobs supported across Northeastern Ontario, including the jobs in Ontario Northland itself.
Table 26: Estimated Employment Multipliers, by Region and Type of Expenditures MULTIPLIER NUMBER OF JOBS PER $1 MILLION OF EXPENDITURES REGION OPERATIONAL WAGES AND PENSION AND CAPITAL SALARIES BENEFITS EXPENDITURES Northeastern Ontario 26.28 8.29 5.27 North Bay 24.86 6.87 NA Average other communities 22.56 4.57 NA
Similarly as in the case of income multipliers, employment multipliers for pension benefits are smaller than multipliers for wages and salaries. This is because there is no direct employment associated with pension benefits; they are immediately re-spend on consumer goods and services in the expenditure cycle that represents induced effects..
15 In a simple model, the multiplier associated with wages and salaries equal 1/(1-MPC) while the multiplier associated with pension benefits equal MPC/(1 – MPC), where MPC is the marginal propensity to consume.
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The employment multiplier shows that for each million dollars of capital and other expenditures by Ontario Northland, 5.27 person-years of employment is generated in Northeastern Ontario‟s economy. This multiplier is smaller than the other types of multipliers because of leakages out of the region and because the industrial activities corresponding to this type of expenditures (primarily manufacturing and construction) have intrinsically smaller labour content than many activities corresponding to wages and salaries. In particular, re-spending of wages and salaries corresponds to business activities in retail, personal services, and other sectors which are relatively labour-intensive. In addition, expenditures on wages and salaries create direct jobs at Ontario Northland.
5.7.3 Total Impact of Ontario Northland in Northeastern Ontario
Table 27 shows the estimated impact of Ontario Northland in Northeastern Ontario in terms of total value added and employment attributable to its activities. All estimates are based on multipliers presented in Table 25 and Table 26. The table shows that Ontario Northland accounts for about $209 million of value added and 2,140 jobs in Northeastern Ontario.
Table 27: Estimated Annual Economic Impacts of Ontario Northland in Northeastern Ontario AMOUNT OF TOTAL VALUE- EMPLOYMENT DIRECT CATEGORY OF SPENDING ADDED (NUMBER OF EXPENDITURE ($ MILLIONS) JOBS) ($MILLIONS) Wages and Salaries $57.7 $84.9 1,516 Pension Benefits $25.0 $21.8 208 Capital and Other Expenditures $79.0 $102.7 416 Total $161.7 $209.4 2,140
Table 28 shows the implied (i.e. resulting from estimated total impacts presented in Table 27) multipliers of Ontario Northland in Northeastern Ontario. The table shows that the employment multiplier amounted to 13.2 jobs per $1 million of expenditures and the GDP multiplier amounted to $1.29 per $1 of expenditures. The table also shows that for each direct job at Ontario Northland, there are overall 2 jobs across Northeastern Ontario attributable to Ontario Northland. In other words, for each job at Ontario Northland, there is another job somewhere in Northeastern Ontario that exists because of Ontario Northland business presence in the region.
Table 28: Implied Total Multipliers of Ontario Northland Expenditures in Northeastern Ontario MULTIPLIER TYPE VALUE Total employment (number of direct, indirect, and induced jobs) per $1 M of direct expenditures of Ontario Northland 13.2 Total GDP (direct, indirect, and induced) per $1 of direct expenditures of Ontario Northland $1.29 Total number of jobs (direct, indirect and induced) attributable to Ontario Northland per 1 direct job at Ontario Northland 2.01
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5.7.4 Relative Magnitude of Ontario Northland Multipliers
While there were no studies identified at the time of writing this report that would undertake a similar type of assessment and multiplier estimation and that would allow for a comparison of the estimated multipliers, a partial and qualified comparison could be done with the use of provincial level multipliers from Statistics Canada Inter-Provincial Input-Output model. A sample of multipliers for selected industries is shown in Table 29. The first qualification of this comparison is to the level of geography. As explained earlier in this report, provincial multipliers tend to be higher than the corresponding regional level multipliers. The second qualification refers to the scope of the impact the multipliers are measuring. While multipliers shown in Table 28 are total multipliers (i.e. for direct, indirect, and induced impacts), those shown in Table 29 do not include the induced effects.
Comparing Table 28 and Table 29, we can see that Ontario Northland multipliers are higher by order of magnitude 1.15 to about 2.6, even for the broad category of the transportation and warehousing industry and information and cultural industries where many activities of Ontario Northland would likely be classified. This is indicative of a relatively high impact of Ontario Northland and a high multiplier of Ontario Northland activities.
Table 29: Sample Provincial Level Multipliers EMPLOYMENT GDP MULTIPLIER MULTIPLIER (DIRECT AND INDIRECT INDUSTRY (DIRECT AND INDIRECT GDP PER $1 OF JOBS PER $1 MILLION OF EXPENDITURES) EXPENDITURES) Construction 9.88 0.72 Manufacturing (total sector) 5.22 0.49 Transportation and warehousing 11.45 0.74 Utilities 4.92 0.80 Information and cultural industries 8.25 0.78 Source: Statistics Canada, 2004 Inter-Provincial Input-output model
5.7.5 Relative Importance of Ontario Northland in Northeastern Ontario
The relative importance of Ontario Northland in the regional economy can be examined in terms of Ontario Northland contribution to regional GDP and employment.
Contribution to Regional GDP (Value Added)
Table 30 shows the estimated GDP for Northeastern Ontario by industry and compares total value added generated by Ontario Northland (the sum of direct, indirect, and induced value added) as reported in Table 27 to GDP in various industries and overall in the entire regional economy.
Overall, Ontario Northland contributes about 1.0% to the entire economy of Northeastern Ontario. In the absence of Ontario Northland, its employment and the supplier business
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opportunities that the company generates, total GDP in the region would likely decline in the short to medium term by about 1.0%. This impact is similar in magnitude to the effects of the 2008 worldwide economic downturn on the Canadian economy. For example, Statistics Canada has reported in early 2008 that total Canadian GDP fell by 1% in December 2008 and by 0.8% in the entire fourth quarter of 2008. The latter figure represents the largest quarterly decline since 1991 and created some concern about the prospects for the Canadian economy in the near months.
Table 30: GDP in Northeastern Ontario and Relative Impact of Ontario Northland ONTARIO GDP IN NEO GDP IN NEO NORTHLAND GDP ($ M, INDUSTRY ($ M, 2002 IMPACT AS ADJUSTED TO PRICES) PERCENTAGE OF 2007 PRICES) INDUSTRY GDP 11 Agriculture, forestry, fishing and hunting $402.8 $467.3 44.8% 113 Forestry and logging $270.3 $313.5 66.8% 21 Mining and oil and gas extraction $1,462.1 $1,696.0 12.3% 22 Utilities $449.2 $521.1 40.2% 23 Construction $710.1 $823.8 25.4% 31-33 Manufacturing $2,209.0 $2,562.5 8.2% 321 Wood product manufacturing $421.5 $489.0 42.8% 3221 Pulp, paper and paperboard mills $432.5 $501.7 41.7% 41 Wholesale trade $700.3 $812.3 25.8% 44-45 Retail trade $1,226.3 $1,422.5 14.7% 48-49 Transportation and warehousing $858.7 $996.1 21.0% 51 Information and cultural industries $422.9 $490.5 42.7% 52 Finance and insurance $1,899.5 $2,203.4 9.5% 53 Real estate and rental and leasing $1,637.6 $1,899.6 11.0% 54 Professional, scientific and technical services $516.8 $599.5 34.9% 56 Administrative and support, waste management and remediation services $559.9 $649.5 32.2% 61 Educational services $1,061.6 $1,231.4 17.0% 62 Health care and social assistance $1,515.3 $1,757.7 11.9% 71 Arts, entertainment and recreation $169.4 $196.5 106.6% 72 Accommodation and food services $462.7 $536.7 39.0% Tourism $173.4 $201.2 104.1% 81 Other services (except public administration) $510.0 $591.6 35.4% 91 Public administration $1,300.8 $1,508.9 13.9% Total GDP in Northeastern Ontario $18,074.8 $20,966.7 1.0% GDP of Resource-based Industries (Agriculture, forestry, fishing and hunting, mining, wood product manufacturing, pulp, paper and paperboard mills) $2,718.9 $3,153.9 6.6% Source: Statistics Canada Data and HDR calculations.
When comparing Ontario Northland with individual industries, we can also see in Table 30 that GDP generated by Ontario Northland is equal to 21% of GDP in the entire transportation and
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warehousing and 6.6% of GDP in the resource-based industries. Comparison with other industries demonstrates even a higher magnitude of relative significance.16
Contribution of Ontario Northland to the regional and local economy is even more pronounced at the community level and in communities with large employment in Ontario Northland. Table 31 shows the total income (direct, indirect and induced) generated by Ontario Northland as a percentage of total income in a community. Note that this measure of contribution underestimates somewhat the true impact as it captures only the effect of wages, salaries, and pension benefits.17
Table 31: Contribution of Ontario Northland to Local Income for Selected Communities INCOME DUE TO ONTARIO COMMUNITY NORTHLAND AS PERCENTAGE OF TOTAL INCOME Englehart 48.4% Cochrane 11.5% Temagami 4.1% North Bay 5.5% New Liskeard 4.0% Kirkland Lake 2.3% Source: Estimated by HDR
Table 31 shows that Ontario Northland‟s contribution to the local income ranges from 2.3% in Kirkland Lake where Ontario Northland has 23 employees to 48.4% in Englehart. The table thus demonstrates that Ontario Northland accounts for a significant share of the total regional income in many communities in Northeastern Ontario.
Contribution to Employment in the Region
Table 32 shows the employment in Northeastern Ontario by industry and compares total employment impact of Ontario Northland (the sum of direct, indirect, and induced employment in Northeastern Ontario attributable to Ontario Northland) as reported in Table 27 to employment in various industries and overall in the entire regional economy.
16 Industry-level comparisons should be done with some caution and a qualification that GDP by industry shown in the table in this section represents only the direct effect of the industry, whereas the impact of Ontario Northland reported and discussed here refers to the total effect, including direct, indirect and induced effects. Specifically, GDP generated by Ontario Northland ($209.4 million) includes GDP in the transportation and warehousing industry as well as some amount of GDP in other industries affected through indirect and induced effects. These industries include various manufacturing industries, construction, retail and personal services. Therefore, industry level comparisons should be interpreted as an indication of the magnitude of importance of an individual business. The most correct assessment of the economic contribution should refer to the entire economy being analyzed as it includes all industries.. 17 Due to data limitation, possible impacts of operational and capital expenditures could not be included.
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Overall, Ontario Northland contributes about 0.9% to the entire employment of Northeastern Ontario. When comparing Ontario Northland with individual industries, we can also see in Table 32 that employment attributable to Ontario Northland is equal to 16.4% of employment in the entire transportation and warehousing and 8.5% of employment in the resource-based industries. Comparison with other industries demonstrates even a higher magnitude of significance.
Table 32: Employment in Northeastern Ontario and Relative Impact of Ontario Northland
ONTARIO NORTHLAND EMPLOYMENT EMPLOYMENT IMPACT AS INDUSTRY IN NEO PERCENTAGE OF INDUSTRY EMPLOYMENT
11 Agriculture, Forestry, Fishing and Hunting 4,990 42.9% 21 Mining and Oil and Gas Extraction 10,295 20.8% 22 Utilities 2,055 104.1% 23 Construction 13,850 15.5% 31-33 Manufacturing 20,450 10.5% 41 Wholesale Trade 6,580 32.5% 44-45 Retail Trade 29,795 7.2% 48-49 Transportation and Warehousing 13,055 16.4% 51 Information and Cultural Industries 3,405 62.8% 52 Finance and Insurance 5,450 39.3% 53 Real Estate and Rental and Leasing 3,165 67.6% 54 Professional, Scientific and Technical Services 8,450 25.3% 55 Management of Companies and Enterprises 90 2377.8% 56 Administrative and Support, Waste Management and Remediation Services 10,885 19.7% 61 Educational Services 18,980 11.3% 62 Health Care and Social Assistance 30,080 7.1% 71 Arts, Entertainment and Recreation 4,210 50.8% 72 Accommodation and Food Services 16,910 12.7% 81 Other Services (except Public Administration) 12,000 17.8% 91 Public Administration 16,995 12.6% Total – Industry (NAICS) (3) 231,720 0.9% All Resource-based Industries (Agriculture, forestry, fishing and hunting, mining, wood product manufacturing, pulp, paper and paperboard mills) 25,165 8.5%
Table 33 compares the scale of the employment impact of Ontario Northland (direct, indirect and induced employment) to the impact of other industries considered as important to the region such as various resource-based industries. Specifically, Table 34 shows in more detail employment in various resource industries in Northeastern Ontario, estimates the employment impact of these industries, and compares with the employment impact of Ontario Northland. In estimating total employment generated in various resource-based industries in Northeastern Ontario, it was
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assumed that the employment multiplier for this industry is equal to that of Ontario Northland, i.e. 2.01 jobs for every direct job in that industry.
Table 33: Comparison of Ontario Northland’s Employment Impact with Employment in Other Industries ONTARIO TOTAL NORTHLAND’S DIRECT INDUSTRY EMPLOYMENT INDUSTRY INDUSTRY EMPLOYMENT IMPACT EMPLOYMENT IMPACT AS % OF INDUSTRY IMPACT 113 Forestry and logging 2,190 4,249 48.6% 212 Mining (except oil and gas) 7,755 15,045 13.7% 2123 Non-metallic mineral mining and quarrying 915 1,775 116.3% 2131 Support activities for mining and oil and gas extraction 2,235 4,336 47.6% 321 Wood product manufacturing 5,055 9,807 21.1% 3211 Sawmills and wood preservation 2,675 5,190 39.8% 3212 Veneer, plywood and engineered wood product manufacturing 1,890 3,667 56.3% 3221 Pulp, paper and paperboard mills 2,450 4,753 43.4% TOTAL RESOURCE INDUSTRIES 25,165 50,582 4.2% Source: Employment data based on Statistics Canada, 2006 Census, special tabulation.
The last column of Table 33 shows that the employment attributable to Ontario Northland accounts for over 56% of employment attributable to the veneer and engineered wood product manufacturing, about 48% of employment impact of such industries as forestry and logging or support activities for mining and oil extraction. Overall, the employment impact of Ontario Northland is equal to about 4.2% of employment impact of all resource industries
5.8 Economic Impacts Province-Wide
Table 34 shows the estimated impacts of Ontario Northland in terms of output, employment (or number of jobs), employment income, and GDP. The table demonstrates that economic impacts of Ontario Northland in the entire province include the following:
$396.2 million of gross business output (revenues), including $187.9 of direct output, $110.3 million of indirect output, and $97.9 million of induced output; 2,747 jobs, including 1,060 direct jobs, 641 indirect jobs, and 1,047 induced jobs; $162.08 million employment income, including $86.7 million of direct employment income, $34.9 indirect, and $40.3 induced; and, $218.8 million of GDP, including $98.8 million of direct GDP, $54.2 million indirect, and $65.7 million induced.
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Table 34: Province-Wide Economic Impacts of Ontario Northland: Output, Employment, Employment Income, and GDP EMPLOYMENT, EMPLOYMENT ACTIVITY TYPE AND EXPENDITURES OUTPUT, $ GDP, $ NUMBER OF INCOME, $ GENERATING IMPACTS THOUSAND THOUSAND JOBS THOUSAND DIRECT IMPACTS DUE TO OPERATIONS Operations by Business Line Rail Services $107,785 533 $36,311 $59,707 Telecommunications (Ontera) $38,092 153 $9,829 $23,375 Motor Coach Services $12,200 151 $3,030 $6,129 Refurbishment $19,993 115 $5,655 $3,600 Marine Services $244 0 $0 $112 Corporate $9,634 108 $4,097 $5,900 Pension Benefits $27,804
TOTAL DIRECT IMPACT $187,948 1,060 $86,725 $98,823 INDIRECT IMPACT DUE TO CAPITAL AND EXTENDED HEALTH EXPENDITURES Extended Health Care Benefits $5,650 12 $1,533 $4,104 Capital Expenditures by Type Computer and telecommunications equipment $1,510 7 $469 $596 Software $33 0 $9 $18 Vehicles and transportation equipment $1,811 4 $280 $504 Passenger rail equipment and refurbishment of passenger coaches $213 0 $35 $38 Renovation, repairs and other construction $348 2 $117 $159 Metal components/ materials for railroad construction $1,114 5 $313 $471 Wooden components/ materials for railroad construction $2,751 9 $521 $996 Other materials for railroad construction $35 0 $9 $20 Ferry vessel components $5 0 $2 $3 INDIRECT IMPACT DUE TO CAPITAL EXPENDITURES $13,471 40 $3,288 $6,910 INDIRECT IMPACT DUE TO OPERATIONS AND OTHER EXPENDITURES $96,871 601 $31,674 $47,371 TOTAL INDIRECT IMPACT $110,342 641 $34,962 $54,282 TOTAL INDUCED IMPACT $97,990 1,047 $40,394 $65,768 TOTAL ECONOMIC IMPACT $396,280 2,747 $162,082 $218,873
Table 34 demonstrates that Ontario Northland‟s impact in all of Ontario is larger than just in Northeastern Ontario. This indicates that the impact of the company goes beyond the area where it directly operates providing jobs and generating economic value in the rest of the province as well.
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Table 35 shows the estimated tax revenue impacts of Ontario Northland. As the table demonstrates, the total impact amounted to $94.7 million, including $38.5 million in federal revenues, $43.7 million in provincial revenues, and $12.4 of local and municipal revenues.
Table 35: Province-Wide Tax Revenue Impacts of Ontario Northland TAX REVENUE, LEVEL OF GOVERNMENT $THOUSAND Local/ Municipal $12,426 Provincial $43,791 Federal $38,557 Total $94,775
Table 36 shows the estimated implied multipliers of Ontario Northland operations (including capital expenditures) in the province of Ontario. The table implies that for each $1 of direct output impact (or revenue impact) of Ontario Northland, the following impacts are generated in the entire province:
$2.11 of business output $0.86 of employment income; and $1.16 of GDP.
The table also shows that for each $1 million of Ontario Northland output, there are 14.62 jobs generated across the province (including direct, indirect, and induced jobs). For each 1 direct job at Ontario Northland, there are a total of nearly 2.60 jobs in the province, or 1.60 additional jobs (over and beyond jobs at Ontario Northland itself).
Table 36: Implied Province-Wide Multipliers of Ontario Northland MULTIPLIER TYPE VALUE Total output effect per $1 of direct output of Ontario Northland $2.11 Total employment (number of jobs) per $1 M of direct output of Ontario Northland 14.62 Total employment income per $1 of direct output of Ontario Northland $0.86 Total GDP per $1 of direct output of Ontario Northland $1.16 Total number of jobs (direct, indirect, and induced) created per 1 Ontario Northland job 2.59
5.9 Induced Economic Development Impacts
As argued in the methodology section, the economic impact of Ontario Northland on the regional economy goes well beyond its income and employment impact. This section examines first the available economic data and correlation between transportation connectivity and economic performance of a local economy. Next, the results and comments from the surveys are reviewed and summarized to provide an overall assessment of Ontario Northland interactions with other industries in the region and various impacts not captured in traditional direct, indirect, and
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induced impacts. This section also provides a socio-economic overview of the communities directly affected by Ontario Northland.
5.9.1 Transportation and Telecommunications Connectivity, Economic Wellbeing, and “Liveable” Communities
Freight Transportation Services
The Ontario Northland transportation system connects many small northern communities in Northeastern Ontario to markets beyond Ontario‟s borders. Its rail freight business plays a crucial role in Northeastern Ontario‟s economy. Given the rising cost of fuel and growing environmental concerns, the transportation services Ontario Northland provides is becoming increasingly valuable and in many cases the only economically viable means of transportation in the north. Economic theory suggests that the availability of a cheap and reliable transportation system is a key to regional economic development.
In fact, (and as confirmed by surveys of customers and economic development officers) many of the region‟s largest employers are dependent on Ontario Northland‟s rail freight operations, which typically carry more than 53,000 carloads each year (the equivalent of approximately 132,500 transport truck loads). This system serves most of the major employers between North Bay and Hearst along the Highway 11 corridor. Forestry and mining dominate the economy in this region. Forestry provides approximately 45% of Ontario Northland‟s rail freight revenue.
Over the past few years, Ontario Northland has played a key role in the shipment of construction material to Moosonee for furtherance to the site of a new DeBeers diamond mine in the James Bay lowlands. Comparing northern Aboriginal communities in the area, Moosonee is significantly more economically advanced than other First Nation communities, such as Kashechewan and Fort Albany, that are not connected to the main rail system.
In fact, connectivity has caused significant tourism development in the northern connected communities. To promote this tourism in the north, Ontario Northland has partnered with Ontario‟s Northeast Attraction Group to promote the Polar Bear Express train cooperatively with the other attractions in the region. Similarly, Ontario Northland has partnered with local hospitality operators to promote the Dream Catcher Express between North Bay and Temagami. According to an internal survey, the train has been enthusiastically received by travelers from throughout the province and beyond.
One way to measure the economic impact that connectivity brings to northern communities is to compare their average employment earnings with other similar communities that are not connected by the same transportation system. Average or median employment earnings are perhaps the best economic indicator of the health of a community. Average earnings take into account full-time as well as part-time employment. Average employment earnings also account for short-term unemployment. The average earnings would be higher if there are more full-time or better paying employment opportunities in a community.
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Therefore, to measure the economic impact of Ontario Northland‟s transportation system on northern communities, 34 communities in the region with population of 900 to 50,000 were compared and ranked based on their median employment earnings in 2006. The results are shown in Table 37.
Table 37: Comparison of Median Employment Earnings in Various Communities in Northeastern Ontario
MEDIAN EARNINGS RANKING COMMUNITY POPULATION OF INDIVIDUALS 15 AND OVER
1 Chapleau 2,354 32,664 2 Hearst 5,620 31,935 3 Cochrane 5,487 30,580 4 South Algonquin 1,253 30,018 5 Iroquois falls 4,729 28,448 6 Timmins 42,997 28,428 7 East Ferris 4,200 28,242 8 Michipicoten 3,204 28,151 9 Kirkland Lake 8,248 27,587 10 Driftwood (Cochrane unorganized) 2,447 27,542 11 Kapuskasing 8,509 27,524 12 Moonbeam 1,298 27,523 13 Black River Matheson 2,619 26,426 14 Bonfield 2,009 25,887 15 Blind river 3,780 25,210 16 Temiskaming Shores 10,732 25,009 17 Espanola 5,314 24,663 18 West Nipissing 13,410 23,966 19 Mattawa 2,003 23,831 20 Englehart 1,494 23,642 21 Nipissing TP 1,642 20,669 22 Markstay-Warren 2,475 20,408 23 Chisholm 1,318 19,986 24 Thessalon 1,696 18,827 25 Dalton (Algoma Unorganized) 5,717 18,310 26 Sables-Spanish Rivers 3,237 17,609 27 Cobalt 1,229 16,883 28 Central Manitoulin 1,944 16,860 29 Central Manitoulin 1,944 16,860 30 French River 2,659 16,545 31 St. Joseph 1,129 16,320 Source: Calculated based on 2006 Census.
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Table 37 (continued)
MEDIAN EARNINGS RANKING COMMUNITY POPULATION OF INDIVIDUALS 15 AND OVER
32 Elliot Lake 11,549 16,288 Northeastern Manitoulin and the 33 Islands 2,711 15,643 34 Temagami 934 14,263 Source: Calculated based on 2006 Census
The communities connected by Ontario Northland‟s transportation system are shown in bold font. Table 37 shows that communities directly linked to Ontario Northland rank very high among the list of all small and medium size communities in Northeastern Ontario. In fact, most of them have more northerly locations than other communities in Northeastern Ontario. For example, Hearst, Cochrane, Iroquois falls, Driftwood, Timmins, Kapuskasing and Black River Matheson are all in the Cochrane district which is the most northerly district in Northeastern Ontario. Their earnings rank among the top 13 communities in Northeastern Ontario.
One should note that some of the communities that have ranked high in Table 37 are not really directly comparable with the above northern communities. For example, Chapleau which ranks highest in terms of median earnings is in the Sudbury district and is considered a rail hub with access to CN and proximity to forestry and mining activities in the area. So, being connected to a major rail system and proximity to forestry and mining activities are the main reasons for its high median income. Similarly, South Algonquin is in the Nipissing district in the southeast corner of Algonquin Provincial Park. It lies south of the traditional line between southern and northern Ontario. It is considered part of “cottage country”, and has excellent road connection to the southern Ontario. East Ferris is in the district of Nipissing. It has long been annexed to the city of North Bay. Most of its residents work in North Bay. Also, Michipicoten has been a centre for mining, tourism and forestry industries.
In general, Table 37 clearly shows that most of the communities that are linked to Ontario Northland have higher average earnings than most other communities in Northeastern Ontario.
A notable example of the impact of Ontario Northland on the local communities (that could not be included in Table 37 above or other tables in this report due to lack of data) is the town of Moosonee. Moosonee is located on the shore of Moose River. It is 12 miles south of James Bay. Its population was around 3,000 in 2006 according to the town of Moosonee‟s official website. About 85% of the population is Native Cree. With the arrival of the Ontario Northland railway in 1932, Moosonee became a transportation hub for the James Bay coastal and more northerly communities. The Ontario Northland train is the only overland surface route to Moosonee. In addition to rail connection, Ontario Northland also provides telephone and Internet service to Moosonee and Moose Factory.
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As mentioned above, assessment of the detailed economic impact of Ontario Northland on Moosonee was not possible due to the lack of detailed economic and statistical data. However, anecdotal evidence suggests that the standard of living and economic conditions in Moosonee are significantly better than other northern communities such as Fort Albany, Peawanuck, Kashechewan and Fort Severn that are not directly accessible by rail or road. It is also noteworthy that the general level of prices in Moosonee appears to be lower than those in the other northern communities due to the lower cost of transportation to Moosonee. Similarly, the Ontario Northland train has had a positive impact on the tourism industry in Moosonee by bringing in many tourists for whom it would be very difficult to access the area by other transportation means.
Passenger Transportation Services
Table 38 shows ridership statistics for Ontario Northland passenger transportation services and some indicators based on these statistics. Column (3) converts the annual ridership statistics into the number of round trips per 1000 population in Northeastern Ontario to give a sense of how intensively the services are used by the residents of the region. Column (4) and (5) provide the average monthly statistics for the summer months and the rest of the year, respectively. Column (6) calculates the difference in ridership between the summer peak and the rest of the year. As the summer peak is (typically) largely due to tourism, or ridership for purposes such as leisure or visiting friends, this difference could be roughly interpreted as tourism impact and the number of tourists coming to the area (when dividing by two and ignoring possible double-counting)
Table 38: Passenger Service Statistics and Its Relative Importance AVERAGE DIFFERENCE AVERAGE ROUND MONTHLY IN MONTHLY PASSENGER ANNUAL TRIPS PER SUMMER RIDERSHIP RIDERSHIP SERVICE RIDERSHIP 1000 RIDERSHIP (SUMMER REST OF POPULATION (JULY & VS. REST OF THE YEAR AUGUST) THE YEAR) (1) (2) (3) (4) (5) (6) Motor Coach Services, Hearst to Toronto, 2006-2007 264,150 258.8 28,521 20,711 7,810 Northlander Train Service, 2007-2008 44,733 43.8 4,956 3,482 1,473 Train Service Cochrane to Mosonee, 2007-2008 56,094 55.0 11,394 3,571 7,823 Polar Bear, 2007-2008 38,157 37.4 11,394 2,708 8,686 NOTE: The calculation of round trips per 1000 population assumes the population of Northeastern Ontario of 510,326 (based on Wikipedia).
The table above demonstrates a very large popularity of motor coach services. During the fiscal year 2006 – 2007, the ridership on the Hearst to Toronto route amounted to over 260,000. This implies over 258 round trips per 1000 population in the region, or that 1 in 4 residents of Northeastern Ontario uses the service once a year to make a trip from his or her home to a
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destination serviced and back.18 This result supports the findings from the surveys of economic development officers that suggest a wide use of motor coach services for transportation between local communities to visit families, friends, or for medical appointments, in particular by college students, people who do not have access to a car, or want to avoid driving in certain weather conditions such as in winter.
The table also demonstrates large train ridership. In terms of round trips per 1000 population, at about 40 to 55 trips per year, this statistic is not as large as for the motor coach services. However, it demonstrates that there is a large number of people using the service, many of which are likely tourists. Interpreting the difference between the summer peak and the rest of the year as due to tourism, the conclusion arises that the services are bringing thousands of tourists to the region.
Telecommunication Services
Telecommunication services, including phone and internet, can nowadays be seen as some of the basic services that define the connectivity of a region to the rest of the country and the world.
Email and internet have become some of the key tools in business day to day operations, including internal and external communications, research and development, or sales and customer service. A lot of government information and services are available through the internet as well. Studies also indicate that people increasingly use the internet to search for a wide range of information, entertainment, to purchase goods and services, or for educational purposes.19
A recent study funded by the government of Ontario points out that “Broadband access, usage and technologies are cross-cutting and multi-level issues. Like electricity and the telephone, broadband has changed how we work, live and play.”20 Also “Lack of access to broadband foreshadows diminished economic activity and reduced ability by individuals to access common services, including government services. Access to broadband, on the other hand, enhances economic growth and performance. The research demonstrates that the variety of economic benefits it fosters includes entrepreneurship, marketing, workforce skills development, knowledge sharing among businesses and citizens, and linking innovation to the marketplace. Furthermore, communities where broadband is available on a mass market basis demonstrate higher rates of growth in employment and business development.”21
Ontario Northland and its telecommunication services division Ontera are thus providing important contributions to the regional business and community development. Services provided to small and remote areas that are difficult to serve due to large distances and small population densities are particularly worth mentioning. Interviews with senior executives indicated that
18 This calculation assumes that the service used exclusively by residents of Northeastern Ontario. 19 See Statistics Canada‟s news releases and studies based on its bi-annual internet use survey. 20 See “Digital Divide and Access Issues”, Executive Summary, Draft October 2008, Page 2. Available from Digital Ontario at http://www.digitalontario.mgs.gov.on.ca/en/about-digital-ontario. 21 See the study cited previously, Page 4.
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Ontario Northland continually invests in equipment renewal and technological improvements to ensure a high quality of service.
Although according to the surveys there are other service providers in Northeastern Ontario, some customers are choosing Ontera because of a better price and the quality of service.
The recent Bear Island Connectivity project that established connectivity to the Temagami First Nations health centre is an example of a project with potential implications on quality of life and broader economic well being in the area.
5.9.2 Impact of Ontario Northland on the Overall Profile and Performance of the Regional Economy
Surveys of customers provided an overwhelming support for the statement or claims that freight rail services play an extremely important role in the regional economy by providing reasonably priced transportation for many companies‟ products. As a result, companies are able to achieve one or more of the following:
Access more markets; Remain competitive in more markets; Reduce their direct costs, Rationalize their operations; and, Reduce transit time and get products to their customers in a more timely manner.
For these reasons, good access to rail connections becomes important. Without the access to rail services, it is likely that many companies would see a reduction in their business, in particular in the current situation of an economic downturn when finding alternative markets for a product is very challenging.
The survey of tourist operators also indicated that Ontario Northland plays an important role and help bring in the tourist to the region. The respondents to the survey indicated that as much as 75% to 85% of their business is due to the presence of Ontario Northland.
The survey of mayors and economic development officers has also confirmed that a large number of local businesses depend on Ontario Northland‟s freight transportation services, and residents depend on Ontario Northland‟s passenger services.
Although only a small number of respondents agreed that services, or procurement and employment opportunities provided by Ontario Northland have improved the attractiveness of their communities to potential investors and residents, most communities (80%) use Ontario Northland‟s name and reference to Ontario Northland‟s services in their promotional materials or actions to attract investors, new residents, and tourists. The respondents also recognized the importance of local purchasing by Ontario Northland in supporting local business community in terms of providing direct revenue generation opportunities.
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According to some comments from survey respondents, Ontario Northland helps to convey a message that Northern Ontario has sustainable industry and skilled trades which also helps to attract new people to the region and retain young people.
This is certainly consistent with the overall profile of the company that features business lines such as freight and passenger rail, telecommunications, or rail car refurbishment services. Many jobs in these areas by its nature require a high level of technical skills.
In addition to the above identified impacts, surveys of Ontario Northland senior executives pointed out that the company provides affordable and high-quality telecommunication services that also connect many remote areas of Northeastern Ontario. The company strives to further expand services to underserviced and remote areas so as to put people and businesses in Northeastern Ontario on equal communication footing compared to all other people and businesses in North America. As mentioned in the previous section, in today‟s economy of email and instant messaging, video-conferencing, and internet being used as an important research and business tool, this is likely to become more and more important factor for business competitiveness and investor attraction.
The expansion of Ontario Northland into the rail refurbishment services is, on the other hand, an example of the contribution to the diversity of the local economy that may also help increase the profile, broader exposure of the region, and opportunities as the company accumulates experience in this business.
5.9.3 Ontario Northland and Socio-Economic Profile of Communities Directly Affected by the Company
Table 39 presents the socio-economic profiles of communities where Ontario Northland has direct employees. The statistics shown include total population, labour force, distribution of labour force by industry, and other labour market statistics such as participation rate, unemployment rate, median earnings, composition of household income, and percentage of population in low income. For comparison purposes, the last column in the table shows the statistics for all of Ontario.
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Table 39: Socio-economic Profiles of Communities with Ontario Northland Employment North Temiskaming Kirkland Indicator Sudbury Bay Cochrane Englehart Timmins Shores Lake Temagami Hearst Kapuskasing Ontario Total Population (2006) 157,857 53,966 5,487 1,494 42,997 10,732 8,248 934 5,620 8,509 12,160,282 Total experienced labour force ages 15 and over 79,795 26,660 2,745 610 22,330 5,385 3,615 445 3,015 4,005 6,473,735 Employment in Ontario Northland 13 601 151 91 78 50 23 9 7 5 Ontario Northland employment as % of labour force 0.0% 2.3% 5.5% 14.9% 0.3% 0.9% 0.6% 2.0% 0.2% 0.1% Distribution of employment Agriculture and other resource-based industries 8.2% 2.2% 7.3% 6.6% 14.4% 5.1% 15.6% 2.2% 7.8% 11.4% 2.9% Mining 7.2% 1.1% 1.1% 0.0% 10.5% 1.6% 11.3% 0.0% 0.0% 4.2% 0.4% Construction 6.4% 5.1% 6.6% 4.1% 7.0% 6.4% 3.7% 15.7% 7.0% 5.1% 5.9% Manufacturing 6.0% 5.7% 16.0% 10.7% 5.1% 9.2% 3.7% 5.6% 19.2% 15.6% 13.9% Wholesale trade 3.8% 2.8% 1.3% 0.0% 3.3% 3.8% 1.7% 0.0% 2.2% 2.6% 4.7% Retail trade 12.9% 14.8% 13.5% 9.0% 14.0% 16.8% 11.1% 19.1% 13.1% 13.9% 11.1% Finance and real estate 4.2% 4.6% 1.6% 1.6% 3.4% 2.8% 2.5% 4.5% 3.8% 3.2% 6.8% Health care and social services 12.4% 13.4% 10.9% 12.3% 11.7% 12.3% 19.2% 4.5% 9.3% 14.2% 9.4% Educational services 8.8% 8.4% 6.6% 12.3% 7.4% 8.0% 8.6% 2.2% 7.3% 6.5% 6.7% Business services 15.3% 19.9% 16.6% 23.0% 16.0% 18.4% 9.4% 16.9% 10.8% 9.5% 19.7% Transportation and warehousing 4.6% 6.9% 9.8% 16.4% 5.3% 7.5% 2.9% 10.1% 6.6% 5.4% 4.7% Other services 22.0% 23.1% 19.7% 20.5% 17.8% 17.3% 24.5% 29.2% 19.6% 18.0% 18.7% Accommodation and food services 7.0% 8.6% 5.6% 7.4% 6.8% 7.1% 8.4% 11.2% 8.5% 8.0% 6.4% Public administration 7.0% 8.1% 8.7% 5.7% 5.4% 2.3% 10.5% 7.9% 3.6% 4.5% 5.4% Other Labour Market Statistics Participation rate 63% 61.3% 63.5% 51.6% 65.5% 62.4% 54.9% 55.8% 66.8% 57.8% 67.1% Unemployment rate 7.8% 7.7% 6.2% 12.7% 7.1% 6.6% 7.5% 9.8% 10.0% 8.2% 6.4% Median earnings - Persons 15 years and over $26,815 $23,685 $30,580 $23,642 $28,428 $25,009 $27,587 $20,302 $31,935 $27,524 $29,335 Median household income (2005) $55,019 $46,628 $48,286 $37,994 $55,623 $49,511 $37,342 $39,251 $56,897 $48,857 $60,455 Composition of total income (100%) Earnings - As a % of total income 72.80% 69.6 75.6 63.7 77.1 69.4 68.5 58.0 76.0 72.7 77.4
Government transfers - % of total income 12.60% 14.7 15.0 21.1 12.9 14.9 19.8 25.1 11.7 15.4 9.8 Other money - As a % of total income 14.70% 15.7 9.4 15.4 10.0 15.6 11.6 17.2 12.4 11.8 12.9 % in low income before tax - All persons 11.80% 17.4 16.8 19.2 12.7 11.3 19.1 13.6 10.9 11.6 14.7 Sources: Employment in Ontario Northland by community has been provided by Ontario Northland. Other data in the table has been compiled from 2006 Census data.
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Table 39 demonstrates that Ontario Northland accounts for a large proportion of employment in many communities, including nearly 15% of labour force in Englehart, 5.5% in Cochrane, and 2.3% in North Bay. In Cochrane and North Bay, Ontario Northland is one of the top 10 largest employers in the area.22 In North Bay, where Ontario Northland has its headquarters, excluding local school boards and other educational institutions from the employer ranking would move Ontario Northland to the top five employers in the area. Clearly, at this level of relative employment a company must be very visible in the local community and directly or indirectly affect the employment opportunities of many individuals.
The table also shows that almost all communities have a relatively large – larger than the provincial average – employment in resource-based industries, including agriculture, forestry, and mining. For example, in Kirkland Lake, employment in resource-based industries amounts to 15.6%, in Timmins it amounts to 14.4%, and in Kapuskasing it amounts to 11.4%, whereas on average in Ontario this industry accounts for just 2.9% of labour force.
In fact, mining has been historically a catalyst of economic development of many communities in Northern Ontario. For example, Kirkland Lake was founded as a gold mining camp in 1911. By the early 1920s, the town recorded the second highest level of gold production in Canada. With the closing of the original mines, Kirkland Lake declined economically toward the end of the last century. However, in recent years, Kirkland Lake Gold Inc. (then Foxpoint Resources) found new zones of mineralization which further increases the mine‟s economic life.
The city of Timmins was also founded following the discovery of gold reserves in the area in 1912. In the early 1960s, also other minerals including silver, zinc, copper and nickel were discovered.
It is well known that the forestry and mining industries frequently use rail transportation services, and customer surveys indicate that this transportation mode is extremely important to the economic viability of the individual companies in that sector. Should rail services be not available, a large share of local employment could be at risk of down-sizing and lay-offs.
Table 39 also shows that many communities have relatively large employment in manufacturing. For example, in Cochrane manufacturing accounts for 16% of labour force, in Hearst it accounts for 19.2, in Kapuskasing for 15.6%, and in Englehart for 10.7%, whereas on average in Ontario manufacturing accounts for 13.9% of labour force.
The manufacturing industry in the area is largely comprised of forestry and wood products industry. For example, historically, Kapuskasing has been a major newsprint producer, and Tembec pulp and paper mill is the town's major employer. Grant Forest Products, located on the western periphery of Englehart, is the largest oriented strand board (OSB) plant in the world. In Kirkland Lake, Tembec Forest Products Group has converted in recent years its Kenogami sawmill into a value-added centre for manufacturing finger-jointed lumber, and Temiskaming Shores features custom sawmilling operation.
22Information regarding to employers in Englehart could not be identified. However the size of this community suggests that Ontario Northland is one of the largest employers in the area as well.
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Similarly as the forestry and mining industry, the above industries also rely heavily on rail transportation. The surveys have shown that for these industries, rail transportation is also important for economic viability of the industry.
It should be pointed out, however, that resource-based and related products industries are not the only industrial sectors in the area. Examples include Ontera‟s telecommunications services, General Motors Canada cold-weather automotive testing center in Kapuskasing, or smelting and metal fabrication plants in Timmins.
In the North Bay region, the mining supply industry has become one of the important sectors in the local economy. There are approximately 65 local area businesses providing mining exploration and development services, as well as other services, equipment and products including:
Mining exploration, development and mine operating services; Fabricated metal machinery and equipment; Fabricated rubber, plastics and chemical products for mining; Wholesale equipment and supplies for mining; and, Business services for mining including engineering/geo-technical.
Finally, Table 39 shows that a large proportion of local labour force is in the accommodation and food services industry which primarily caters to tourism in the region. For example, this industry accounts for 11.2% of labour force in Temagami and for 8% (or more) of labour force in Hearst, Kirkland Lake, North Bay, and Kapuskasing. This compares to the provincial average of 6.4%. As revealed in the surveys, services provided by Ontario Northland, including the Polar Bear Express, the Dream Catcher Express, and the Northlander, are important for local tourism by bringing in tourists that would not come to the region in the absence of these services.
Table 39 also shows that on average the area is not economically as well off as the entire province of Ontario. In particular, the table demonstrates that the unemployment rate in the area tends to be higher than on average in Ontario, participation rate tends to be lower, and median individual income (with only some exceptions) and household income also tend to be lower than on average in Ontario. This again emphasizes the value of the presence of large employers such as Ontario Northland for providing direct employment opportunities and supporting local communities through supplier linkages as well as forward linkages (affordable services) discussed above.
5.10 Quality of Life Impacts
Surveys of employees, pensioners, mayors and economic development officers, senior executives and various data and operational information about the company consistently indicate that Ontario Northland is making a positive contribution to the quality of life in Northeastern Ontario by improving many aspects of personal and community living.
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Specifically, survey of employees reveals an overwhelming agreement with the proposition that the presence of Ontario Northland improves the quality of life in the region. Almost 80% of respondents expressed an agreement with the statement that the presence of the company definitely improved the quality of life in the local communities, and another 15% had the opinion that the company somewhat improved the quality of life (see Table 13).
The key factors influencing this impact (with more than 50% or more respondents agreeing as shown in Table 13) included the following:
High quality employment opportunities; Tourism exposure of the region; Intercity passenger transportation, improvements in personal mobility, access to family and friends outside the area; Provision of high quality and reasonably priced services; Apprenticeship opportunities for young people; and, Provision of important services locally by an easy to reach company that understands local customers and their needs.
The employment opportunities offered by Ontario Northland ranked highest as the most often indicated factor influencing the positive impact. This result is likely driven by the type of experience that employees acquire at Ontario Northland as well as very competitive salaries and resulting high household incomes and standards of living that they are enjoying.
However, the respondents also seem to appreciate the notions of improved connectivity of the region to the rest of the province and availability of services similar to those accessible to residents in larger urban areas, including intercity passenger transportation or telecommunication services.
According to the respondents to the survey of mayors and economic development officers, people are using intercity transportation – the motor coach and passenger rail services – to visit family and friends, to travel to school/ college, or to get to medical appointments. The service is important as some people do not have access to a car, or for various reasons want to avoid driving in the winter or in inclement weather conditions. Ontario Northland passenger transportation services provide many communities with efficient and timely access to the North/ South.
Regarding telecommunication services (and in particular broadband internet access), as discussed earlier in the previous sub-section, studies indicate that people increasingly use the internet to search for a wide range of information, for entertainment, to purchase goods and services, to inquire about government services, or for research and educational purposes. Many educational institutions are now offering their programs on-line as distance learning programs. The recent example of the Bear Island connectivity project demonstrates a similar scope and potential for healthcare and wellness services. Therefore, access to broadband internet may thus imply better access to education, government services, improved delivery of various healthcare and wellness programs, even from a remote community.
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Important and illustrative evidence as to the impact of Ontario Northland on the quality of life in Northeastern Ontario is also provided by the comments offered by the respondents to the employee survey. These comments are listed in Table 40. The comments suggest that employees value very highly their jobs and professional experience they are getting at Ontario Northland. They see this factor as well as the services that the company provides as very important for the economic performance of Northeastern Ontario.
Table 40: Comments from Respondents to the Employee Survey 1. Cochrane would not have the tourism/economic impact in Northeastern Ontario without Ontario northland. When all other small towns in NE Ontario are experiencing difficulties, Cochrane continues to flourish. 2. The company helps single parents to take care of their children by providing good employment opportunities; provide experience and training to employees. 3. Ontario Northland enables my family to have a high quality life both personally and professionally. It allows me to live in beautiful northern Ontario. 4. Better paying jobs equal more spending capabilities in the communities. 5. Ontario Northland provides a unique level of personalized, expert service in telecommunications. 6. Ontario Northland is vital to northern Ontario‟s economy. 7. Access to rail freight shipping in Northern Ontario (high volume carloads) makes Northeastern Ontario industries more sustainable. This improves the quality of life for everyone in Northeastern Ontario. 8. Other factors affecting the quality of life include supplying high speed network connectivity to remote communities. 9. I am fortunate to be employed by Ontario Northland. It is a great place to work. Most of the people here are very friendly. We also thrive to improve our quality of life. 10. Ontario Northland is a 100 year old organization with a legacy of providing essential transportation and telecommunications services to low density and remote northern communities. The positive economic and social impact of ONTC on Northeastern Ontario is significant and vital. 11. The only link from James Bay to Toronto. Ontario Northland is not just a part of our history, it is our history and our future.
It is worth mentioning that Ontario Northland employees also provided themselves a contribution to the quality of life in the region by volunteering their time in a wide range of organizations, acting as coaches and assistants, mentors, board members, councillors, providing help with fundraising and other administrative functions.
Pensioners who responded to the survey were less likely to agree with the statement that Ontario Northland improved the quality of life in the region. Specifically, only about 60% of respondents expressed an agreement with the statement that the presence of the company definitely improved the quality of life in the local communities. Another 28% had the opinion that the company somewhat improved the quality of life.
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Pensioners were indicating similar factors influencing the positive impact as employees did, although at a lower overall frequency. Pensioners seem to appreciate more than employees the sponsorship of community events as one of the factors influencing the positive impact of Ontario Northland with 42% of pensioner respondents agreeing it is an important influencing factor (as opposed to 33% of employee respondents agreeing). On the other hand the provision of important services locally seems to be valued more by employees than pensioners (52% of employees indicating this as a factor influencing the positive impact as opposed to 33% of pensioners indicating this factor)
Respondents to the survey of mayors and economic development officers also expressed a strong agreement with the suggestion that Ontario Northland has improved the quality of life in their communities (with 7 out of 10 respondents indicating that Ontario Northland definitely has improved the quality of life, and 2 indicating that Ontario Northland has somewhat improved the quality of life in their communities). The key reasons for that impact (with 70 to 80% of respondents indicating that reason) include services provided by Ontario Northland and tourism exposure. Sponsorship of community events, high quality employment opportunities, and provision of important services locally were also indicated as some of the important reasons (with 50% to 60% of respondents agreeing).
In addition to the above identified impacts, surveys of Ontario Northland senior executives pointed out that the company provides affordable bus and rail passenger services throughout Northeastern Ontario. For example, for the residents of Moosonee and Moose Factory and the coastal communities, the Polar Bear express is the only affordable option to travel to the south. Many routes are heavily subsidized as they are not profitable in sparsely populated areas with declining populations. Some more profitable southern routes are used to “cross-subsidize” the northern routes. Private companies would likely not provide these services in the absence of Ontario Northland. As an example, one respondent pointed out that Greyhound Canada had recently reduced service from Thunder Bay to Hearst.
All senior executives interviewed were also emphasizing that Ontario Northland continually strives to improve the level of service, respond to customer needs, as well as refurbish and renew their equipment.
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6: SUMMARY OF STUDY FINDINGS AND CONCLUSIONS
This study examined the socio-economic impacts of Ontario Northland in its area of service. The specific impacts considered and evaluated include:
Jobs and income in Northeastern Ontario and province-wide that are attributable to Ontario Northland either directly, or indirectly through supplier-purchasing relationships and re-spending of employee wages and salaries; Community and business and economic development impacts in Northeastern Ontario due to Ontario Northland presence and its services; and, Quality of life impacts in Northeastern Ontario due to Ontario Northland presence in the region.
The first category of impacts represents the traditional metrics evaluated in economic impact studies that quantify the effects of the various rounds of expenditures and economic activity that takes place throughout the economy as a result of some initial expenditure or business activity.
The second category of impacts represents the “forward linkages effects”, or effects on service users and customers and the local economies where services are provided. The type of effects considered include productivity and profitability effects, and improved business attractiveness.
The third category of impacts represents the effects of Ontario Northland presence in the region that improve various aspects of people‟s daily life and make the region a more attractive and “liveable” area.
All impacts were analyzed and evaluated using a rigorous methodology widely accepted and recommended by the economic literature and practice.
Below we summarize study results (in their various forms of manifestation) grouped into four categories that correspond to the type of impacts examined.
2. Economic impacts (jobs and income) in Northeastern Ontario
Ontario Northland accounts for a total of about $209 million of value added and 2,140 jobs in Northeastern Ontario. These figures include value added generated directly by Ontario Northland, direct employment at Ontario Northland as well as spin-off effects or value added and jobs created through input purchasing from suppliers in Northeastern Ontario and re-spending of salaries of employees directly or indirectly related to Ontario Northland. There are 13.2 jobs across Northeastern Ontario for each $1 million of expenditures by Ontario Northland on salaries, operational inputs and capital programs. For each job at Ontario Northland, there is another job somewhere in Northeastern Ontario that exists because of Ontario Northland business presence in the region.
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Each $1 of expenditures by Ontario Northland on salaries, operational inputs and capital programs results in a total of $1.29 of value added (or regional income) in Northeastern Ontario. Total value added impact of Ontario Northland accounts for about 1% of total GDP in Northeastern Ontario. Contribution of Ontario Northland to the local economy is even more pronounced at the community level, where impacts range from about 1.4% of value added in Kirkland Lake, 3.7% in North Bay, to as much as 30.4% of value added in Englehart.
3. Economic impacts (jobs, income, and related effects) in the entire province of Ontario
Ontario Northland accounts for a total of about $396.5 million of business revenue, 2,747 jobs, and $162.1 million in employment income across Ontario, $218.8 million of GDP, as well as $94.7 million in tax revenue to various levels of governments. These figures include effects generated directly by Ontario Northland as well as spin- off effects created through input purchasing from suppliers in Ontario and re-spending of salaries of employees directly or indirectly related to Ontario Northland. Each $1 of Ontario Northland operational output results in a total $2.11 of business output, $0.86 of employment income, and each $1 million of Ontario Northland operational output results in a total of 14.62 jobs across the province. For each job at Ontario Northland, a total of nearly 1.6 additional jobs (over and beyond jobs at Ontario Northland) are generated in various industries across the province.
4. Community and business/economic development impacts in Northeastern Ontario
Freight rail services play an extremely important role in the regional economy by providing competitive well priced transportation options for many companies‟ products improving thus their economic viability, in particular in industries such as mining, forestry, sawmills, and wood products manufacturing. Given a relatively large local employment in the above industries (up to about 27% of labour force, depending on the community), a large share of local employment could be at risk of down-sizing and lay-offs should Ontario Northland rail services be not available, or substantially reduced. The specific benefits of Ontario Northland rail services to individual companies include: Access more markets; Possibility to remain competitive in more markets; Reduction in direct costs; and, Rationalization of logistics and plant operations. Bus parcel services allow local businesses to send packages throughout the region in a timely manner; for example hospitals use the service to send time-sensitive patient samples that have to be examined within a certain time limit. Ontera telecommunication services help put people and businesses in Northeastern Ontario on equal communication footing compared to all other people and businesses
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in North America, and provides an essential tool for research, marketing, business and economic development of the region. Passenger transportation services bring in many tourists to the region and help increase the tourism exposure of the region. Transportation connectivity improves the regional economic wellbeing; the communities that are linked to Ontario Northland rail services tend to have higher average earnings than most other communities in Northeastern Ontario. Availability and proximity to services provided by Ontario Northland (rail, telecommunications, bus parcel) are considered important factors in business location decision and staying in business. Many local communities refer to Ontario Northland and services provided by Ontario Northland in their promotional information packages intended to attract new business investment and residents.
5. Quality of life impacts in Northeastern Ontario
There is a strong agreement in local communities that the presence of Ontario Northland improves the quality of life in Northeastern Ontario. The key factors influencing this impact include the following: High quality employment and apprenticeship opportunities; Passenger transportation services; and, Provision of other high quality and reasonably priced services. Ontario Northland contributes to improved connectivity of the region to the rest of the province and availability of services similar to those available to residents in larger urban areas. Ontario Northland helps to convey a message that Northern Ontario has sustainable industry and skilled trades. Passenger transportation services (rail and motor coach) provide reasonably priced and convenient transportation options to residents of Northeastern Ontario for transportation between local communities to visit families, friends, or for medical appointments. As many as 1 in 4 residents of Northeastern Ontario may be using the motor coach services annually, and many more use passenger rail services. The services are particularly important to college students, people who do not have access to a car, or want to avoid driving in certain weather conditions such as in winter. Ontera telecommunication services help connect remote areas of Northeastern Ontario to the rest of the province and Canada and enhance access services and information. The services alsohelp adopt novel uses of technologies that improve quality of life in a community such as electronic access to medical practitioners and specialists, or distance education. Ontario Northland provides affordable and high-quality communication services and passenger transportation services that also cover many remote areas of Northeastern Ontario. Private companies would likely not provide these services in the absence of Ontario Northland due to low profitability.
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Ontario Northland strives to further expand services to underserviced and remote areas so as to improve the level of service, respond to customer needs, as well as refurbish and renew their equipment.
In summary, this study demonstrates that Ontario Northland provides a significant contribution to the economy of Northeastern Ontario and the entire province by generating direct jobs and spin- off business opportunities as well as by providing many services essential for the competitiveness and prosperity of Northern Ontario.
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7: OPPORTUNITIES TO MOVE FORWARD
Opportunities to move forward clearly depend on the overall economic situation in the province as well as global economic outlook – including the price of oil that determines the competitiveness of truck transportation against rail – and global trends in industries that are major customers of Ontario Northland.
Currently, Ontario Northland is facing several challenges due to, for example, declining population base combined with low population densities, or closures of some forestry products operations that were major customers of Ontario Northland‟s freight rail services.
It is unlikely that these trends will be reversed in the near future. Any funding and government reimbursement for provincially mandated services will also likely remain constrained. Therefore, Ontario Northland has to continue to search for options and strategies to reduce costs, generate demand and increase revenues across all business lines, and ensure customer satisfaction and customer loyalty so as to retain the existing demand.
Interviews with senior executives indicated that Ontario Northland is already working on future plans and strategies to ensure sustainability of its operations. Any plans and strategies will have to be prioritized so as to achieve as many goals as possible within the budgets available. An increase in the price of oil will make rail and boat transportation more economical against truck (although it will also increase operational costs of Ontario Northland) and thus could be used to position the freight rail (and perhaps the passenger rail) so as to generate greater demand for services. Such opportunities should be closely monitored.
A cost-benefit or business case analysis might help in obtaining some specific quantitative answers as to what strategies and investments would generate the largest return, both from the social point of view and from the Ontario Northland‟s bottom line point of view. The results of such analysis could then be used as a decision support tool and perhaps also in communications with the provincial government. In any case, competition between divisions for funds and resources must be avoided.
Examples of specific strategies and opportunities to examine and consider in future plans include the following.
Renew equipment with an eye to reduce operating costs, for example replace aging current motor coaches with smaller size busses (that would be used on routes serving areas with small population densities), and replace other equipment with more economical versions. Invest in infrastructure and technologies that would reduce costly service interruption, or equipment failure. Consider expanding services to Northwestern Ontario and/or Quebec in service areas that are characterized by economies of scale and that might help achieve greater efficiencies of operations and a reduction in average costs for the entire business line.
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Consider a larger role of Ontario Northland throughout Northern Ontario as well as Quebec and examine the extent and conditions under which activities in these geographic areas could obtain some financial support from provincial governments through one-time investment grants or cost shares, or continuous subsidies. A recent announcement of the Ontario government regarding the Building Broadband in Rural and Northern Ontario program accepting applications indicates that funding may be available for such initiatives. Strive to increase revenues in market segments that are currently profitable and have a favourable outlook for the future by expanding the range of services and offering new complementary services. Telecommunications services in larger urban centres that have higher population densities might be a good candidate for consideration (for example expand services into network management or web site design for smaller to medium size companies). Additional or frequent motor coach services between larger urban centres might offer another possibility for demand and revenue generation. Continue working on marketing strategies to attract more tourists to the region, increase ridership on passenger rail, and demand for tourist packages. Ensure readiness in case of renewed mineral exploration and mining activity in Northern Ontario, or new mining investments in the region (such as in the James Bay area). Research costs, potential revenues/ profitability of service, and explore capital funding options and conditions. Continue improving the operational performance of the rail cars refurbishment division and monitor the industry for further business opportunities. As transit agencies and rail companies renew and modernize their ageing equipment there may be more of such opportunities.
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8: ABOUT THE STUDY AUTHORS
This study was conducted by Dr. Ewa Tomaszewska of HDR|Decision Economics and Dr. Bakhtiar. Moazzami of Lakehead University.
Dr. Ewa Tomaszewska is a Senior Economist at HDR|Decision Economics. Dr. Tomaszewska is an applied economist with experience in policy and data analysis and economic modeling. Within the last three years, Dr. Tomaszewska has been involved in a number of economic impact studies for government agencies and private organizations, including impact of closures of three small airports in the Greater Toronto Area; impact of the Toronto Pearson International Airport, impact of the forestry industry in Northwestern Ontario, impact of marine transportation on the Great Lakes and St. Lawrence Seaway System, as well as impact of investment projects to improve major railway corridors in the United States.
Dr. B. Moazzami is a full professor of economics at Lakehead University. He has written many books and reports on Northern Ontario’s economic development challenges and opportunities. Dr. Moazzami is well-known for his research activities relating to Northern Ontario.
Dr. Moazzami has recently published a comprehensive report, “Northern Ontario in the 21st Century: Challenges and Opportunities” for Federal Economic Development Initiative for Northern Ontario (FedNor). In 2005, Dr. Moazzami was commissioned by the City of Thunder Bay to prepare a comprehensive economic development report for the City and Northwestern Ontario. In 2006, he was commissioned by the Northwestern Ontario Forestry Council to prepare an economic impact study of forestry industry in Northwestern Ontario. Subsequent to that work, he was commissioned by FedNor to prepare an economic impact study of the forestry sector in Northeastern Ontario. Currently, he is commissioned by the Ontario government to prepare a report on industrial trends and opportunities at regional and sub-regional areas for the Growth Plan for Northern Ontario initiative.
Dr. Moazzami has been a regular guest speaker at the University of Waterloo’s Economic Development Program delivered in Northern Ontario. He has also been involved in development and delivery of many training courses for various economic development officers in many Northern Ontario communities.
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