Economic Impact Study of Southport Aerospace
Prepared by:
The University of Manitoba Transport Institute
Economic Impact Study for Southport Aerospace
Prepared for:
Southport Aerospace Incorporated
Prepared by:
Allister Hickson, Ph.D., CFA Matt Seguire, M.A.
University of Manitoba Transport Institute
This report is provided “as‐is” and the Contractor makes no warranty, either expressed or implied, including but not limited to warranties of merchantability and fitness for a particular purpose. In no event will the Contractor be liable for any indirect, special, consequential or similar damages.
May, 2006
i
Table of Contents Page
Executive Summary...... 1
1.0 Introduction ...... 2
2.0 Southport Overview ...... 2
3.0 Structure and Limitations of Economic Impact Studies...... 3
4.0 Methodology...... 4
5.0 Economic Impact of Southport on the Economy...... 5
5.1 Expenditures and GDP...... 5 5.2 Employment and Labour Income...... 8 5.3 Tax Revenues...... 10
ii Executive Summary
Located three kilometres outside Portage la Prairie, Southport Aerospace Centre Inc. (Southport) is a not‐for‐profit company that has managed and developed the space which was a former Canadian Air Force base. Further to its management and development activities, the Southport site houses training, research, recreation, manufacturing and accommodation services for the community.
This report examines the economic impact of Southport. The expenditure, gross domestic product (GDP), employment, labour income, and taxation effects measured were determined based on surveys distributed to Southport tenants. These are classified as the direct impact of Southport. Additionally, Southport has indirect effects on the economy as expenditures and employment from Southport stimulates regional economic activity. Using multipliers for Manitoba as a whole, these additional impacts were estimated. These are classified as the total effect in the economy due to Southport.
As shown in the following table Southport has a significant effect on the economy. Over the next 5 years it will generate $494,000,000 in expenditures, $288,000,000 in GDP, 3,800 jobs, $190,000,000 in labour income and $95,000,000 in taxes.
Direct Impact of Total Effect in the Economy Southport Due to Southport (From 2006 to 20111) (From 2006 to 2011) Expenditures ($000,000) 272 494 GDP ($000,000) 165 288 Employment ( #) 1,900 3,800 Labour Income ($000,000) 108 190 Taxation Revenue ( $000,000) 54 95
Annually the expected impact is:
Direct Impact of Total Effect in the Economy Southport Due to Southport (Yearly Average from 2006 (Yearly Average from 2006 to to 2011) 2011) Expenditures ($000,000) 54.4 98.8 GDP ($000,000) 33.0 57.6 Employment ( #) 380.0 760.0 Labour Income ($000,000) 21.6 38.0 Taxation Revenue ( $000,000) 10.8 19.0
1 The analysis is based on the time period January 1, 2006 to December 31, 2010.
1 1.0 Introduction
This report examines the economic impact of the Southport Aerospace Centre Inc. (Southport). In 1992, Southport assumed control of the buildings and land formerly known as CFB Portage la Prairie. Since that time, the location has become a dynamic centre of commercial activity. More recently, Southport was awarded the opportunity to provide state of the art flight training for the Department of National Defence. The business, training, and recreational aspects provided by Southport contribute a valued social and economic fabric to Manitoba’s Central Plains.
2.0 Southport Overview
Southport is a not‐for‐profit management and development corporation located three kilometres south of Portage la Prairie. Before its release in 1992, the space owned and managed by Southport was home to the Canadian Air Force for 50 years. Since assuming responsibility for the management and commercial development of the property, Southport has become more than an organizational body. It is now recognized as a community, home to families and students of the aviation and aerospace industries, as well as the businesses and facilities that serve local residents.
The corporation’s mission is to establish a first‐class business centre featuring aviation and aerospace training facilities, research and development of new products, light manufacturing, and educational facilities.
Southport has over 81 hectares available for commercial development, over 100,000 square feet of existing structures available for lease, and is one of a few North American industrial locations that maintains its own airport. As a part of the transfer of ownership from the Canadian Forces, Southport obtained a variety of physical assets appropriate for the development of educational and training opportunities. Currently, the training facilities located in Southport are; the Canadian Forces Flying Training School (CFTS), Allied Wings Flight Training Services, Stevenson Aviation and Aerospace Centre, Campus Manitoba, Red River College and Accelerated Christian Education Canada.
2 In addition to the training facilities, the complex has a number of recreational services and residential buildings. An aquaplex, a gymnasium, a golf course, and a bowling alley provide the residents of Southport with a variety of recreational services. Over 180 duplex‐style homes are available for rent on a short and long‐ term basis. The complex also has a full service Canada Post outlet and a convenience store for residents.
In March 2005, Southport was awarded a federal contract to host the CFTS program for the Canadian Forces for the next 20 years. Although housed at Southport, the program is being supported by a consortium known as Allied Wings.2 The CFTS program includes primary flight training, multi‐engine training, and rotary flight training. These services will be provided through the development of a training multiplex (including simulators and classroom space), as well as facilities dealing with meteorological services, air traffic control, emergency response, and airfield aviation safety. Initial training is expected to begin in 2006, with the new developments being fully operational in 2007.
3.0 Structure and Limitations of Economic Impact Studies
Economic impact models are analytical tools for measuring and predicting the effects of economic activity on a community, city, or country. This type of study provides an objective evaluation of the economic effect that a particular action, group, or organization has on a given area. The principle behind economic impact studies is that the expenditures of one area of economic activity are multiplied throughout the overall economy, creating a ripple effect. By constructing an input‐ output analysis, this cascading effect can be measured in a quantifiable manner.
Manipulation of input‐output tables establishes economic impact multipliers, which are used to determine the effect of changes in spending in different areas of the economy. Multipliers represent the relationship between a change in the economy and the economic condition that follows as a result of that change. Multipliers are associated with direct, indirect, and induced effects.
The total economic impact of an action is defined as the sum of direct, indirect and induced economic activity. Direct economic activity is typically measured by the
2 Allied Wings includes such groups as Canadian Helicopters Ltd., Canadian Base Operators, and Atlantis Systems International Inc.
3
variables of employment, labour income, expenditures, contributions to gross domestic product, and taxation. Indirect economic activity results from inputs supplied to the direct sector. Induced economic activity represents the trickle‐down effects of direct and indirect actions as they multiply through the entire economy. The indirect and induced effects reflect the leverage that direct activity promotes throughout the economy.
Variances that exist between economic impact models are primarily a result of the definition of what constitutes and/or contributes to direct economic activity, the reliability of input data, and the robustness of multipliers.
Much like the challenge of clearly identifying what contributes to the direct effect, economic impact studies are also limited by the possibility of double‐counting, or leakages (economic activity occurring outside the immediate community or industry of concern).
In this report, the economic impact of Southport was assessed based on survey data from Southport tenants, and multipliers supplied by the Manitoba Bureau of Statistics (MBS).3
4.0 Methodology
The empirical data for this report was gathered through a survey research design. A survey was designed to acquire current and forecast information related to operating expenditures, capital expenditures, and employment at Southport. Since military staff trained at the site are not permanent residents, an additional survey was constructed to capture their local expenditures. Prior to mailing out the survey, Southport officials mailed a letter indicating the purpose of the study.
Once completed, the surveys were mailed back to the University of Manitoba Transport Institute (UMTI) where the data was recorded, stored, and analyzed.
3 Multipliers are not available at the municipal level in Manitoba. Typical indirect and induced effects bleed off to the larger economy rather than being localized.
4 Like most economic impact studies, this study was limited by the nature of the multipliers. The multipliers used were not specific to the Southport community, or to the Municipality of Portage la Prairie.4
At Southport there is one particularly large tenant, some medium sized tenants, and a variety of smaller tenants. For confidentiality reasons the analysis in this report is not disaggregated by firm size. As well, to further protect confidentiality this report summarizes the data over a 5 year period.
5.0 Economic Impact of Southport on the Economy
The economic impact of Southport consists of two distinct components. The first is the effect due to day to day operations at the facility. In this case, the impact relates to the effect of expenditures and employment on an ongoing basis. The second category is the economic impact of capital expenditures. Generally due to their infrequent nature, these effects provide a short term boost to the local economy. In this study these two components have been identified separately and are identified as “ongoing” and “capital”.
These distinct components are measured through four economic attributes. The first measure is the expenditures and gross domestic product (GDP). The second is employment. Related, is the amount of labour income (or salaries, and wages) generated. Finally, the impact on taxation revenues provides a measure of the impact on financing of governments.
5.1 Expenditures and GDP
Over the next 5 year period (from 2006 to 2011), as shown in Figure 1, total direct expenditures at Southport are estimated at $272,000,000 million ($54,400,000 per year on average). This consists of $232,000,000 in direct ongoing operating expenditures and $40,000,000 related directly to capital.
4 The Manitoba Bureau of Statistics does not compile multipliers at the local and community level.
5 Figure 1
Total Direct Expenditures Due to Southport From 2006 to 2011
$300,000,000 $272,000,000
$232,000,000 $250,000,000
$200,000,000
$150,000,000 Expenditures
Year
5 $100,000,000
$40,000,000
$50,000,000
$0 1 Direct Ongoing Direct Capital Direct Total
When this direct expenditure ripples through the economy the impact is more substantial. The total expenditure impact over the next 5 years (from 2006 to 2011) is estimated at $494,000,000 (Figure 2). For every dollar directly expended an additional $.82 is generated elsewhere in the economy.
Figure 2
Total Direct and Leveraged Expenditures Due to Southport From 2006 to 2011
$600,000,000 Leverage = 82%
$494,000,000 $500,000,000 $425,000,000
$400,000,000
$300,000,000 Expenditures
Year
5 $200,000,000
$69,000,000 $100,000,000
$0 1 Total Ongoing Total Capital Total
Direct GDP at market price attributable to Southport is shown in Figure 3. Over the next 5 years (from 2006 to 2011) Southport is expected to contribute $165,000,000
6 ($33,000,000 per year) in value added to the economy. The majority of this value added is due to ongoing operations at the site.
Figure 3
Direct Contribution to GDP Due to Southport From 2006 to 2011
$180,000,000 $165,000,000
$160,000,000 $148,000,000
$140,000,000
$120,000,000 GDP $100,000,000
$80,000,000 YearTotal
5 $60,000,000
$40,000,000 $17,000,000
$20,000,000
$0 1 Ongoing Capital Total
The total GDP resulting from Southport for the Manitoba economy over the next 5 years (from 2006 to 2011) is estimated at $288,000,000 (or $57,600,000 per year). Of this, $255,000,000 is from ongoing operations and $33,000,000 is due to capital projects. The leverage is 75%. Figure 4
Total Contribution to GDP Due to Southport From 2006 to 2011
$350,000,000 Leverage = 75%
$300,000,000 $288,000,000 $255,000,000
$250,000,000
GDP $200,000,000
$150,000,000 YearTotal
5
$100,000,000
$33,000,000 $50,000,000
$0 1 Ongoing Capital Total
7 5.2 Employment and Labour Income
Direct employment at the Southport location is expected to be 1,900 full time equivalents over the next 5 years (from 2006 to 2011) as shown in Figure 5. Average annual employment is estimated at 380 persons. The 1,900 full time equivalents consist of 1,600 which are ongoing positions, (320 per year on average) while 300 (60 per year) are due to capital projects. Given the transitory nature of capital projects the base steady state level of annual employment at Southport can be estimated at 320 full time equivalents.
Figure 5
Total Direct Employment Due to Southport From 2006 to 2011
2,000 1,900
1,800 1,600 1,600
1,400
s
ʹ 1,200 FTE
l 1,000 Year
5
800
600
300 400
200
0 1 Direct Ongoing Direct Capital Direct Total
When the effect throughout the economy is considered, the 1,900 direct jobs result in 3,800 total jobs (Figure 6). Each direct job at Southport creates 1 additional job elsewhere.
8 Figure 6
Total Direct and Leveraged Employment Due to Southport From 2006 to 2011
4,000 Leverage = 100% 3,800
3,500 3,100 3,000
2,500 s ʹ FTE 2,000 Year
5
1,500
1,000 700
500
0 Total Ongoing Total1 Capital Total
Direct labour income attributable to Southport for the next 5 years (from 2006 to 2011) is estimated at $108,000,000 ‐ $94,000,000 ongoing and $14,000,000 due to capital projects. Average yearly direct labour income is $21,600,000.
Figure 7
Total Direct Labour Income Due to Southport From 2006 to 2011
$120,000,000 $108,000,000
$94,000,000 $100,000,000
$80,000,000 Income
$60,000,000 Labour
Year
5
$40,000,000
$20,000,000 $14,000,000
$0 1 Direct Ongoing Direct Capital Direct Total
Per direct person employed that average annual income is $57,000.
9 When the economy wide effect is considered (Figure 8), the total labour income generated by Southport over the next 5 years (from 2006 to 2011) is estimated to be $190,000,000 ($38,000,000 per year). Each dollar of direct labour income at Southport generates an additional leverage of $.76 in the economy.
Figure 8
Total Direct and Leveraged Labour Income Due to Southport From 2006 to 2011
$200,000,000 Leverage = 76% $190,000,000 $166,000,000 $180,000,000
$160,000,000
$140,000,000
$120,000,000 Income
$100,000,000 Labour
$80,000,000 Year
5
$60,000,000
$40,000,000 $24,000,000
$20,000,000
$0 1 Total Ongoing Total Capital Total
5.3 Tax Revenues
Tax revenues generated by Southport include municipal property taxes, income taxes, goods and services tax, provincial sales tax and indirect taxes (such as property and business taxes).
Direct tax revenues from Southport are those tax revenues generated by activity at Southport, such as; employment, buying office supplies, or acquiring new capital equipment. Total taxes that result from Southport include these direct taxes sources, plus the effect of taxes gathered due to the leverage of Southport throughout the economy. The latter includes indirect taxes.
Over the next 5 years (from 2006 to 2011) the tax revenue generated due to activities directly at Southport is estimated to average $10,800,000 per year or $54,000,000 in total, as shown in Figure 9.
10 Figure 9
Total Direct Tax Revenue Due to Southport From 2006 to 2011
$60,000,000 $54,000,000 $48,000,000 $50,000,000
$40,000,000 Revenue $30,000,000 Tax
Year
5 $20,000,000
$6,000,000 $10,000,000
$0 1 Direct Ongoing Direct Capital Direct Total
For every dollar of tax revenue generated directly at Southport an additional $.76 in tax revenue is generated throughout the economy. Total tax revenue generated over the next 5 years (from 2006 to 2011) is estimated to be $95,000,000 (or $19,000,000 per year).
Figure 10
Total Direct and Leveraged Tax Revenues Due to Southport From 2006 to 2011
$100,000,000 Leverage = 76% $95,000,000
$90,000,000 $82,000,000
$80,000,000
$70,000,000
$60,000,000 Revenue
$50,000,000 Tax
$40,000,000 Year
5
$30,000,000
$20,000,000 $13,000,000
$10,000,000
$0 1 Total Ongoing Total Capital Total
11 Sources of the $95,000,000 in tax revenues are shown in Figure 11. Over the next 5 years (from 2006 to 2011) $40,000,000 in PST is expected to be generated due to Southport. An additional $32,000,000 is estimated to be generated through income taxes.
Figure 11
Total Tax Revenue Due to Southport by Type From 2006 to 2011
$45,000,000
$40,000,000 $40,000,000
$35,000,000 $32,000,000
$30,000,000
$25,000,000 Revenue
Tax $20,000,000 Year
5 $15,000,000 $12,000,000 $10,000,000
$6,000,000 $5,000,000 $5,000,000
$0 PST Income Indirect1 GST Property
Indirect taxes are forecast at $12,000,000. The GST and property taxes are smaller at $6,000,000 and $5,000,000 respectively.
12