COMPARISON OF BUSINESS COSTS FOR NORTHERN ONTARIO CITIES

Prepared for: Prepared by:

City of North Bay Economic Development MMK Consulting Inc. Sault Ste. Marie Economic Development Corporation Glenn Mair Thunder Bay Community Economic Development Corporation Treena Cook Timmins Economic Development Corporation

December 8, 2014

Contents

Introduction and methodology...... 1 Introduction and objective 1 Study scope 2 Methodology 5

Cost comparison results...... 7 Overall results 7 Comparison of selected jurisdictions 8 Results by major sector 9 Results by industry 11

Comparison by cost component ...... 12 Significance of cost factors 12 Labour costs 13 Facility costs 14 Transportation costs 15 Utilities 17 Financing costs 18 Taxes other than income 18 Income tax 21

Appendix A – Detailed Comparisons ...... 23

Introduction and methodology

Introduction and objective

In March of 2014, KPMG released a major study, Competitive Alternatives, KPMG’s Guide to International Business Location Costs1. That study compared the cost of doing business in more than 100 cities in ten countries, including Canada and the United States. The range of cities included in the Competitive Alternatives 2014 study included Toronto and Sudbury in Ontario, along with 30 other Canadian cities and 74 cities in the US.

The municipalities of North Bay, Sault Ste. Marie, Thunder Bay, and Timmins (collectively the “Municipalities”) did not participate as part of the main, published Competitive Alternatives 2014 study. However, the Municipalities now wish to have their communities added to the established comparative analysis, to obtain a better understanding of the costs of doing business in their respective cities relative to other cities regionally, nationally, and cross-border in the US.

The objective of this report is to provide the Municipalities with an overview of the cost competitiveness of their cities within the province of Ontario, and in comparison to other selected cities in Canada and the United States. This report provides:

An overall business cost index for each municipality

Specific cost indices for the four sectors and subsectors analyzed in the Competitive Alternatives report (digital services, R&D, corporate services and manufacturing)

Specific cost indices for each of the 19 individual industry-specific model business operations that underlie the analysis

An analysis and comparison of specific business cost factors that both underlie and help explain the results for the industries and sectors compared.

Many different approaches exist to assessing the cost of doing business in any given city. This study utilizes both analytical approaches and major data sources similar to those that are often used in corporate site selection projects. Thus, this study presents a comparison of business costs as they may be perceived by a mid-to-large sized company (and/or its advisors) undertaking a site selection study across the range of jurisdictions included in this analysis.

While great care has been taken in performing this analysis and developing the findings, the comparisons presented are of a general nature and should not be interpreted as a definitive or final opinion on the merits of locating any specific facility in one jurisdiction over another.

This report has been prepared for the exclusive use of the municipalities of North Bay, Sault Ste. Marie, Thunder Bay, and Timmins. Each municipality has agreed that this report will represent a confidential report to the collective group of Municipalities. MMK Consulting does not take any responsibility for any distribution of this report to third parties by any of the Municipalities.

1 MMK Consulting manages many aspects of the Competitive Alternatives study on behalf of KPMG.

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Study scope

Business costs in context

Selecting the best site for a business operation requires careful consideration of a wide range of factors, including business costs, the business environment, cost of living, and quality of life.

The following table illustrates some of the major factors that can influence the site location decisions. However, the relative importance of each of these site location factors, along with others not shown in this table, will vary among different industries, and even among individual firms within particular industries.

For many firms, a logical first step in locating or relocating a business operation is to perform a high-level scan of which jurisdictions represent cost-competitive locations, as represented by the top left quadrant of the table. This study is designed to address this issue of relative business costs.

Comparison cities

The comparisons presented in this report reflect new research for four cities in northern Ontario—North Bay, Sault Ste. Marie, Timmins, and Thunder Bay. For purposes of comparison, results for these cities are shown relative to 10 other cities selected from among the 131 cities included in Competitive Alternatives 2014:

Other Ontario cities: Sudbury, Toronto, Chatham-Kent

Other Canadian cities: Moncton (NB), Montreal (QC), Winnipeg (MB), and Vancouver (BC)

US regional cities: Cedar Rapids (IA), Minneapolis (MN), and Saginaw (MI).

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The analysis is based on the greater metropolitan area of each of the 14 cities. This approach allows for a realistic comparison between locations, recognizing that many business facilities choose to locate in suburban or urban-fringe areas of large metro areas.

Sectors and industries

This study compares seven different business-to-business (B2B) service sector operations and 12 different manufacturing operations, as detailed in the following table. The 19 individual business operations have been chosen to reflect industries that are regularly seen making site selection decisions through the assessment of multiple jurisdictions.

Each of the business operations examined reflects a representative, industry-specific business that has been defined in detail and modeled to analyze its pro forma operating costs in each of the study locations. The 19 business operations cover a wide range of operating requirements, including labor, facility, and capital requirements. Results for all 19 business operations are presented in Chapter 2.

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The hierarchy of sector and industry analysis for Competitive Alternatives is illustrated below. This hierarchy helps to illustrate the relationships between the overall results, sector results, and industry-specific business cost results presented in this report.

The overall results for all cities and countries represent the top level of the analysis hierarchy and incorporate business modeling outcomes from both the services sector and the manufacturing sector. Those results are ultimately based on the analysis of 19 individual industry-specific business operations, as shown in the bottom (red) level of the analysis hierarchy. Sectors and subsectors form the middle (green) level of the analysis hierarchy, connecting and combining results for reasonably similar types of business operation. The Competitive Alternatives study, and this report, highlight results for four key sectors and subsectors—digital services, R&D, corporate services, and manufacturing.

Cost factors

This study analyzes the same range of 26 location-sensitive cost factors as were included in the Competitive Alternatives 2014 study, as detailed in the following table (overleaf). These major location-sensitive cost factors generally represent between 35 and 90 percent of total operating costs for the specific business operations examined in this study.

Some significant costs (major plant and equipment; commodity raw materials, parts, and subcomponents for the manufacturing process) tend to be governed by world market prices or are fixed at other levels of the supply chain, and do not vary substantially by location. These fixed costs are more substantial for manufacturing operations than for service operations, and are held constant (in US dollars) for comparison purposes. A number of less significant cost factors, such as advertising, accounting services, and office supplies, may be location- sensitive, but do not have a material impact on the overall comparison and are not examined in this study.

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Except as noted below (re exchange rates) and on Page 6, all cost data used in this study are current as of the last quarter of 2013, which was the effective date for all data and analysis contained in the published Competitive Alternatives 2014 study.

Methodology

This study is based on the same methodology as the KPMG Competitive Alternatives study. Key methodological aspects of the Competitive Alternatives study relevant to this report are summarized as follows.

Determination of US baseline index

The four largest US cities by population—New York, Los Angeles, Chicago, and Dallas Fort Worth—are used to calculate the US national results and form the baseline index of 100.0 against which business costs in other cities are compared. Due to the generally lower business costs seen in Canada and in smaller cities in general, all cities examined in this report show business costs below the US baseline of 100.0.

Exchange rates

All figures in this report are expressed in US dollars unless otherwise stated. Canadian dollar amounts have been converted to US dollars at an exchange rate of US$1.00 = Cdn$1.09 (Cdn$1 = US$0.9174). This exchange rate represents the current default Canada-US exchange rate in the Competitive Alternatives Cost Model, and reflects the average Canada-US exchange rate from the second quarter of 2014.

We note that the Canadian dollar has been trading at values lower than US$0.9174 since late-September 2014. Cost advantages for all Canadian cities relative to all US cities would be marginally higher if study results were recalculated using December 2014 exchange rates.

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Consistency with the published Competitive Alternatives 2014 study

For the 10 comparison cities previously included in the published Competitive Alternatives 2014 study (as identified on Page 2), the index results presented in this report differ from those published in the Competitive Alternatives 2014 report. These variations are due to the fact that the Competitive Alternatives Cost Model is updated semi-annually for exchange rate changes and major tax changes at the national and provincial/state levels. These updates can impact both:

The costs for specific cities being studied (e.g. Toronto or Winnipeg), thus changing the results of a city relative to the US baseline; and/or

Costs for cities included in the calculation of the US baseline index (refer Page 5), thus impacting the relative index results for all cities.

The analysis in this report reflects more recent data than used in the published Competitive Alternatives 2014 study and therefore results presented herein cannot be compared to those in the Competitive Alternatives 2014 report. However, current and valid comparisons between the northern Ontario municipalities and additional cities included in the Competitive Alternatives 2014 study can be made using the online Competitive Alternatives Cost Model. Access to the Competitive Alternatives Cost Model has been provided to the Municipalities in conjunction with delivery of this report.

Incentives

Significant, generally-accessible incentives, with clearly defined eligibility criteria, are included in the scope of this study. These incentives include certain tax rate reductions, tax abatements, sales tax exemptions, favorable interstate income apportionment rules, investment tax credits, research and development incentives, and job tax credits available in various jurisdictions.

For major business investments, it is not uncommon for governments to also offer incentive packages negotiated on a discretionary basis. These packages typically comprise a complex set of financing assistance, infrastructure support, and/or tax abatements tailored to specific investment and job creation proposals. The analysis in this report does not distinguish among jurisdictions based on such discretionary incentives, because:

There is generally no before-the-fact basis for forecasting the value of incentives any jurisdiction may ultimately provide, without entering into negotiations over a specific investment proposal

The primary focus of the cost analysis is on the fundamental business cost structures that apply to typical business operations within each jurisdiction.

Interpretation of results

Further information about the Competitive Alternatives study methodology can be obtained from the study report and appendices (Volume II Report), available for download at: www.CompetitiveAlternatives.com.

While great care has been taken in performing this analysis and developing the findings, the resulting comparisons are of a general nature. All factors examined in this study are subject to change over time due to changes in local laws, regulations, and/or market conditions. The results of this study should not be interpreted as a definitive or final opinion on the merits of locating any specific facility in one jurisdiction over another. Further analysis is required to determine the preferred site for any specific facility or operation.

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Cost comparison results

Overall results

The overall results, by city or country, represent the highest level of aggregation of business costs in this study, combining the results for all industries and cost factors examined. Business costs in each city are estimated based on the analysis of:

Representative business operations for 19 industries—7 services and 12 manufacturing operations

26 individual location-sensitive cost components.

Total business costs in each location are expressed as a percentage index, with the baseline index of 100.0 being assigned to the United States. Locations with business costs lower than the US baseline have a cost index less than 100, while locations with business costs higher than the US base have a cost index greater than 100. Rankings are based on ascending business costs, with lower cost cities ranking ahead of higher cost cities.

Overall results are illustrated below for the five northern Ontario cities—the four Municipalities new to the analysis in this report, plus Sudbury which was included in the published Competitive Alternatives 2014 study.

All of the northern Ontario communities show business costs below the US baseline, ranging from 8.6 percent below the US base in North Bay to 7.1 percent below the US base in Thunder Bay. The range of variation in total business costs among the five cities is modest, at 1.5 percentage points, and overall business costs in Sudbury and Timmins are virtually equivalent, with both cities scoring a cost index of 92.4 (7.6 percent below the US).

Overall Cost Index Results for Northern Ontario Cities, US = 100.01

North Bay 91.4

Sault Ste. Marie 92.0

Sudbury 92.4

Timmins 92.4

Thunder Bay 92.9

US Baseline 100.0

80 85 90 95 100

1 Average of services and manufacturing sectors, based on 7 service operations and 12 manufacturing operations.

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Comparison of selected jurisdictions

The results for the northern Ontario cities are also compared to a wider range of cities across Canada and cross- border in the US, as identified on Page 2. This broader comparison shows the northern Ontario cities to be grouped in the middle of the pack among the comparison cities:

Business costs in the northern Ontario cities are higher than in several relatively low-cost Canadian cities, such as Moncton, Chatham-Kent, Winnipeg, and Montreal. Average business costs in Montreal and North Bay are virtually identical, separated by only 0.1 percentage point.

Business costs in the northern Ontario cities are consistently lower than in Vancouver, and each of the US cities chosen for comparison, and are 7.1-8.6 percent below the US baseline.

Average business costs in Toronto are virtually equivalent to both Sudbury and Timmins, with higher labour and facility costs in Toronto being offset by higher transportation and property tax costs in both Sudbury and Timmins.

Overall Cost Index Results for Comparison Cities, US = 100.01

Moncton, NB 89.1

Chatham-Kent, ON 90.4

Winnipeg, MB 91.0

Montreal, QC 91.3

North Bay, ON 91.4

Sault Ste. Marie, ON 92.0

Sudbury, ON 92.4

Timmins, ON 92.4

Toronto, ON 92.4

Thunder Bay, ON 92.9

Vancouver, BC 93.5

Cedar Rapids, IA 94.0

Saginaw, MI 96.1

Minneapolis, MN 98.2

US Baseline 100.0

80 85 90 95 100

1 Average of services and manufacturing sectors, based on 7 service operations and 12 manufacturing operations.

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Results by major sector

Comparative results for the northern Ontario cities and other comparison cities in each of four main sectors and subsectors are illustrated on the following page. These results are summarized as follows:

Results for the digital services subsector are based on the analysis of two representative business operations—a software development firm and a video game production studio. Costs in this subsector primarily reflect salary levels and benefit costs associated with hiring creative and technical IT professionals.

The northern Ontario cities show their strongest results in this subsector, with all cities showing a business cost advantage of over 20 percent relative to the US baseline. North Bay ranks second among the 14 cities compared, and Chatham-Kent and Moncton are the only two cities to rank ahead of any of the northern Ontario cities for low business costs. Within this subsector, Ontario’s Interactive Digital Media Tax Credit provides a significant advantage to all Ontario cities and helps to explain why all of the northern Ontario cities rank ahead of both Montreal and Winnipeg in this subsector.

Results for the R&D services subsector are based on three representative operations—a biomedical research firm, an electronic systems design/test facility, and a clinical trials management firm. Cost differentials for R&D reflect differences in labor costs for scientific and technical employees, as well as differences in the tax and incentive treatment of R&D costs.

The northern Ontario cities rank in fourth through eight place among the 14 cities compared, with all cities showing a business cost advantage of over 21 percent relative to the US baseline. Moncton, Winnipeg and Chatham-Kent are the only cities to rank ahead of the northern Ontario cities for low business costs in this subsector. These strong results for Moncton and Winnipeg are partially attributable to the 15% fully refundable R&D tax credit available in New Brunswick and the 20% partially refundable R&D credit available in Manitoba—providing both of these jurisdictions with an advantage relative to Ontario’s 4.5% non-refundable R&D credit for medium and large companies.

Results for the corporate services subsector are based on two representative operations—a shared services center and an international financial services firm. Labor costs for both entry-level admin and customer service employees, as well as finance professionals, are significant in this subsector.

Similar to the R&D subsector, the northern Ontario cities rank in fourth through eight place among the 14 cities compared, with all cities showing a business cost advantage of at least 19 percent relative to the US baseline. Once again, Moncton, Winnipeg and Chatham-Kent are the only cities to rank ahead of the northern Ontario cities. Within northern Ontario, business costs are lowest in North Bay (consistent with the other three sectors and subsectors) and highest in Sault Ste. Marie (consistent with the R&D subsector), although less than one percentage point separates the cost results of the five cities.

Results for the manufacturing sector are based on 12 industry-specific operations, as listed on Page 3. For manufacturing firms, costs for globally sourced machinery, materials, parts, and subcomponents are similar by location, resulting in lower cost differences among locations in this sector.

Results for the northern Ontario cities are less favorable in this sector, with North Bay ranking sixth among the 14 cities and Thunder Bay ranking 12th. Transportation costs for moving products to market are a significant factor for many types of manufacturers, and represent a weakness for the northern Ontario cities due to their geographic location. This causes major population and transportation hubs such as Montreal and Toronto to rank ahead of the northern Ontario cities in this sector.

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Results by Sector, US = 100.0

Digital Services Average Research & Development Average

Chatham-Kent, ON 78.5 Moncton, NB 70.7

North Bay, ON 78.7 Winnipeg, MB 73.5

Moncton, NB 78.9 Chatham-Kent, ON 76.3

Timmins, ON 79.0 North Bay, ON 77.2

Sudbury, ON 79.4 Timmins, ON 77.8

Sault Ste. Marie, ON 79.4 Thunder Bay, ON 78.3

Thunder Bay, ON 79.5 Sudbury, ON 78.4

Montreal, QC 80.0 Sault Ste. Marie, ON 78.9

Winnipeg, MB 81.2 Montreal, QC 80.4

Toronto, ON 82.0 Vancouver, BC 83.9

Vancouver, BC 85.4 Cedar Rapids, IA 84.3

Cedar Rapids, IA 90.8 Toronto, ON 84.4

Saginaw, MI 93.9 Saginaw, MI 88.4

Minneapolis, MN 96.0 Minneapolis, MN 93.4

US Baseline 100.0 US Baseline 100.0

70.0 75.0 80.0 85.0 90.0 95.0 100.0 70.0 75.0 80.0 85.0 90.0 95.0 100.0

Corporate Services Average Manufacturing Sector Average

Moncton, NB 74.5 Moncton, NB 94.9

Winnipeg, MB 79.3 Chatham-Kent, ON 95.4

Chatham-Kent, ON 79.7 Montreal, QC 95.4

North Bay, ON 80.2 Toronto, ON 95.7

Timmins, ON 80.5 Winnipeg, MB 96.2

Thunder Bay, ON 80.6 North Bay, ON 96.6

Sudbury, ON 80.7 Vancouver, BC 96.9

Sault Ste. Marie, ON 81.0 Sault Ste. Marie, ON 97.0

Montreal, QC 83.1 Cedar Rapids, IA 97.1

Cedar Rapids, IA 83.9 Sudbury, ON 97.6

Vancouver, BC 85.4 Timmins, ON 97.8

Toronto, ON 87.0 Thunder Bay, ON 98.3

Saginaw, MI 87.9 Saginaw, MI 98.4

Minneapolis, MN 93.3 Minneapolis, MN 99.8

US Baseline 100.0 US Baseline 100.0

70.0 75.0 80.0 85.0 90.0 95.0 100.0 70.0 75.0 80.0 85.0 90.0 95.0 100.0

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Results by industry

Index results for all comparison cities for each of the 19 business operations examined in this study are detailed below. Further results for each city, by cost component, as well as results for other Competitive Alternatives study cities are available online using the Competitive Alternatives Cost Model.

Results by Industry Operation, US = 100.0

Research & Digital Corporate Manufacturing Development Services Services

Adv. Electr- Medical Spec. Clinical Product Video Int'l Shared Battery Aircraft Auto onics Food Dev Metal Pharma Plastics Precision Chemic Telecom Biomed Trials Testing Software Game Financial Services Northern Ontario

North Bay, ON 97.8 96.8 97.3 95.7 97.4 94.5 97.4 95.7 99.4 97.4 96.2 94.9 79.4 80.9 73.8 84.4 71.7 74.8 84.5 Sault Ste. Marie, ON 98.9 96.9 97.6 95.8 98.4 94.6 98.1 95.8 100.3 98.0 96.2 95.0 81.4 82.0 75.6 85.1 72.3 75.5 85.4 Sudbury, ON 99.1 97.8 98.4 96.8 98.3 95.8 99.0 96.6 101.2 98.0 96.8 95.7 80.7 81.9 75.0 85.2 72.2 75.2 85.1 Timmins, ON 99.7 97.8 98.5 96.7 99.1 95.7 99.4 96.6 101.8 98.3 96.7 95.5 80.1 81.4 74.4 84.7 72.0 75.0 85.0 Thunder Bay, ON 101.7 97.8 98.9 96.5 101.0 95.5 100.4 96.5 103.1 99.3 96.6 95.5 80.4 82.0 75.0 85.4 72.2 75.4 84.9

Other Jurisdictions Cedar Rapids, IA 97.8 97.0 97.4 96.9 97.3 95.7 96.4 96.7 96.8 98.0 97.4 96.6 83.7 89.0 82.8 90.8 90.8 84.4 83.4 Chatham-Kent, ON 95.9 95.3 96.3 94.8 96.0 93.1 95.3 94.3 96.6 96.5 95.6 94.3 78.4 80.2 73.1 84.4 71.3 74.6 83.8 Minneapolis, MN 100.7 99.4 99.9 99.0 101.3 99.1 100.7 99.1 101.4 100.1 99.0 98.8 94.0 94.0 92.6 96.0 96.1 91.9 94.4 Moncton, NB 96.8 94.6 95.7 94.0 97.7 91.1 95.2 93.1 97.1 96.4 94.9 92.6 74.4 67.6 68.9 81.0 76.3 70.8 77.6 Montreal, QC 95.5 95.8 96.3 95.3 95.5 93.4 95.2 94.5 95.9 96.4 96.0 94.8 83.7 80.2 77.7 82.5 77.1 77.9 87.3 Saginaw, MI 98.7 98.5 98.3 98.1 98.6 97.8 98.0 98.4 98.4 99.1 98.6 98.3 87.5 93.4 87.1 93.6 94.2 87.6 88.1 Toronto, ON 95.8 95.7 96.5 95.2 96.0 94.0 95.6 95.0 96.6 96.7 96.2 95.0 87.7 86.2 81.0 88.2 74.5 82.5 90.7 Vancouver, BC 97.9 97.2 97.4 96.3 97.3 94.9 97.8 96.6 98.4 97.7 96.8 95.7 87.4 84.7 80.7 87.7 82.5 80.5 89.3 Winnipeg, MB 98.8 95.5 96.8 94.5 99.4 92.4 97.7 94.7 99.2 97.7 95.2 93.5 78.1 68.3 71.9 84.0 77.9 75.8 82.1

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Comparison by cost component

Significance of cost factors

The significance of the location-sensitive cost factors examined in Competitive Alternatives 2014 (and in this study) varies both by location and operation, with variations existing between the services sector and the manufacturing sector. Cost percentages quoted in this chapter are from the Competitive Alternatives 2014 study.

Labor costs include wages and salaries, employer-paid statutory plans, and other employee benefits. Labor costs represent the largest category of location-sensitive cost factors, ranging from 75 to 90 percent of location- sensitive costs for the services operations examined, and from 44 to 60 percent for manufacturing operations.

Facility costs represent the next significant cost factor. For services operations, office lease costs represent 4 to 16 percent of total location-sensitive costs. For manufacturing operations, industrial lease costs range from 2 to 6 percent of location-sensitive costs.

Transportation costs are only assessed for manufacturing operations, reflecting the costs of moving finished goods to markets and representing 7 to 24 percent of total location-sensitive costs for those operations.

Utility costs represent 1 to 8 percent of location-sensitive costs. Electricity and natural gas costs are more significant for manufacturers than for non-manufacturers.

Costs of capital include both depreciation and interest. These are major cost items for manufacturers, ranging from 9 to 21 percent of location-sensitive costs. Capital-related costs are much less significant for services operations, at 0 to 7 percent of location-sensitive costs.

Taxes typically represent 2 to 10 percent of total location-sensitive costs for the services operations examined, and 6 to 14 percent for manufacturing operations.

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Labour costs

Labor costs represent the most significant group of cost factors examined in this study, and include salaries and wages, employer-paid statutory plans, and other employee benefits. The workforce required for each business operation is based on 42 benchmark job positions used consistently throughout this study. These positions reflect the full range of skills and responsibilities typically required in each of the business operations.

Salaries and wages include regular compensation, as well as any additional cash compensation customarily paid to employees (shift bonuses, incentive pay, etc.). Salary and wage levels are lowest in Moncton, Winnipeg, and Cedar Rapids, with the northern Ontario cities all ranking between 5th and 10th for this factor. Salary and wage costs in the northern Ontario cities are 3.9 to 5.3 percent lower than in Toronto. The largest salary differentials between northern Ontario and Toronto are seen for management and professional jobs (up to 11 percent), with much smaller wage differentials seen for technical/operational jobs (as little as 2 percent).

Statutory plans and payroll-based taxes are compared as a percentage of payroll. These costs are lowest Vancouver and Moncton, then followed by all of the Ontario locations in 3rd through 9th place.

Other employee benefits include a wide range of employer-paid perks, such as vacation entitlements, supplemental retirement savings, and private medical coverage (which represents a major cost item for US employers). These costs, compared as a percentage of payroll, are lowest in Winnipeg and Vancouver, with all Ontario cities tied in 5th place for this factor.

Labour Cost Comparison, per Employee

Benefits Salaries & Wages Total Labour Statutory Plans Other Benefits Average per Avg. per Employee1 Percent of Percent of Employee1 (US$) Rank Payroll Rank Payroll Rank (US$) Rank Northern Ontario

North Bay, ON $61,066 5 8.2% 9 27.0% 5 $82,536 4 Sault Ste. Marie, ON $61,428 7 8.1% 6 27.0% 5 $83,000 6 Sudbury, ON $61,844 9 8.1% 5 27.0% 5 $83,561 7 Timmins, ON $61,384 6 8.1% 7 27.0% 5 $82,959 5 Thunder Bay, ON $61,969 10 8.1% 4 27.0% 5 $83,706 8

Other Jurisdictions

Cedar Rapids, IA $60,725 3 9.0% 12 34.3% 12 $87,060 12 Chatham-Kent, ON $60,969 4 8.1% 8 27.0% 5 $82,397 3 Minneapolis, MN $66,788 14 10.4% 13 34.3% 12 $96,675 14 Moncton, NB $56,297 1 6.3% 2 25.5% 3 $74,245 1 Montreal, QC $61,737 8 11.2% 14 25.8% 4 $84,547 9 Saginaw, MI $63,464 11 8.8% 11 38.5% 14 $93,516 13 Toronto, ON $64,463 12 7.9% 3 27.0% 5 $86,983 11 Vancouver, BC $65,031 13 5.6% 1 25.4% 2 $85,180 10 Winnipeg, MB $58,808 2 8.2% 10 24.8% 1 $78,206 2

1 Average for services sector (7 business operations) and manufacturing sector (12 business operations), as per the overall results. Represents 42 different job positions, including professional and management positions.

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Total labor costs, combining all of the above labor-related cost elements, are lowest in Moncton, Winnipeg, Chatham-Kent, North Bay, and Timmins. Moderate statutory plan and other benefit costs result in higher rankings for each of the northern Ontario cities for total labor costs than for salaries and wages, indicating larger pay packets for employees than in some other jurisdictions while still maintaining moderate total labor costs for employers. Total labor costs in the northern Ontario cities are, on average, 3.8 to 5.1 percent lower than in Toronto.

Facility costs

Office leasing

For the services operations examined in this study, facilities are assumed to be established in leased Class “A” office or commercial space, ranging from 10,000 to 45,000 square feet (929 to 4,180 square meters). For most services operations examined in this study, costs are based on office space located in a suburban office park, or equivalent location. The international financial services operation examined is assumed to be located in a downtown (city center) office building.

Facility Costs, Office and Factory Leasing Costs

Manufacturing – Services Sector – Office Lease1 Factory Lease2 Suburban Downtown Suburban US$ per US$ per US$ per sq.ft.3 Rank sq.ft.3 Rank sq.ft.3 Rank Northern Ontario North Bay, ON $14.67 4 $14.67 3 $7.98 12 Sault Ste. Marie, ON $18.81 8 $18.81 7 $5.05 4 Sudbury, ON $15.60 6 $19.71 8 $8.26 13 Timmins, ON $15.60 6 $15.60 5 $8.62 14 Thunder Bay, ON $14.67 4 $14.67 3 $5.50 7

Other Jurisdictions Cedar Rapids, IA $12.00 3 $13.50 2 $4.13 3 Chatham-Kent, ON $11.93 2 $11.93 1 $3.67 2 Minneapolis, MN $26.04 12 $28.50 10 $6.63 10 Moncton, NB $19.72 9 $21.57 9 $5.28 6 Montreal, QC $24.05 11 $40.93 12 $5.50 7 Saginaw, MI $10.50 1 $18.00 6 $3.41 1 Toronto, ON $28.05 13 $44.50 13 $5.06 5 Vancouver, BC $28.44 14 $49.57 14 $7.34 11 Winnipeg, MB $21.57 10 $30.93 11 $5.73 9

1 Gross rent for office facilities includes all operating, tax, and insurance costs passed on by the landlord to the tenant as additional rent. 2 Net rent for a prime bulk industrial facility. All operating costs are in addition and are borne directly by the tenant. 3 Equals 0.09 m2, 10.76 sq.ft. = 1 m2.

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In many smaller cities there is limited (if any) distinction between suburban and downtown markets and/or there may be little or no Class “A” space available either downtown or in the suburbs. In such cases, the best alternative office space cost has been used, regardless of whether it is located in the suburbs or downtown. Among the northern Ontario cities, only Sudbury shows a meaningful differentiation between available high quality office space in downtown and suburban locations.

Office lease costs reflect gross rent, and also include all operating, tax, and insurance costs generally passed on by the landlord to the tenant in each location. The northern Ontario cities fare well in this comparison of office leasing costs, with costs generally below average in both the suburban and downtown comparisons. Cedar Rapids, Chatham-Kent, and Saginaw are the only other comparison locations to offer similarly competitive office leasing costs.

Factory leasing

For the manufacturing operations, facilities are assumed to be established in a leased suburban industrial building, either an existing modern building or a design-build-lease facility developed for this firm and leased back by the developer. Land requirements range from 2 to 7 acres (0.8 to 2.8 hectares) and factory sizes range from 30,000 to 120,000 square feet (2,790 to 11,148 square meters).

Factory lease costs for each location are based on rental costs for prime bulk industrial space. Lease costs only include net rent. Additional costs, including utilities and property taxes, are borne directly by the manufacturing firm and are considered later in this chapter. Based on these parameters, factory lease costs are lowest in Saginaw, Chatham-Kent, Cedar Rapids, and Sault Ste. Marie.

Some smaller communities, including North Bay, Sudbury, and Timmins show relatively high costs for industrial leasing. This is generally attributable to a limited market of existing suitable industrial facilities, and developers who view the development of a new tenant-specific building to be quite risky due to the potential difficulty of finding replacement tenants in the future (if required). In such instances, it may be more economical (in the long run) for a firm to buy and build its own facility, saving money on rent by assuming the future risks associated with the facility.

Industrial land and construction

As the manufacturing operations examined utilize leased industrial buildings, industrial land and construction costs do not directly impact facility costs reported here. However, these costs are collected as part of the study research program and are used to estimate market values of industrial properties in each location, as a basis for calculating local property taxes.

Transportation costs

The manufacturing operations examined in this study are assumed to deliver their physical products by some combination of surface (land and sea) and air freight. The table below illustrates the transportation modes typically used by each type of model business operation, as well as the relative significance of transportation costs for each industry model.

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Transportation costs are estimated based on a general practice that firms deliver product to major distribution centers in full load or standardized less-than-full load quantities, using normal delivery schedules. (In other words, the model assumes that firms are not selling to customers requiring just-in-time (JIT), just-in-order (JIO), or other specialized warehousing and delivery services, which can significantly affect transportation costs.)

The comparisons are based on costs-to-market, combining transportation rates for each distribution channel and the proximity of each location to major markets for the various products, generally on a global basis. Figures shown here for all freight modes include relevant fuel and security surcharges.

For surface freight—40’ containers to global destinations and equivalent road freight to regional destinations— average costs per load are lowest from Toronto, Montreal, and Saginaw, and are highest from Moncton, Winnipeg, and Thunder Bay.

Costs for air freight to a range of global destinations also vary by region. Average air freight costs are lowest from Toronto, Montreal, and Minneapolis, and are highest from Winnipeg, Vancouver, and Thunder Bay.

Combining these two distribution channels, total freight costs are lowest from Toronto, Montreal, and Saginaw. Total freight costs for all of the northern Ontario cities are above average relative to the comparison group of cities. This factor negatively impacts the total business cost rankings for the northern Ontario cities in the manufacturing sector, particularly in operations where transportation costs represent a larger portion of total location costs—advanced batteries, aircraft parts, plastic products, food processing, and metal components. In these industries, transportation costs are particularly significant either because products are high volume relative to value, or high value but also very high weight and/or with complex transportation needs.

16

Transportation Costs

Global Distribution Total Annual Cost

Surface Freight Air Freight

per Load1,2 per Kg1 US$'0003 Rank Northern Ontario North Bay, ON $2,518 $3.24 $2,888 8 Sault Ste. Marie, ON $2,665 $3.31 $3,049 10 Sudbury, ON $2,556 $3.24 $2,925 9 Timmins, ON $2,710 $3.38 $3,099 11 Thunder Bay, ON $3,022 $3.51 $3,432 14

Other Jurisdictions Cedar Rapids, IA $2,110 $2.98 $2,464 4 Chatham-Kent, ON $2,100 $3.05 $2,472 5 Minneapolis, MN $2,318 $2.97 $2,662 6 Moncton, NB $2,740 $3.31 $3,126 12 Montreal, QC $2,005 $2.79 $2,335 2 Saginaw, MI $2,015 $3.16 $2,401 3 Toronto, ON $1,968 $2.77 $2,294 1 Vancouver, BC $2,310 $3.44 $2,755 7 Winnipeg, MB $2,978 $3.39 $3,370 13

1 Average for those manufacturing operations that utilize full-load delivery logistics for each mode of distribution. 2 Per standard 40’ container, or equivalent. 3 Average for 12 manufacturing operations included in the overall results.

Utilities

Electricity

The operations examined in this study are not particularly energy-intensive, and none of the operations examined use sufficient electricity to qualify for wholesale electricity purchasing in Ontario or to benefit from the Northern Industrial Electricity Rate Program. Compared in US cents per kilowatt-hour (table overleaf), electricity costs are lowest in Winnipeg, Cedar Rapids, and Minneapolis, and are highest in Chatham-Kent and Toronto.

Among the northern Ontario cities, Sault Ste. Marie and Thunder Bay have the lowest electric costs, ranking 8th and 9th respectively among the 14 cities. Between these two cities, electric costs are lower in Thunder Bay for smaller firms (<1,000 kW demand) but lower in Sault Ste. Marie for mid-sized firms as Thunder Bay Hydro moves firms with demand of 1,000-5,000 kW onto a more expensive rate schedule.

Natural gas

Natural gas costs are analyzed only for manufacturing operations, as natural gas is generally irrelevant or immaterial for service operations. Compared on the basis of US dollars per 100 cubic feet (CCF), natural gas costs are lowest in Minneapolis, Thunder Bay, and Winnipeg, and are highest in Montreal and Moncton.

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Utility Costs, Electricity and Natural Gas

Electricity1 Natural Gas2 US¢ per US$ per kWh Rank CCF 3 (100ft3) Rank Northern Ontario North Bay, ON 11.1 ¢ 10 $0.52 6 Sault Ste. Marie, ON 10.8 ¢ 8 $0.52 6 Sudbury, ON 11.9 ¢ 12 $0.52 6 Timmins, ON 11.9 ¢ 11 $0.52 6 Thunder Bay, ON 10.9 ¢ 9 $0.46 2

Other Jurisdictions Cedar Rapids, IA 5.3 ¢ 2 $0.49 4 Chatham-Kent, ON 12.0 ¢ 13 $0.54 10 Minneapolis, MN 7.0 ¢ 3 $0.46 1 Moncton, NB 9.2 ¢ 7 $1.19 14 Montreal, QC 8.0 ¢ 5 $0.76 13 Saginaw, MI 8.4 ¢ 6 $0.69 12 Toronto, ON 12.0 ¢ 14 $0.51 5 Vancouver, BC 7.3 ¢ 4 $0.64 11 Winnipeg, MB 5.3 ¢ 1 $0.46 3

1 Average for 19 operations included in the overall results. 2 Average for 12 manufacturing operations included in the overall results. Natural gas costs have not been analyzed for services operations. 3 Equals 2.83 m3 or 29.87 GJ.

Financing costs

The base interest rates used in this study represent typical cash deposit rates and mid-class commercial bond/loan rates in each country in Q4 2013. For Canada, these rates reflect 1.10 percent for cash deposits and 5.06 percent for mid-class commercial borrowing. For the United States, the equivalent rates are 0.38 percent for cash deposits and 4.16 percent for mid-class commercial borrowing.

For operations in volatile industries or with limited fixed assets to offer as security, additional interest rate premiums have been added to the base borrowing rates as appropriate.

Taxes other than income

Property taxes

Property taxes paid in each city are compared in the following table (overleaf) on the basis of US dollars of tax per square foot of building space. Property taxes include taxes levied on the value of land and buildings, machinery and equipment, inventory, and other physical assets. Property tax costs can vary significantly between locations based on both local tax rates and local property values.

81

For services operations occupying leased office space, property taxes on real estate are typically levied on the landlord. The amount of tax passed on to the tenant is captured indirectly in total office leasing costs (refer to Page 14), but is not separately identifiable. For this reason, 12 of the 14 cities compared below report no property tax cost for services operations. For the two cities showing a property tax cost, Saginaw is due to direct taxation of business equipment while Winnipeg is due to a tax on business occupancy.

For manufacturing operations, property taxes typically account for about two percent of location-sensitive costs. The lowest property tax costs for manufacturing operations are in North Bay, followed by Cedar Rapids, Winnipeg, and Toronto.

Northern Ontario cities have some of the highest property tax costs among the 14 cities compared, with Sault Ste. Marie ranking 11th, Sudbury 13th, and Thunder Bay 14th. While property values vary by city and also influence property tax costs, among the Northern Ontario cities compared, North Bay’s property tax rate for light industry is 3.175 percent while in Sudbury and Timmins the equivalent rate exceeds 5.0 percent, and in Sault Ste. Marie and Thunder Bay the light industry tax rate is in excess of 5.5 percent.

Total Property Taxes

Services Sector1 Manufacturing (Leased Facilities) Sector2 US$ per US$ per sq.ft.3 Rank sq.ft.3 Rank Northern Ontario North Bay, ON $0.00 1 $2.83 1 Sault Ste. Marie, ON $0.00 1 $5.60 11 Sudbury, ON $0.00 1 $6.23 13 Timmins, ON $0.00 1 $5.27 9 Thunder Bay, ON $0.00 1 $6.66 14

Other Jurisdictions Cedar Rapids, IA $0.00 1 $3.78 2 Chatham-Kent, ON $0.00 1 $5.57 10 Minneapolis, MN $0.00 1 $4.02 6 Moncton, NB $0.00 1 $5.00 7 Montreal, QC $0.00 1 $5.71 12 Saginaw, MI $0.99 13 $5.21 8 Toronto, ON $0.00 1 $3.89 4 Vancouver, BC $0.00 1 $3.96 5 Winnipeg, MB $1.37 14 $3.82 3

1 Average for 7 services sector operations included in the overall results. Property taxes levied on the landlord for leased multi-tenant office space are not included here, but are implicitly included in gross rents, compared above under Facility Costs. 2 Average for 12 manufacturing sector operations included in the overall results. Includes all property taxes related to leased industrial facilities. 3 Average US$ per square foot of building space. 1 sq.ft. = 0.09 m2; 10.76 sq.ft. = 1 m2.

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Sundry Local Business Taxes

In addition to property taxes, which represent the most common form of local business tax, sundry local business taxes are also included in the Competitive Alternatives analysis where required. Sundry local business taxes, which can take a wide variety of forms, do not apply in any of the 14 cities compared in this report, but do impact total cost calculations for approximately 20 cities included in the Competitive Alternatives 2014 study.

Capital tax

Capital taxes include all taxes levied on business financial capital, including long term debt, share capital, and/or retained earnings/reserves. Capital taxes can include taxes levied annually, and/or one-time taxes levied at the time debt or shares are issued.

Capital taxes no longer apply to general corporations in any jurisdiction in Canada, but do apply in certain jurisdictions outside of Canada. In the United States, capital taxes apply (in various forms) in about 40 percent of all locations examined in Competitive Alternatives 2014. Among the cities compared in this report, Minneapolis is the only location where a capital tax applies, and the capital tax cost is capped at US $5,000 per year.

Sales and transaction taxes

Transaction taxes include gross receipts, non-refundable sales, and refundable value-added/sales (GST or VAT) taxes.

Gross receipts taxes apply in a small number of US jurisdictions (but not in the three jurisdictions compared in this report), either instead of, or in addition to, state or local income taxes. The United States also imposes an industry-specific gross receipts tax on manufacturers of medical devices.

Non-refundable sales taxes apply in nearly all US states, and a minority of Canadian provinces (BC, SK, MB). Where non-refundable sales taxes apply, exemptions are generally available for many of the costs incurred by a manufacturer to avoid the compounding of taxes into the price of goods at each stage of production.

Among the 14 cities compared in this report, the sales tax burden typically varies from US $72,000 in Saginaw to US $110,000 per annum in Cedar Rapids. Sales tax costs are significantly higher in Winnipeg, at US $216,000 per annum, due to sales tax applying on manufacturing machinery and equipment. However, a provincial income tax credit for new investment in manufacturing machinery more than offsets the amount of the sales tax paid, and results in Winnipeg having the lowest provincial income tax burden among the 14 comparison cities.

Refundable value-added/sales taxes (GST or VAT) have been excluded from the analysis since their refundable nature means there is no net cost to a business once input tax credits (refunds) have been claimed. These taxes do impose a cost on companies in terms of administration and cash flow timing, but such costs are not material to this study. Among the 14 comparison cities in this report, a GST-style tax is the only form of sales tax to apply in Ontario, Quebec, and New Brunswick.

02

Income tax

Effective income tax rates are calculated to reflect combined corporate tax rates (federal, provincial/state, and local), net of generally applicable tax credits, grants, and other government incentives. Effective tax rates may vary by city within a state or province due to the existence of local corporate income taxes (e.g., in Saginaw) or differences in business costs impacting the value of applicable incentives (e.g., R&D tax credits that vary based on local wage levels for R&D staff). Effective income tax costs are compared by sector.

Effective Combined Corporate Income Tax Rate1

Services Sector Manufacturing Research & Corporate 4 Digital Services2 Sector Development3 Services2 % Rank % Rank % Rank % Rank Northern Ontario North Bay, ON 10.7% 7 1.2% 10 26.1% 5 17.9% 9 Sault Ste. Marie, ON 10.1% 5 0.9% 8 26.1% 8 17.6% 6 Sudbury, ON 10.1% 4 0.9% 7 26.1% 7 16.9% 5 Timmins, ON 10.4% 6 1.1% 9 26.1% 6 16.8% 4 Thunder Bay, ON 9.9% 3 0.8% 6 26.0% 3 16.4% 3

Other jurisdictions Cedar Rapids, IA 32.7% 13 18.2% 13 35.7% 13 26.5% 14 Chatham-Kent, ON 11.0% 8 1.4% 11 26.0% 4 18.8% 11 Minneapolis, MN 31.6% 12 13.7% 12 35.6% 12 24.5% 12 Moncton, NB 20.8% 11 -21.3% 2 26.5% 10 15.4% 2 Montreal, QC 8.1% 2 -8.7% 3 19.3% 1 17.6% 7 Saginaw, MI 32.7% 14 20.5% 14 35.8% 14 25.9% 13 Toronto, ON 7.7% 1 0.2% 5 26.1% 9 18.4% 10 Vancouver, BC 17.9% 9 0.0% 4 20.9% 2 17.8% 8 Winnipeg, MB 18.8% 10 -30.9% 1 26.6% 11 11.9% 1

1 Net of government grants and incentives. 2 Average for two operations included in the overall results. 3 Average for three R&D operations included in the overall results. Most activities represent tax-eligible R&D activities. Negative effective income tax rates are the result of R&D refundable income tax credits, grants or other incentive programs. These amounts may be substantial in some countries or locations. 4 Average for 12 manufacturing operations included in the overall results.

Effective tax rates for digital services operations are partially influenced by tax incentives for R&D expenditures, as well as incentives for digital media production offered in some Canadian and US jurisdictions. Among the 14 comparison cities for this sector, effective corporate income tax rates are lowest in Toronto and Montreal, followed by the five northern Ontario cities ranked in third through seventh places. Ontario’s Interactive Digital Media Tax Credit provides a significant advantage to all Ontario cities, causing them to have effective income tax rates more than two thirds lower than in the three US cities compared.

12

For R&D services, both Canada and the US, and many of their provinces and states, offer R&D tax incentives. These tax credits may be fully or partially refundable in certain situations, resulting in a “negative” tax cost (or net government subsidy) for R&D operations in some jurisdictions. Winnipeg, Moncton, and Montreal all benefit from refundable R&D tax credits, and thus have negative effective income tax rates in this subsector. While effective tax rates for the northern Ontario cities are generally higher than for their Canadian counterparts, they are still significantly lower than in each of the three US cities compared.

For general corporate services operations, effective tax rates tend to be relatively closer to a jurisdiction’s nominal tax rate, due to fewer incentives applying in this subsector. Among the 14 comparison cities, effective corporate income tax rates are lowest in Montreal and Vancouver, followed by all the Ontario cities. Effective tax rates for Ontario in this subsector are about 10 percentage points lower than in the three US cities compared.

For manufacturing operations, effective corporate income tax rates are lowest in Winnipeg and Moncton due to the applicability of investment tax credits in those jurisdictions. However, the northern Ontario cities also fare well in this sector, with third place through sixth place all being filled by northern Ontario cities.

Nature of results

The results described here are sensitive to operating specifications, including revenue assumptions. Effective tax rates will also vary for different operations, regions, and cities, and over time, due to changes in tax laws and regulations. These results are of a general nature, and further detailed analysis is required to draw a conclusion about comparative tax rates for a particular operation in alternate locations.

22

Appendix A – Detailed Comparisons

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COMPETITIVE ALTERNATIVES.COM COST MODEL DETAILED COMPARISON REPORT

OPERATION: OVERALL AVERAGE (USD$'000) Sault City Chatham-Kent Moncton Montreal North Bay Ste. Marie Sudbury Thunder Bay Timmins Toronto Vancouver Winnipeg Cedar Rapids Minneapolis Saginaw United States Region ON NB QC ON ON ON ON ON ON BC MB IA MN MI Average Country CA CA CA CA CA CA CA CA CA CA CA US US US Included in national average User-defined values applied

Exchange rate, per USD$ C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 $1.0000 $1.0000 $1.0000 $1.0000

Initial Investment

Cash 313 313 313 313 313 313 313 313 313 313 313 313 313 313 313 Inventory 2,208 2,208 2,208 2,208 2,208 2,208 2,208 2,208 2,208 2,208 2,208 2,208 2,208 2,208 2,208 Fixed assets 9,499 9,499 9,499 9,499 9,499 9,499 9,499 9,499 9,499 9,499 9,499 9,499 9,499 9,499 9,499 12,020 12,020 12,020 12,020 12,020 12,020 12,020 12,020 12,020 12,020 12,020 12,020 12,020 12,020 12,020

Initial Financing

Debt 5,275 5,275 5,275 5,275 5,275 5,275 5,275 5,275 5,275 5,275 5,275 5,275 5,275 5,275 5,275 Equity 6,745 6,745 6,745 6,745 6,745 6,745 6,745 6,745 6,745 6,745 6,745 6,745 6,745 6,745 6,745 12,020 12,020 12,020 12,020 12,020 12,020 12,020 12,020 12,020 12,020 12,020 12,020 12,020 12,020 12,020

10-Year Average Profit & Loss

Sales 23,934 23,788 24,131 23,961 24,016 23,996 23,994 23,982 24,257 24,230 23,968 24,129 24,521 24,285 24,771

Location-sensitive costs Salary and wages 5,377 4,965 5,445 5,385 5,417 5,454 5,465 5,413 5,685 5,735 5,186 5,355 5,890 5,597 6,184 Statutory plans 438 315 610 439 440 442 442 441 452 319 425 484 614 494 576 Other benefits 1,452 1,268 1,402 1,454 1,462 1,473 1,475 1,462 1,535 1,458 1,286 1,838 2,022 2,156 2,256 Productivity adjustment – – – – – – – – – – – – – – – Total labor 7,267 6,548 7,456 7,279 7,320 7,369 7,382 7,316 7,671 7,512 6,897 7,678 8,526 8,247 9,017

Rank, salary 4 1 8 5 7 9 10 6 12 13 2 3 14 11 Rank, total labor 3 1 9 4 6 7 8 5 11 10 2 12 14 13

Facility lease 292 457 537 492 433 518 397 528 568 664 504 312 588 272 550 Rank, facility lease 2 6 11 7 5 9 4 10 12 14 8 3 13 1

Surface freight 987 1,292 939 1,179 1,254 1,198 1,429 1,274 921 1,097 1,408 989 1,089 943 820 Air freight 249 271 228 265 270 265 287 276 226 281 277 243 243 258 236 Total transportation 1,236 1,563 1,168 1,444 1,524 1,463 1,716 1,550 1,147 1,378 1,685 1,232 1,331 1,201 1,056

Rank, transportation 5 12 2 8 10 9 14 11 1 7 13 4 6 3

Electricity 203 156 136 189 183 202 186 201 204 124 90 91 119 143 148 Gas 39 87 56 38 38 38 34 38 37 47 34 36 34 51 43 Total utilities 243 243 192 227 221 240 220 239 241 170 124 126 153 194 192

Rank, electricity 13 7 5 10 8 12 9 11 14 4 1 2 3 6 Rank, gas 10 14 13 6 6 6 2 6 5 11 3 4 1 12

Total operating costs 9,037 8,810 9,352 9,441 9,498 9,590 9,715 9,633 9,627 9,724 9,209 9,348 10,598 9,913 10,814

Rank, operating costs 2 1 5 6 7 8 11 10 9 12 3 4 14 13

Page 1 of 10 Sault Chatham-Kent Moncton Montreal North Bay Ste. Marie Sudbury Thunder Bay Timmins Toronto Vancouver Winnipeg Cedar Rapids Minneapolis Saginaw United States

Interest 93 86 89 104 109 115 122 116 100 115 100 174 186 180 189 Depreciation 1,169 1,169 1,169 1,169 1,169 1,169 1,169 1,169 1,169 1,169 1,169 1,169 1,169 1,169 1,169 Total interest, depreciation 1,262 1,256 1,259 1,274 1,278 1,284 1,291 1,285 1,269 1,284 1,269 1,343 1,355 1,349 1,358

Sundry expenses – – – – – – – – – – – – – – –

Income tax, national 408 322 395 365 349 327 308 324 375 328 388 1,010 744 859 660 Income tax, regional 191 249 95 160 147 131 114 131 158 227 0 (15) (35) 10 87 Income tax, local – – – – – – – – – – – – – 2 4 Capital tax, national – – – – – – – – – – – – – – – Capital tax, regional – – – – – – – – – – – – 5 – 3 Sales tax 1 – 1 1 1 1 1 1 1 104 216 110 82 72 148 Property tax 211 189 216 107 212 236 252 199 147 149 117 143 152 201 243 Gross receipts tax – – – – – – – – – – – 9 9 9 9 Business tax – – – – – – – – – – 44 – – – – Tax rebates, grants, incentives – – – – – – – – – – – – – – (9) Total taxes (net of grants) 810 760 706 634 708 695 675 655 680 809 766 1,257 956 1,153 1,144

Total location-sensitive costs 11,110 10,827 11,317 11,348 11,484 11,568 11,681 11,573 11,576 11,816 11,244 11,949 12,909 12,415 13,316

Location-insensitive costs Materials 7,729 7,729 7,729 7,729 7,729 7,729 7,729 7,729 7,729 7,729 7,729 7,729 7,729 7,729 7,729 Other operating expenses 1,886 1,886 1,886 1,886 1,886 1,886 1,886 1,886 1,886 1,886 1,886 1,886 1,886 1,886 1,886 Total location-insensitive costs 9,615 9,615 9,615 9,615 9,615 9,615 9,615 9,615 9,615 9,615 9,615 9,615 9,615 9,615 9,615

Total costs 20,724 20,441 20,931 20,963 21,099 21,183 21,296 21,187 21,191 21,431 20,858 21,563 22,524 22,030 22,930

Net profit after tax 3,210 3,347 3,200 2,998 2,917 2,813 2,698 2,795 3,067 2,798 3,110 2,565 1,997 2,255 1,841 % of sales 13.4% 14.1% 13.3% 12.5% 12.1% 11.7% 11.2% 11.7% 12.6% 11.5% 13.0% 10.6% 8.1% 9.3% 7.4%

Overall cost rank 2 1 4 5 6 7 10 8 9 11 3 12 14 13 Overall cost index 90.4 89.1 91.3 91.4 92.0 92.4 92.9 92.4 92.4 93.5 91.0 94.0 98.2 96.1 100.0

Summary Measures

Net profit before income tax & grants 3,809 3,918 3,689 3,523 3,412 3,272 3,120 3,249 3,600 3,354 3,499 3,560 2,706 3,126 2,582 Regional apportionment factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 6.4% 6.4% 6.4% 65.9% Effective income tax rate, net of grants 15.7% 14.6% 13.3% 14.9% 14.5% 14.0% 13.5% 14.0% 14.8% 16.6% 11.1% 28.0% 26.2% 27.9% 28.7% Rank 10 7 2 9 6 5 3 4 8 11 1 14 12 13

Property-based taxes per sq.ft. $2.78 $2.50 $2.86 $1.42 $2.80 $3.11 $3.33 $2.63 $1.94 $1.98 $2.59 $1.89 $2.01 $3.10 $3.49 Rank 9 6 11 1 10 13 14 8 3 4 7 2 5 12

Capital tax, % of total assets 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% Other taxes, % of sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.5% 0.9% 0.6% 0.5% 0.4% 0.7%

Stat. plans as a % of wages 8.1% 6.3% 11.2% 8.2% 8.1% 8.1% 8.1% 8.1% 7.9% 5.6% 8.2% 9.0% 10.4% 8.8% 9.3% Rank 8 2 14 9 6 5 4 7 3 1 10 12 13 11

Tax & benefit burden, % of income before taxes & benefits 45.7% 41.2% 45.9% 45.7% 47.2% 48.1% 49.0% 47.8% 46.5% 48.0% 44.3% 58.3% 64.3% 62.8% 68.4% Rank 3 1 5 4 7 10 11 8 6 9 2 12 14 13

Factory lease, US$ per sq.ft $3.67 $5.28 $5.50 $7.98 $5.05 $8.26 $5.50 $8.62 $5.06 $7.34 $5.73 $4.13 $6.63 $3.41 $4.70 Office lease, US$ per sq.ft. $11.93 $19.98 $25.55 $14.68 $18.80 $15.92 $14.68 $15.60 $29.31 $30.04 $22.29 $12.12 $26.23 $11.08 $28.97

Electricity, US¢ per kWh 11.98¢ 9.20¢ 8.02¢ 11.13¢ 10.80¢ 11.89¢ 10.94¢ 11.85¢ 12.01¢ 7.30¢ 5.28¢ 5.34¢ 7.03¢ 8.42¢ 8.74¢ Gas, US$ per 100 cu.ft. $0.54 $1.19 $0.76 $0.52 $0.52 $0.52 $0.46 $0.52 $0.51 $0.64 $0.46 $0.49 $0.46 $0.69 $0.59

Interest rate, debt 5.96% 5.96% 5.96% 5.96% 5.96% 5.96% 5.96% 5.96% 5.96% 5.96% 5.96% 5.06% 5.06% 5.06% 5.06% Interest rate, cash 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 0.38% 0.38% 0.38% 0.38% NPV discount rate 5.96% 5.96% 5.96% 5.96% 5.96% 5.96% 5.96% 5.96% 5.96% 5.96% 5.96% 5.06% 5.06% 5.06% 5.06% NPV of cash flows (US$'M) $19.89 $20.88 $19.96 $18.26 $17.65 $16.84 $15.95 $16.68 $18.85 $16.82 $19.06 $16.18 $11.70 $13.75 $10.53 Rank 3 1 2 6 7 8 12 10 5 9 4 11 14 13

Total incentives: US$ per job, after estimated tax effects $5,128 $6,945 $6,705 $5,110 $5,123 $5,121 $5,055 $5,092 $5,239 $4,075 $7,948 $2,607 $2,609 $2,231 $2,322

Page 2 of 10 COMPETITIVE ALTERNATIVES.COM COST MODEL DETAILED COMPARISON REPORT

OPERATION: MANUFACTURING AVERAGE (12 operations) (USD$'000) Sault City Chatham-Kent Moncton Montreal North Bay Ste. Marie Sudbury Thunder Bay Timmins Toronto Vancouver Winnipeg Cedar Rapids Minneapolis Saginaw United States Region ON NB QC ON ON ON ON ON ON BC MB IA MN MI Average Country CA CA CA CA CA CA CA CA CA CA CA US US US Included in national average User-defined values applied

Exchange rate, per USD$ C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 $1.0000 $1.0000 $1.0000 $1.0000

Initial Investment

Cash 340 340 340 340 340 340 340 340 340 340 340 340 340 340 340 Inventory 4,417 4,417 4,417 4,417 4,417 4,417 4,417 4,417 4,417 4,417 4,417 4,417 4,417 4,417 4,417 Fixed assets 16,391 16,391 16,391 16,391 16,391 16,391 16,391 16,391 16,391 16,391 16,391 16,391 16,391 16,391 16,391 21,148 21,148 21,148 21,148 21,148 21,148 21,148 21,148 21,148 21,148 21,148 21,148 21,148 21,148 21,148

Initial Financing

Debt 10,294 10,294 10,294 10,294 10,294 10,294 10,294 10,294 10,294 10,294 10,294 10,294 10,294 10,294 10,294 Equity 10,854 10,854 10,854 10,854 10,854 10,854 10,854 10,854 10,854 10,854 10,854 10,854 10,854 10,854 10,854 21,148 21,148 21,148 21,148 21,148 21,148 21,148 21,148 21,148 21,148 21,148 21,148 21,148 21,148 21,148

10-Year Average Profit & Loss

Sales 34,840 34,840 34,840 34,840 34,840 34,840 34,840 34,840 34,840 34,840 34,840 34,840 34,840 34,840 34,840

Location-sensitive costs Salary and wages 5,023 4,626 5,076 5,038 5,057 5,107 5,095 5,064 5,295 5,359 4,834 4,919 5,414 5,141 5,605 Statutory plans 479 346 645 481 481 485 483 483 495 359 450 477 639 494 580 Other benefits 1,419 1,236 1,367 1,423 1,428 1,443 1,439 1,430 1,495 1,425 1,254 1,922 2,115 2,254 2,331 Productivity adjustment – – – – – – – – – – – – – – – Total labor 6,920 6,207 7,088 6,942 6,966 7,034 7,017 6,977 7,285 7,143 6,537 7,317 8,167 7,888 8,516

Rank, salary 4 1 8 5 6 10 9 7 12 13 2 3 14 11 Rank, total labor 3 1 9 4 5 8 7 6 11 10 2 12 14 13

Facility lease 279 402 419 608 384 629 419 656 385 559 436 314 505 260 358 Rank, facility lease 2 6 7 12 4 13 7 14 5 11 9 3 10 1

Surface freight 1,973 2,585 1,879 2,358 2,508 2,396 2,859 2,548 1,843 2,194 2,816 1,978 2,177 1,886 1,640 Air freight 499 541 456 530 541 530 573 552 452 561 554 486 485 516 471 Total transportation 2,472 3,126 2,335 2,888 3,049 2,925 3,432 3,099 2,294 2,755 3,370 2,464 2,662 2,401 2,112

Rank, transportation 5 12 2 8 10 9 14 11 1 7 13 4 6 3

Electricity 334 248 224 308 299 330 305 330 334 205 142 140 192 227 236 Gas 79 175 111 76 76 76 68 76 74 93 68 72 67 101 86 Total utilities 413 422 335 384 376 406 373 406 408 298 210 212 259 329 322

Rank, electricity 14 7 5 10 8 11 9 11 13 4 2 1 3 6 Rank, gas 10 14 13 6 6 6 2 6 5 11 3 4 1 12

Total operating costs 10,084 10,156 10,177 10,821 10,774 10,994 11,240 11,139 10,372 10,754 10,553 10,308 11,593 10,877 11,308

Rank, operating costs 1 2 3 9 8 11 13 12 5 7 6 4 14 10

Page 3 of 10 Sault Chatham-Kent Moncton Montreal North Bay Ste. Marie Sudbury Thunder Bay Timmins Toronto Vancouver Winnipeg Cedar Rapids Minneapolis Saginaw United States

Interest 307 300 300 329 336 348 362 351 312 335 323 369 388 377 389 Depreciation 1,972 1,972 1,972 1,972 1,972 1,972 1,972 1,972 1,972 1,972 1,972 1,972 1,972 1,972 1,972 Total interest, depreciation 2,278 2,271 2,272 2,300 2,308 2,319 2,333 2,323 2,284 2,307 2,295 2,341 2,359 2,349 2,360

Sundry expenses – – – – – – – – – – – – – – –

Income tax, national 503 311 485 420 394 352 316 341 474 403 462 1,151 757 951 726 Income tax, regional 361 393 310 304 287 257 225 250 342 295 5 (3) (14) 10 98 Income tax, local – – – – – – – – – – – – – – – Capital tax, national – – – – – – – – – – – – – – – Capital tax, regional – – – – – – – – – – – – 7 – 5 Sales tax – – – – – – – – – 109 319 102 73 63 176 Property tax 421 378 431 215 423 471 505 399 293 298 234 286 304 374 472 Gross receipts tax – – – – – – – – – – – 18 18 18 18 Business tax – – – – – – – – – – 54 – – – – Tax rebates, grants, incentives – – – – – – – – – – – – – – – Total taxes (net of grants) 1,285 1,082 1,226 939 1,105 1,080 1,045 990 1,110 1,105 1,073 1,554 1,144 1,416 1,494

Total location-sensitive costs 13,648 13,509 13,674 14,060 14,187 14,394 14,619 14,452 13,766 14,166 13,921 14,202 15,096 14,642 15,161

Location-insensitive costs Materials 15,457 15,457 15,457 15,457 15,457 15,457 15,457 15,457 15,457 15,457 15,457 15,457 15,457 15,457 15,457 Other operating expenses 1,999 1,999 1,999 1,999 1,999 1,999 1,999 1,999 1,999 1,999 1,999 1,999 1,999 1,999 1,999 Total location-insensitive costs 17,456 17,456 17,456 17,456 17,456 17,456 17,456 17,456 17,456 17,456 17,456 17,456 17,456 17,456 17,456

Total costs 31,104 30,966 31,131 31,516 31,643 31,850 32,075 31,908 31,222 31,623 31,377 31,658 32,552 32,098 32,617

Net profit after tax 3,736 3,874 3,709 3,323 3,196 2,990 2,764 2,931 3,618 3,217 3,463 3,181 2,287 2,742 2,223 % of sales 10.7% 11.1% 10.6% 9.5% 9.2% 8.6% 7.9% 8.4% 10.4% 9.2% 9.9% 9.1% 6.6% 7.9% 6.4%

Overall cost rank 2 1 3 6 8 10 12 11 4 7 5 9 14 13 Overall cost index 95.4 94.9 95.4 96.6 97.0 97.6 98.3 97.8 95.7 96.9 96.2 97.1 99.8 98.4 100.0

Summary Measures

Net profit before income tax & grants 4,600 4,577 4,504 4,048 3,877 3,599 3,305 3,523 4,434 3,915 3,929 4,330 3,029 3,702 3,046 Regional apportionment factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 5.0% 5.0% 5.0% 54.8% Effective income tax rate, net of grants 18.8% 15.4% 17.6% 17.9% 17.6% 16.9% 16.4% 16.8% 18.4% 17.8% 11.9% 26.5% 24.5% 25.9% 27.0% Rank 11 2 7 9 6 5 3 4 10 8 1 14 12 13

Property-based taxes per sq.ft. $5.57 $5.00 $5.71 $2.83 $5.60 $6.23 $6.66 $5.27 $3.89 $3.96 $3.82 $3.78 $4.02 $5.21 $6.45 Rank 10 7 12 1 11 13 14 9 4 5 3 2 6 8

Capital tax, % of total assets 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Other taxes, % of sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.3% 0.9% 0.4% 0.3% 0.2% 0.6%

Stat. plans as a % of wages 9.5% 7.5% 12.7% 9.6% 9.5% 9.5% 9.5% 9.5% 9.3% 6.7% 9.3% 9.7% 11.8% 9.6% 10.3% Rank 9 2 14 10 7 6 5 8 4 1 3 12 13 11

Tax & benefit burden, % of income before taxes & benefits 46.0% 40.7% 46.6% 46.1% 48.5% 50.1% 51.8% 49.8% 46.1% 47.3% 44.5% 55.4% 63.0% 60.3% 66.5% Rank 3 1 6 4 8 10 11 9 5 7 2 12 14 13

Land, US$'000 per acre – – – – – – – – – – – – – – – Building, US$ per sq.ft. $3.67 $5.28 $5.50 $7.98 $5.05 $8.26 $5.50 $8.62 $5.06 $7.34 $5.73 $4.13 $6.63 $3.41 $4.70

Electricity, US¢ per kWh 12.04¢ 8.93¢ 8.06¢ 11.07¢ 10.78¢ 11.88¢ 10.98¢ 11.88¢ 12.02¢ 7.37¢ 5.11¢ 5.05¢ 6.91¢ 8.18¢ 8.49¢ Gas, US$ per 100 cu.ft. $0.54 $1.19 $0.76 $0.52 $0.52 $0.52 $0.46 $0.52 $0.51 $0.64 $0.46 $0.49 $0.46 $0.69 $0.59

Interest rate, debt 5.14% 5.14% 5.14% 5.14% 5.14% 5.14% 5.14% 5.14% 5.14% 5.14% 5.14% 4.24% 4.24% 4.24% 4.24% Interest rate, cash 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 0.38% 0.38% 0.38% 0.38% NPV discount rate 5.14% 5.14% 5.14% 5.14% 5.14% 5.14% 5.14% 5.14% 5.14% 5.14% 5.14% 4.24% 4.24% 4.24% 4.24% NPV of cash flows (US$'M) $22.13 $23.21 $22.20 $18.95 $17.98 $16.36 $14.62 $15.91 $21.23 $18.11 $20.01 $19.08 $11.85 $15.51 $11.30 Rank 3 1 2 7 9 10 13 11 4 8 5 6 14 12

Total incentives: US$ per job, after estimated tax effects $2,870 $5,362 $3,581 $2,804 $2,789 $2,774 $2,621 $2,745 $2,927 $2,699 $5,930 $2,156 $1,527 $2,071 $1,690

Page 4 of 10 COMPETITIVE ALTERNATIVES.COM COST MODEL DETAILED COMPARISON REPORT

OPERATION: R&D AVERAGE (3 operations) (USD$'000) Sault City Chatham-Kent Moncton Montreal North Bay Ste. Marie Sudbury Thunder Bay Timmins Toronto Vancouver Winnipeg Cedar Rapids Minneapolis Saginaw United States Region ON NB QC ON ON ON ON ON ON BC MB IA MN MI Average Country CA CA CA CA CA CA CA CA CA CA CA US US US Included in national average User-defined values applied

Exchange rate, per USD$ C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 $1.0000 $1.0000 $1.0000 $1.0000

Initial Investment

Cash 333 333 333 333 333 333 333 333 333 333 333 333 333 333 333 Inventory – – – – – – – – – – – – – – – Fixed assets 3,383 3,383 3,383 3,383 3,383 3,383 3,383 3,383 3,383 3,383 3,383 3,383 3,383 3,383 3,383 3,717 3,717 3,717 3,717 3,717 3,717 3,717 3,717 3,717 3,717 3,717 3,717 3,717 3,717 3,717

Initial Financing

Debt 33 33 33 33 33 33 33 33 33 33 33 33 33 33 33 Equity 3,684 3,684 3,684 3,684 3,684 3,684 3,684 3,684 3,684 3,684 3,684 3,684 3,684 3,684 3,684 3,717 3,717 3,717 3,717 3,717 3,717 3,717 3,717 3,717 3,717 3,717 3,717 3,717 3,717 3,717

10-Year Average Profit & Loss

Sales 9,235 9,056 9,744 9,315 9,489 9,429 9,419 9,376 10,026 10,003 9,438 9,823 10,748 10,164 11,301

Location-sensitive costs Salary and wages 4,287 3,989 4,350 4,286 4,324 4,357 4,381 4,310 4,528 4,568 4,158 4,347 4,725 4,549 5,005 Statutory plans 287 221 427 287 291 292 292 290 295 202 298 399 457 386 471 Other benefits 1,144 1,006 1,107 1,144 1,153 1,163 1,169 1,150 1,208 1,148 1,019 1,444 1,571 1,697 1,772 Productivity adjustment – – – – – – – – – – – – – – – Total labor 5,719 5,216 5,883 5,717 5,767 5,811 5,842 5,750 6,031 5,918 5,475 6,191 6,753 6,631 7,248

Rank, salary 4 1 8 3 6 9 10 5 11 13 2 7 14 12 Rank, total labor 4 1 9 3 6 7 8 5 11 10 2 12 14 13

Facility lease 398 664 813 490 627 520 490 520 933 945 719 400 868 350 935 Rank, facility lease 2 9 11 4 8 6 4 6 13 14 10 3 12 1

Surface freight – – – – – – – – – – – – – – – Air freight – – – – – – – – – – – – – – – Total transportation – – – – – – – – – – – – – – –

Rank, transportation 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Electricity 76 67 49 74 70 77 70 76 77 45 39 42 48 61 63 Gas – – – – – – – – – – – – – – – Total utilities 76 67 49 74 70 77 70 76 77 45 39 42 48 61 63

Rank, electricity 11 7 5 10 9 14 8 12 13 3 1 2 4 6 Rank, gas 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Total operating costs 6,192 5,947 6,745 6,281 6,464 6,409 6,401 6,346 7,041 6,908 6,232 6,633 7,669 7,042 8,247

Rank, operating costs 2 1 10 4 8 7 6 5 12 11 3 9 14 13

Page 5 of 10 Sault Chatham-Kent Moncton Montreal North Bay Ste. Marie Sudbury Thunder Bay Timmins Toronto Vancouver Winnipeg Cedar Rapids Minneapolis Saginaw United States

Interest (77) (96) (82) (76) (76) (76) (76) (76) (75) (76) (100) (23) (22) (21) (17) Depreciation 458 458 458 458 458 458 458 458 458 458 458 458 458 458 458 Total interest, depreciation 381 361 375 381 382 382 382 381 383 382 358 435 435 436 441

Sundry expenses – – – – – – – – – – – – – – –

Income tax, national – – – – – – – – – – – 312 285 256 209 Income tax, regional 18 (305) (114) 16 12 11 11 14 2 – (431) (68) (115) 4 24 Income tax, local – – – – – – – – – – – – – – – Capital tax, national – – – – – – – – – – – – – – – Capital tax, regional – – – – – – – – – – – – 2 – 1 Sales tax 1 – 2 1 1 1 1 1 1 87 99 101 82 72 106 Property tax – – – – – – – – – – – – – 31 17 Gross receipts tax – – – – – – – – – – – – – – – Business tax – – – – – – – – – – 42 – – – – Tax rebates, grants, incentives – – – – – – – – – – – – – – – Total taxes (net of grants) 20 (305) (112) 17 13 13 12 15 4 87 (289) 345 254 363 357

Total location-sensitive costs 6,592 6,004 7,009 6,679 6,859 6,803 6,795 6,743 7,428 7,377 6,300 7,412 8,358 7,841 9,043

Location-insensitive costs Materials – – – – – – – – – – – – – – – Other operating expenses 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315 Total location-insensitive costs 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315 1,315

Total costs 7,907 7,319 8,324 7,994 8,174 8,118 8,110 8,058 8,743 8,692 7,615 8,727 9,673 9,156 10,358

Net profit after tax 1,327 1,737 1,420 1,321 1,315 1,311 1,309 1,318 1,283 1,311 1,823 1,096 1,075 1,008 943 % of sales 14.4% 19.2% 14.6% 14.2% 13.9% 13.9% 13.9% 14.1% 12.8% 13.1% 19.3% 11.2% 10.0% 9.9% 8.3%

Overall cost rank 3 1 9 4 8 7 6 5 12 10 2 11 14 13 Overall cost index 76.3 70.7 80.4 77.2 78.9 78.4 78.3 77.8 84.4 83.9 73.5 84.3 93.4 88.4 100.0

Summary Measures

Net profit before income tax & grants 1,346 1,433 1,307 1,336 1,327 1,323 1,320 1,332 1,285 1,311 1,392 1,340 1,245 1,268 1,176 Regional apportionment factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 5.0% 5.0% 5.0% 76.3% Effective income tax rate, net of grants 1.4% -21.3% -8.7% 1.2% 0.9% 0.9% 0.8% 1.1% 0.2% 0.0% -30.9% 18.2% 13.7% 20.5% 19.8% Rank 11 2 3 10 8 7 6 9 5 4 1 13 12 14

Property-based taxes per sq.ft. – – – – – – – – – – $1.28 – – $0.76 $0.40 Rank 1 1 1 1 1 1 1 1 1 1 14 1 1 13

Capital tax, % of total assets 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.1% 0.0% 0.0% Other taxes, % of sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.8% 1.0% 0.9% 0.7% 0.6% 0.8%

Stat. plans as a % of wages 6.7% 5.5% 9.8% 6.7% 6.7% 6.7% 6.7% 6.7% 6.5% 4.4% 7.2% 9.2% 9.7% 8.5% 9.4% Rank 6 2 14 7 8 5 4 9 3 1 10 12 13 11

Tax & benefit burden, % of income before taxes & benefits 52.2% 34.7% 50.0% 52.3% 52.6% 52.8% 52.9% 52.5% 54.0% 52.3% 36.1% 66.6% 68.0% 70.8% 73.4% Rank 4 1 3 6 8 9 10 7 11 5 2 12 13 14

Land, US$'000 per acre – – – – – – – – – – – – – – – Building, US$ per sq.ft. $11.93 $19.92 $24.38 $14.69 $18.80 $15.60 $14.69 $15.60 $28.00 $28.35 $21.56 $12.00 $26.04 $10.49 $28.06

Electricity, US¢ per kWh 11.48¢ 10.21¢ 7.48¢ 11.23¢ 10.67¢ 11.73¢ 10.57¢ 11.53¢ 11.68¢ 6.78¢ 5.87¢ 6.42¢ 7.28¢ 9.25¢ 9.61¢ Gas, US$ per 100 cu.ft. – – – – – – – – – – – – – – –

Interest rate, debt 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 6.16% 6.16% 6.16% 6.16% Interest rate, cash 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 0.38% 0.38% 0.38% 0.38% NPV discount rate 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 6.16% 6.16% 6.16% 6.16% NPV of cash flows (US$'M) $7.87 $10.72 $8.56 $7.82 $7.78 $7.76 $7.74 $7.80 $7.55 $7.74 $11.28 $6.83 $6.70 $6.20 $5.72 Rank 4 2 3 5 7 8 10 6 11 9 1 12 13 14

Total incentives: US$ per job, after estimated tax effects $7,529 $15,589 $10,471 $7,521 $7,524 $7,523 $7,521 $7,525 $7,388 $7,428 $18,080 $5,848 $7,007 $4,559 $5,333

Page 6 of 10 COMPETITIVE ALTERNATIVES.COM COST MODEL DETAILED COMPARISON REPORT

OPERATION: DIGITAL AVERAGE (2 operations) (USD$'000) Sault City Chatham-Kent Moncton Montreal North Bay Ste. Marie Sudbury Thunder Bay Timmins Toronto Vancouver Winnipeg Cedar Rapids Minneapolis Saginaw United States Region ON NB QC ON ON ON ON ON ON BC MB IA MN MI Average Country CA CA CA CA CA CA CA CA CA CA CA US US US Included in national average User-defined values applied

Exchange rate, per USD$ C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 $1.0000 $1.0000 $1.0000 $1.0000

Initial Investment

Cash 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 Inventory – – – – – – – – – – – – – – – Fixed assets 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,300 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550

Initial Financing

Debt 850 850 850 850 850 850 850 850 850 850 850 850 850 850 850 Equity 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 1,700 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550 2,550

10-Year Average Profit & Loss

Sales 20,075 20,075 20,075 20,075 20,075 20,075 20,075 20,075 20,075 20,075 20,075 20,075 20,075 20,075 20,075

Location-sensitive costs Salary and wages 7,800 7,249 7,908 7,800 7,871 7,919 7,963 7,844 8,228 8,319 7,564 7,914 8,699 8,306 9,235 Statutory plans 521 356 752 521 522 523 524 521 530 351 519 645 779 665 742 Other benefits 1,993 1,752 1,928 1,993 2,011 2,024 2,034 2,005 2,102 2,001 1,775 2,289 2,516 2,696 2,843 Productivity adjustment – – – – – – – – – – – – – – – Total labor 10,313 9,357 10,587 10,313 10,403 10,464 10,520 10,370 10,859 10,670 9,857 10,847 11,994 11,666 12,820

Rank, salary 3 1 7 3 6 9 10 5 11 13 2 8 14 12 Rank, total labor 3 1 9 3 6 7 8 5 12 10 2 11 14 13

Facility lease 255 422 514 314 402 334 314 334 600 608 461 257 557 225 598 Rank, facility lease 2 9 11 4 8 6 4 6 13 14 10 3 12 1

Surface freight – – – – – – – – – – – – – – – Air freight – – – – – – – – – – – – – – – Total transportation – – – – – – – – – – – – – – –

Rank, transportation 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Electricity 83 74 56 80 77 84 76 83 85 49 43 47 53 66 69 Gas – – – – – – – – – – – – – – – Total utilities 83 74 56 80 77 84 76 83 85 49 43 47 53 66 69

Rank, electricity 11 7 5 10 9 13 8 11 14 3 1 2 4 6 Rank, gas 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Total operating costs 10,650 9,852 11,156 10,706 10,882 10,881 10,909 10,786 11,543 11,327 10,361 11,150 12,603 11,956 13,486

Rank, operating costs 3 1 10 4 7 6 8 5 12 11 2 9 14 13

Page 7 of 10 Sault Chatham-Kent Moncton Montreal North Bay Ste. Marie Sudbury Thunder Bay Timmins Toronto Vancouver Winnipeg Cedar Rapids Minneapolis Saginaw United States

Interest (248) (243) (235) (246) (241) (241) (240) (244) (218) (190) (224) (20) (4) (11) 7 Depreciation 339 339 339 339 339 339 339 339 339 339 339 339 339 339 339 Total interest, depreciation 92 96 104 93 99 99 99 96 121 149 116 320 335 329 346

Sundry expenses – – – – – – – – – – – – – – –

Income tax, national 895 983 837 886 857 857 850 872 747 671 904 2,083 1,590 1,792 1,214 Income tax, regional (108) 675 (298) (122) (153) (156) (162) (137) (265) 467 471 (13) (49) 17 146 Income tax, local – – – – – – – – – – – – – – – Capital tax, national – – – – – – – – – – – – – – – Capital tax, regional – – – – – – – – – – – – 4 – 1 Sales tax 2 – 3 2 2 2 2 2 2 114 129 136 104 92 136 Property tax – – – – – – – – – – – – – 28 15 Gross receipts tax – – – – – – – – – – – – – – – Business tax – – – – – – – – – – 28 – – – – Tax rebates, grants, incentives – – – – – – – – – – – – – – (65) Total taxes (net of grants) 789 1,657 542 766 706 703 690 737 485 1,251 1,531 2,205 1,649 1,928 1,447

Total location-sensitive costs 11,531 11,605 11,802 11,564 11,686 11,682 11,698 11,618 12,149 12,727 12,007 13,674 14,587 14,213 15,278

Location-insensitive costs Materials – – – – – – – – – – – – – – – Other operating expenses 2,146 2,146 2,146 2,146 2,146 2,146 2,146 2,146 2,146 2,146 2,146 2,146 2,146 2,146 2,146 Total location-insensitive costs 2,146 2,146 2,146 2,146 2,146 2,146 2,146 2,146 2,146 2,146 2,146 2,146 2,146 2,146 2,146

Total costs 13,677 13,751 13,948 13,710 13,832 13,828 13,844 13,764 14,295 14,873 14,153 15,820 16,733 16,359 17,424

Net profit after tax 6,399 6,325 6,128 6,365 6,243 6,247 6,231 6,311 5,781 5,203 5,923 4,255 3,343 3,717 2,652 % of sales 31.9% 31.5% 30.5% 31.7% 31.1% 31.1% 31.0% 31.4% 28.8% 25.9% 29.5% 21.2% 16.7% 18.5% 13.2%

Overall cost rank 1 3 8 2 6 5 7 4 10 11 9 12 14 13 Overall cost index 78.5 78.9 80.0 78.7 79.4 79.4 79.5 79.0 82.0 85.4 81.2 90.8 96.0 93.9 100.0

Summary Measures

Net profit before income tax & grants 7,186 7,982 6,666 7,129 6,947 6,948 6,919 7,047 6,263 6,340 7,297 6,325 4,884 5,525 3,947 Regional apportionment factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 5.0% 5.0% 5.0% 76.3% Effective income tax rate, net of grants 11.0% 20.8% 8.1% 10.7% 10.1% 10.1% 9.9% 10.4% 7.7% 17.9% 18.8% 32.7% 31.6% 32.7% 32.8% Rank 8 11 2 7 5 4 3 6 1 9 10 13 12 14

Property-based taxes per sq.ft. – – – – – – – – – – $1.29 – – $1.28 $0.69 Rank 1 1 1 1 1 1 1 1 1 1 14 1 1 13

Capital tax, % of total assets 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.0% 0.0% Other taxes, % of sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.6% 0.7% 0.7% 0.5% 0.5% 0.7%

Stat. plans as a % of wages 6.7% 4.9% 9.5% 6.7% 6.6% 6.6% 6.6% 6.6% 6.4% 4.2% 6.9% 8.1% 9.0% 8.0% 8.0% Rank 8 2 14 8 6 5 4 7 3 1 10 12 13 11

Tax & benefit burden, % of income before taxes & benefits 34.0% 37.3% 34.5% 34.0% 34.2% 34.2% 34.3% 34.1% 35.0% 40.9% 39.2% 54.7% 59.7% 58.7% 65.5% Rank 2 9 7 1 4 5 6 3 8 11 10 12 14 13

Land, US$'000 per acre – – – – – – – – – – – – – – – Building, US$ per sq.ft. $11.93 $19.72 $24.05 $14.67 $18.81 $15.60 $14.67 $15.60 $28.05 $28.44 $21.57 $12.00 $26.04 $10.50 $27.95

Electricity, US¢ per kWh 11.83¢ 10.54¢ 7.96¢ 11.40¢ 10.97¢ 11.97¢ 10.83¢ 11.83¢ 12.12¢ 6.95¢ 6.09¢ 6.67¢ 7.53¢ 9.39¢ 9.82¢ Gas, US$ per 100 cu.ft. – – – – – – – – – – – – – – –

Interest rate, debt 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 6.16% 6.16% 6.16% 6.16% Interest rate, cash 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 0.38% 0.38% 0.38% 0.38% NPV discount rate 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 7.06% 6.16% 6.16% 6.16% 6.16% NPV of cash flows (US$'M) $43.29 $42.72 $41.41 $43.06 $42.20 $42.24 $42.13 $42.68 $39.01 $34.98 $39.91 $29.86 $23.26 $25.95 $18.32 Rank 1 3 8 2 6 5 7 4 10 11 9 12 14 13

Total incentives: US$ per job, after estimated tax effects $14,556 $6,466 $15,976 $14,672 $14,814 $14,857 $14,930 $14,750 $15,345 $6,578 $7,762 $1,933 $2,406 $1,529 $2,345

Page 8 of 10 COMPETITIVE ALTERNATIVES.COM COST MODEL DETAILED COMPARISON REPORT

OPERATION: CORPORATE SERVICES AVERAGE (2 operations) (USD$'000) Sault City Chatham-Kent Moncton Montreal North Bay Ste. Marie Sudbury Thunder Bay Timmins Toronto Vancouver Winnipeg Cedar Rapids Minneapolis Saginaw United States Region ON NB QC ON ON ON ON ON ON BC MB IA MN MI Average Country CA CA CA CA CA CA CA CA CA CA CA US US US Included in national average User-defined values applied

Exchange rate, per USD$ C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 C$1.0900 $1.0000 $1.0000 $1.0000 $1.0000

Initial Investment

Cash 250 250 250 250 250 250 250 250 250 250 250 250 250 250 250 Inventory – – – – – – – – – – – – – – – Fixed assets 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000

Initial Financing

Debt – – – – – – – – – – – – – – – Equity 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000

10-Year Average Profit & Loss

Sales 11,673 10,917 12,285 11,743 11,864 11,815 11,814 11,798 12,750 12,591 11,607 12,152 13,514 12,734 14,430

Location-sensitive costs Salary and wages 5,827 5,332 5,915 5,836 5,864 5,848 5,888 5,860 6,242 6,218 5,586 5,835 6,495 6,057 6,930 Statutory plans 439 310 618 440 441 442 442 442 458 324 434 479 600 488 558 Other benefits 1,489 1,289 1,442 1,491 1,498 1,494 1,505 1,498 1,595 1,496 1,311 1,688 1,879 1,966 2,136 Productivity adjustment – – – – – – – – – – – – – – – Total labor 7,754 6,930 7,975 7,767 7,803 7,784 7,834 7,799 8,295 8,037 7,330 8,001 8,974 8,511 9,623

Rank, salary 3 1 10 5 8 6 9 7 13 12 2 4 14 11 Rank, total labor 3 1 9 4 7 5 8 6 12 11 2 10 14 13

Facility lease 218 373 557 268 343 314 268 285 627 667 459 230 493 244 596 Rank, facility lease 1 9 12 4 8 7 4 6 13 14 10 2 11 3

Surface freight – – – – – – – – – – – – – – – Air freight – – – – – – – – – – – – – – – Total transportation – – – – – – – – – – – – – – –

Rank, transportation 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Electricity 57 50 39 55 52 57 52 56 58 35 30 34 38 48 50 Gas – – – – – – – – – – – – – – – Total utilities 57 50 39 55 52 57 52 56 58 35 30 33 38 48 50

Rank, electricity 12 7 5 10 9 13 8 11 14 3 1 2 4 6 Rank, gas 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Total operating costs 8,028 7,353 8,570 8,090 8,198 8,154 8,153 8,140 8,979 8,739 7,819 8,264 9,504 8,802 10,268

Rank, operating costs 3 1 10 4 8 7 6 5 13 11 2 9 14 12

Page 9 of 10 Sault Chatham-Kent Moncton Montreal North Bay Ste. Marie Sudbury Thunder Bay Timmins Toronto Vancouver Winnipeg Cedar Rapids Minneapolis Saginaw United States

Interest (60) (57) (68) (60) (61) (61) (61) (61) (65) (68) (60) (19) (21) (20) (22) Depreciation 260 260 260 260 260 260 260 260 260 260 260 260 260 260 260 Total interest, depreciation 200 203 192 200 199 199 199 199 195 192 200 241 239 240 239

Sundry expenses – – – – – – – – – – – – – – –

Income tax, national 200 188 230 201 204 203 203 202 220 217 200 488 540 509 550 Income tax, regional 154 151 47 155 156 156 155 156 169 91 160 24 26 15 87 Income tax, local – – – – – – – – – – – – – 13 25 Capital tax, national – – – – – – – – – – – – – – – Capital tax, regional – – – – – – – – – – – – 2 – 1 Sales tax 1 – 3 1 1 1 1 1 1 104 119 126 95 84 124 Property tax – – – – – – – – – – – – – 22 12 Gross receipts tax – – – – – – – – – – – – – – – Business tax – – – – – – – – – – 28 – – – – Tax rebates, grants, incentives – – – – – – – – – – – – – – – Total taxes (net of grants) 354 338 279 357 361 359 359 358 389 412 506 637 662 642 797

Total location-sensitive costs 8,582 7,894 9,041 8,646 8,758 8,712 8,711 8,697 9,563 9,342 8,525 9,141 10,404 9,684 11,303

Location-insensitive costs Materials – – – – – – – – – – – – – – – Other operating expenses 2,088 2,088 2,088 2,088 2,088 2,088 2,088 2,088 2,088 2,088 2,088 2,088 2,088 2,088 2,088 Total location-insensitive costs 2,088 2,088 2,088 2,088 2,088 2,088 2,088 2,088 2,088 2,088 2,088 2,088 2,088 2,088 2,088

Total costs 10,669 9,981 11,129 10,734 10,845 10,800 10,798 10,784 11,651 11,430 10,612 11,229 12,492 11,771 13,390

Net profit after tax 1,004 936 1,156 1,009 1,019 1,015 1,016 1,014 1,099 1,162 995 923 1,023 963 1,040 % of sales 8.6% 8.6% 9.4% 8.6% 8.6% 8.6% 8.6% 8.6% 8.6% 9.2% 8.6% 7.6% 7.6% 7.6% 7.2%

Overall cost rank 3 1 9 4 8 7 6 5 12 11 2 10 14 13 Overall cost index 79.7 74.5 83.1 80.2 81.0 80.7 80.6 80.5 87.0 85.4 79.3 83.9 93.3 87.9 100.0

Summary Measures

Net profit before income tax & grants 1,358 1,274 1,433 1,365 1,378 1,373 1,373 1,372 1,487 1,469 1,355 1,435 1,589 1,500 1,701 Regional apportionment factor 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 15.0% 15.0% 15.0% 78.8% Effective income tax rate, net of grants 26.0% 26.5% 19.3% 26.1% 26.1% 26.1% 26.0% 26.1% 26.1% 20.9% 26.6% 35.7% 35.6% 35.8% 38.9% Rank 4 10 1 5 8 7 3 6 9 2 11 13 12 14

Property-based taxes per sq.ft. – – – – – – – – – – $1.58 – – $1.05 $0.56 Rank 1 1 1 1 1 1 1 1 1 1 14 1 1 13

Capital tax, % of total assets 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.2% 0.0% 0.0% Other taxes, % of sales 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.9% 1.1% 1.1% 0.7% 0.7% 0.9%

Stat. plans as a % of wages 7.5% 5.8% 10.4% 7.5% 7.5% 7.5% 7.5% 7.5% 7.3% 5.2% 7.8% 8.2% 9.2% 8.0% 8.0% Rank 7 2 14 8 5 9 4 6 3 1 10 12 13 11

Tax & benefit burden, % of income before taxes & benefits 69.4% 67.4% 66.9% 69.4% 69.3% 69.3% 69.4% 69.4% 69.0% 65.8% 69.3% 75.2% 75.4% 76.3% 77.0% Rank 11 3 2 9 5 6 10 8 4 1 7 12 13 14

Land, US$'000 per acre – – – – – – – – – – – – – – – Building, US$ per sq.ft. $11.92 $20.44 $30.52 $14.68 $18.79 $17.18 $14.68 $15.59 $34.36 $36.55 $25.15 $12.58 $26.99 $13.37 $32.66

Electricity, US¢ per kWh 12.14¢ 10.75¢ 8.27¢ 11.82¢ 11.18¢ 12.25¢ 11.07¢ 12.04¢ 12.36¢ 7.41¢ 6.45¢ 7.20¢ 8.06¢ 10.21¢ 10.64¢ Gas, US$ per 100 cu.ft. – – – – – – – – – – – – – – –

Interest rate, debt 6.06% 6.06% 6.06% 6.06% 6.06% 6.06% 6.06% 6.06% 6.06% 6.06% 6.06% 5.16% 5.16% 5.16% 5.16% Interest rate, cash 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 1.10% 0.38% 0.38% 0.38% 0.38% NPV discount rate 6.06% 6.06% 6.06% 6.06% 6.06% 6.06% 6.06% 6.06% 6.06% 6.06% 6.06% 5.16% 5.16% 5.16% 5.16% NPV of cash flows (US$'M) $6.64 $6.14 $7.76 $6.68 $6.75 $6.72 $6.73 $6.71 $7.34 $7.79 $6.59 $6.36 $7.12 $6.68 $7.25 Rank 11 14 2 9 5 7 6 8 3 1 12 13 4 10

Total incentives: US$ per job, after estimated tax effects – – $2,717 – – – – – – $1,356 – – – – ($7)

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