ECONOMIC IMPACT AND STRUCTURE OF THE MANITOBA RAIL INDUSTRY

Transcription

1 ECONOMIC IMPACT AND STRUCTURE OF THE MANITOBA RAIL INDUSTRY FINAL REPORT Prepared for: Manitoba Transportation and Government Services Prepared by: The Transport Institute 631 Drake Center University of Manitoba Winnipeg, MB, R3T 5V4 Tel: Fax:

2 Economic Impact and Structure of the Manitoba Rail Industry FINAL REPORT Prepared for: Manitoba Transportation and Government Services Prepared by: The Transport Institute

3 Economic Impact and Structure of the Manitoba Rail Industry FINAL REPORT Written by: Erica Vido and Caroline Chapain This report has been financially supported by the Manitoba Department of Transportation and Government Services. The views expressed do not necessarily represent those of the Department. The Department provides no warranties as to the validity or accuracy of the information presented herein. Transport Institute - 1 -

4 EXECUTIVE SUMMARY The Manitoba rail industry generates significant economic activity for the Province of Manitoba. The rail industry has considerable influence on the local economy; providing jobs, taxes and ongoing business revenues. The continued effect of the direct economic activity combined with the indirect and induced effects is almost $1 billion, or 2.86% of Manitoba s GDP. Manitoba s rail industry, as defined in this study, is comprised of freight and passenger transportation service providers and companies that provide goods and services that support rail operations. Rail transportation service providers include three Class I railways and several Class II railways. Twenty-one companies support rail operations in Manitoba. These are classified as rail equipment manufacturers, sales and distribution companies and service providers. The overall objective of this study was to document the structure of this industry and to quantify the total economic impact this industry has on Manitoba s economy. The response rate comprising the survey of primary and secondary linkage organizations was 67% for rail transportation companies 1 and 33% for rail support companies. Although a complete census could not be obtained, the surveys captured a large majority of the economic activity attributable to this industry. This study on rail operations produced the following results: Table A: Economic Impact of MB Rail Industry Economic Activity Total Economic Impact Increase in GDP at Market Prices $964,830,000 Direct Impact $480,057,000 Indirect Impact $208,608,000 Induced Impact $276,165,000 Impact to Total MB Labour Income $614,531,000 Impact to Total MB Employment (person-years) 15,959 1 All of the Class I carriers, CN, CP and Via Rail are included in this analysis. These companies represent a large majority of Manitoba Rail Industry economic activity. Transport Institute - 2 -

5 In the year 2000, Manitoba s rail industry contributed o 2.86% to Manitoba s GDP. o 3.57% to Manitoba s Total Labour Income. o 27.06% to Manitoba s Transportation and Warehousing Labour Income. o 2.88% to Total Manitoba Employment. o 14.2% to Total Manitoba Employment in Transportation Services and Transportation Equipment Manufacturing. Transport Institute - 3 -

6 ECONOMIC IMPACT AND STRUCTURE OF THE MANITOBA RAIL INDUSTRY FINAL REPORT TABLE OF CONTENTS Executive Summary..2 List of Tables.6 List of Figures Introduction Study Objectives Methodology Linkages The Survey Questionnaires Economic Impacts to be Measured and Methods of Measurement Multipliers Secondary Sources Economic Impact Results Economic Impact of Rail Transportation Railway Revenues Railway Labour Income Railway Employment Railway Employment Trends Railway Taxes Railway Fuel Consumption Economic Impact of Rail Support Operations Rail Support Operations Revenues Rail Support Operations Labour Income Rail Support Operations Employment Total Economic Impact of the Manitoba Rail Industry Manitoba Rail Industry Revenues Manitoba Rail Industry Labour Income Manitoba Rail Industry Employment Future Perceptions of Survey Participants Structure of the Manitoba Rail Industry Rail Transportation Companies in Manitoba Railway Company Interviews Rationalization and Shortline Development General Organizational Structure in Manitoba Administrative Function Marketing Function Operations Function General Perceptions and Remarks..40 Transport Institute - 4 -

7 4.3 Rail Support Operations (Secondary Linkages) Rail Equipment Manufacturing Rail Industry Services Providers Rail Equipment Sales and Distribution Manitoba Rail Network Connections Manitoba Trends in Trade Activity Trans-border Traffic Domestic Traffic Overseas Container Traffic Conclusion References...60 Appendices.. 61 Transport Institute - 5 -

8 LIST OF TABLES Table 1 Rail Industry Operating Ratios, Table 2 Manitoba Industry Intensity Ratios 14 Table 3 Ratio of GDP at Market Prices to GDP at Factor Cost..15 Table 4 Target Population and Response Rate of Railway Companies in Manitoba.16 Table 5 Railway Transportation Economic Activity: Railway Revenues...17 Table 6 Impact to Manitoba GDP at Market Prices..17 Table 7 Rail Transportation Distribution of Revenue, Manitoba. 17 Table 8 Railway Distribution of Freight Revenue, Manitoba, Table 9 Railway Transportation Economic Activity: Railway Labour Income.. 19 Table 10 Impact to Labour Income, Manitoba, Table 11 Reported Employment...19 Table 12 Railway Transportation Economic Activity: Railway Employment.20 Table 13 Impact to Employment, Manitoba, Table 14 Rail Transportation Employment, Manitoba, Table 15 Manitoba Rail Transport and Related Services Employment, Table 16 Average hourly earnings and weekly hours for hourly employees in rail transport and related services in Manitoba, (nominal $), Table 17 Taxes Paid by Railways, Manitoba, Table 18 Railway Fuel Consumption in Manitoba, Table 19 Fuel Tax Estimates, Table 20 Rail Equipment Manufacturing, Sales and Distribution, and Services, Survey Response Rates.27 Table 21 Rail Support Operations Economic Activity: Revenues..28 Table 22 Impact to Manitoba GDP at Market Prices, Table 23 Rail Support Operations Economic Activity: Labour Income..29 Table 24 Impact to Labour Income, Manitoba, Table 25 Reported Employment..30 Table 26 Rail Support Operations Economic Activity: Employment..30 Table 27 Impact to Employment, Manitoba, Table 28 Manitoba Rail Industry Economic Activity: Revenues. 31 Table 29 Impact to Manitoba GDP at Market Prices, Table 30 Manitoba Rail Industry Economic Activity: Labour Income. 32 Transport Institute - 6 -

9 Table 31 Impact to Labour Income, Manitoba, Table 32 Manitoba Rail Industry Economic Activity: Employment.33 Table 33 Impact to Employment, Manitoba Table 34 Profile of Rail Equipment Manufacturing, Sales and Distribution, and Services, Manitoba, Table 35 Profile of Rail Equipment Manufacturers, Manitoba, Table 36 Manitoba Rail Traffic, Southbound Movements to the U.S. by CN and CPR..51 Table 37 Manitoba Rail Traffic, Northbound Movements from the U.S..53 Table 38 Manitoba Intra and Inter-Provincial Outbound Rail Movements 54 Table 39 Change in Distribution Patterns 55 Table 40 Manitoba Intra and Inter-Provincial Inbound Rail Movements...56 Table 41 Change in Distribution Patterns 56 LIST OF FIGURES Figure 1 Modal Split Canadian Forecast Trends 8 Figure 2 Manitoba Employment in Railway Transport and Related Services, Figure 3 Average Hourly Earnings for Hourly Employees in the Railway Transport and Related Services Sector, Manitoba (nominal $) Figure 4 Average Weekly Hours for Hourly Employees in the Railway Transport and Related Services Sector, Manitoba, Figure 5 Fuel Consumption by Manitoba Railways, Figure 6 Expected Future Markets for Rail Support Operations 34 Figure 7 Manitoba Rail Traffic, Southbound Movements to the U.S..52 Figure 8 Manitoba Rail Traffic, Northbound Movements from the U.S. 53 Figure 9 Manitoba Inter and Intra Provincial Outbound Rail Movements.55 Figure 10 Manitoba Inter and Intra Provincial Inbound Rail Movements..57 Figure 11 Manitoba Overseas Container Traffic, Figure 12 Manitoba s Marine Container Imports/Exports by Traffic Corridor..58 Transport Institute - 7 -

10 1.0 Introduction Winnipeg is a gateway for freight moving between Eastern and Western Canada, and transborder freight to the U.S and Mexico. Rail plays a crucial role in the long haul freight transportation (predominantly export movement) of goods moving through Manitoba and originating from Manitoba, notably grain and forest products. Trucking dominates the short haul freight traffic at rail s expense, however rail is becoming increasingly important for intermodal shippers. The evolving modal split in Canadian freight transport is illustrated in Figure 1. Today, the railways are specialized long-distance carriers of intermodal freight and of high volume commodities such as coal, grain, potash, lumber and petroleum products. Figure 1: Modal Split Canadian Forecast Trends Index: 1990= Rail For-Hire Trucking Marine Source: Transport Canada for forecasts, Statistics Canada year 1999 F2000 F2001 F2002 F2003 F2004 F2005 Manitoba s rail industry is comprised of freight and passenger transportation service providers and companies that provide goods and services to support rail operations. Rail transportation service providers in Manitoba include three Class I railways: Canadian National Railway (CN), Canadian Pacific Railway (CPR) and Via Rail Canada. Several Class II or shortline railways also operate in Manitoba, the most notable being the Hudson Bay Railway. Traditionally, rail companies have remanufactured and maintained their own equipment. Developments through the 90 s have seen these services being contracted out to third parties. CN and CPR have massively invested in new locomotives, drastically reducing their re-manufacturing operations. The rail support Transport Institute - 8 -

11 sector includes companies that design, manufacture and sell rolling stock, fixed equipment and other fabricated products and companies that provide supporting services to freight and passenger rail transportation. Competition and profitability in rail transportation have been the driving forces of change in Canadian railway networks and operations. Under pressure from shareholders, the railways have worked hard to boost profitability. In the last decade, CN and CPR have massively restructured their networks and operations to minimize costs. In conjunction with the grain industry s need for an efficient and lower cost grain handling and transportation system, the need for profitability has driven system rationalization. The federal government has responded to the needs of Canada s rail sector, first in 1987 with the National Transportation Act, and again in 1996 with the Canada Transportation Act. Service, access, rates and competition have been the focus of recent regulatory reforms. A significant outcome has been the emergence of a shortline industry. During the 1990 s, 1727 route-km of track have been transferred from the Class I carriers to shortlines, while another 1016 route-km have been abandoned. Manitoba s rail operations have been profoundly affected by these changes. Other factors driving change in the rail sector are international trade agreements such as CUSTA and NAFTA. Of all freight movements between the United States and Canada, 27.3% was moved by rail in 1999, an increase of 5.8% since Manitoba is one of only two Canadian provinces with a U.S. rail terminal. BNSF operates a terminal in Winnipeg and has connections to its U.S. rail network through an operating agreement with CN. Interurban rail passenger transportation, although not Manitoba s main mode of intercity passenger transport, is provided by ViaRail Canada. ViaRail provides the only overland access to Manitoba s northern communities, with a terminus at Churchill, Manitoba. As Manitoba s rail environment evolves, the effects on Manitoba s economy are not clear. Statistics Canada provides a brief overview of Manitoba s transportation industry Transport Institute - 9 -

12 but does not give comprehensive information. Furthermore, this data is often aggregated with all of the Prairie Provinces. 1.1 Study Objectives The primary aim of this study is to assess the total economic impact (EI) of the Manitoba Rail Industry. Specific objectives are: To quantify the total impacts of rail-related revenue, employment, labour income and tax revenue, including the multiplier effects emanating from the initial revenue; and, To establish the exact structure of the Manitoba Rail Industry. 2.0 Methodology Economic impacts are a result of the economic activity of the individuals and organizations that define the rail industry. In the case of Manitoba s rail industry, this would include rail transportation services expenditures and supporting manufacturing and services industries expenditures, as well as employment income and taxes that occur in the province, minus the possible linkages between both groups. Care must be taken to ensure that double counting does not occur and that leakages (that part of the economic activity occurring outside of the provincial economy) are identified. The impact would also be measured in terms of person-years of employment. The taxation impact of the rail industry is assessed to the extent that data was available. Direct Economic Impact The direct economic impact is defined as the employment, income and other economic benefit generated by those companies working in rail transportation services and in rail support operations in Manitoba. Indirect Economic Activities Indirect economic activities of the rail industry are attributable to firms that supply services, materials and other inputs to the organizations involved in the direct economic Transport Institute

13 activity. Rail-related expenditures from direct activities become the revenue of indirect activities. Induced Economic Activities Induced economic activity is the effect of successive rounds of spending which begin with the consumption spending of individuals involved in the direct and indirect economic activities. These trickle-down impacts represent the multiplier effects of the direct and indirect impacts. The result is increased employment and income over and above the levels for which the direct and indirect activities are responsible Linkages Primary linkages are defined as those companies that provide rail transportation services in Manitoba for either passengers or freight. Specifically; Class I: Two international freight carriers, Canadian National Railway and Canadian Pacific Railway and one national passenger carrier, Via Rail Canada Inc, and their related operations. Class II: Other rail carriers involved in rail transportation services. These are Manitoba s shortline operations: Central Manitoba Railway, Southern Manitoba Railway, Hudson Bay Railway and Greater Winnipeg Water District Railway and two excursion lines: Prairie Dog Central Railway and Assiniboine Valley Railway. Secondary Linkages comprise all rail support operations, specifically: Rail equipment manufacturing companies Rail equipment sales and distribution companies Rail supporting services companies 2.2 The Survey The quality of any economic impact study is a function of the care and completeness of the data. It is important to acquire information from as many of these industry Transport Institute

14 participants as possible, particularly from the largest, most important companies. To accomplish this, there are three main requirements: The participants must be well defined a comprehensive and up-to date list must be generated; The survey must capture the necessary information while at the same time avoid being difficult or overly time-consuming, and; The cooperation of survey participants must be secured this is critical for the success of the study. From this definition of the Manitoba Rail Industry, a list of industry participants was generated. The survey and the methods of data collection determine the accuracy of the economic impact study. This study will perform a complete enumeration, rather than inferring the impacts from a sample. Class I and Class II railways were easily identified. However, the rail support operations sector is more diversified and more difficult to determine. Industry Canada provides a database on Canadian railway suppliers. This database has been complemented by information from the Canadian Association of Railway Suppliers, the TrainsCan.com website and Manitoba s Yellow Pages. A list of 30 participants was generated by these databases. 2.3 Questionnaires Three questionnaires, one for freight services, one for passenger services and one for rail support operations were designed in order to apply MBS input/output model multipliers to the data collected. Samples of these surveys are presented in the appendix. All information collected was for the year Rail transportation services companies expenditures on maintenance, equipment and infrastructure have to be considered specifically. If these expenses accrue to Manitoba companies, there is risk of double counting. Rail support operations companies were Transport Institute

15 asked to identify the proportion of their revenues that accrue to rail transportation services companies in Manitoba. This proportion of their activities is excluded to obtain the net direct economic impact of the Manitoba Rail Industry. 2.4 Economic Impacts to be Measured and Methods of Measurement Output, employment and labour income can be used to assess the economic impact of the Manitoba Rail Industry. Estimates of the taxes paid by the rail industry indicate the contribution to the local tax base. The units of measurement are defined as follows: Rail revenues (output) represent actual sales of goods and services earned locally. Employment is reported in total person-years of rail employment. One person, employed full time for one year represents one-person year of employment. Labour income measures the total annual wages, salaries and benefits received as a result of rail employment. Rail taxes show the contribution to the local tax base, it includes federal, provincial and municipal taxes and levies paid by rail-related firms and organizations. 2.5 Multipliers The economic multipliers used to calculate the direct, indirect and induced economic impacts are obtained from the Manitoba Bureau of Statistics (MBS). They are derived from a statistical model of input-output data that traces Manitoba inter-industry flows of goods and services. The MBS economic multipliers are widely accepted and recognized as being comprehensive and accurate. The most recent multipliers are from This study uses the Manitoba Industry Intensity Ratios for medium industry groups. These intensity ratios estimate the total impact to Manitoba GDP at factor cost, labour income and employment based on a given change in industrial output. The result is the net monetary impact to the industry. This study uses total operating expenditures information and estimates industrial output by applying the inverse of the operating ratio to these expenditures (see Table 1). MBS provides an Industry Intensity Ratio for the Transport Institute

16 transportation sector. This includes rail freight and passenger transportation. It also provides Industry Intensity Ratios for the transportation equipment sector, which includes rail equipment. These Industry Intensity Ratios are applied to the industrial output estimates to obtain the impact to GDP at factor costs. Table 1 : Rail Industry Operating Ratios, Operating Ratio Canadian National 0.696* Canadian Pacific 0.769* VIA Rail 1.000* Shortline Rail Transportation 0.903** Rail Support Operations 0.711** Source :* Calculated from CN, CPR and VIA Rail s annual reports; **Calculated from Statistics Canada (2001, Table 1, p16-19). To obtain the net monetary impact to the economy, the impact to GDP at factor costs should be adjusted by applying another multiplier that will give the impact to Manitoba s GDP at market prices, inclusive of the value of indirect taxes and subsidies. Direct, indirect and induced economic impacts can then be calculated using MBS compositional break downs. Table 2: Manitoba Industry Intensity Ratios (total economic impact in Manitoba per value of industry output) GDP at Factor cost Labour Income Employment (person-year/$million) adjusted for wage inflation Transportation Equipment Transportation Source: Manitoba Bureau of Statistics, Manitoba Economic Multipliers (1998, p. 24) Table 2 presents the Industry Intensity Ratios used for this study that are needed to calculate the total economic impact at factor cost of the rail industry. These Industry Intensity Ratios evaluate that part of output that will be spent on Manitoba goods and Transport Institute

17 services. The Employment Intensity Ratio has been adjusted for wage inflation at a rate of 4.7% 2. Table 3 presents the Ratio of GDP at Market Prices to GDP at Factor Cost used for this study. This ratio is needed to calculate the total economic impact, at market prices, of the rail industry. GDP at Market Prices includes the value of indirect taxes and subsidies, these items are exluded from GDP at Factor Cost (Table 2). Table 3: Ratio of GDP at Market Prices to GDP at Factor Cost GDP at market prices composition (%) Ratio : Direct Indirect Induced Impact GDP at market prices/ GDP at Factor cost Impact Impact Transportation Equipment % 16.4% 29.3% Transportation % 21.8% 28.6% Source: Manitoba Bureau of Statistics, Manitoba Economic Multipliers (1998, p. 26) 2.6 Secondary Sources Rail in Canada (2001) 3, published by Statistics Canada, gives complementary information regarding Canadian rail transportation services companies for the year This publication, and annual reports from Canadian National Railway, Canadian Pacific Railway and VIA Rail are used to gather background information. There is no equivalent publication for rail manufacturing companies. Statistics Canada surveys manufacturing companies in Canada and breaks down the information by province 4. However, in their most recent publication, they surveyed only 18 companies that manufacture railroad rolling stock in Canada. Of those 18 companies, 15 were located in Ontario (10) or Quebec (5). Only one was located in Manitoba. 2 See wage inflation in Manitoba at 3 Rail in Canada (1999), Statistics Canada, XIB, December Manufacturing Industries of Canada: national and provincial areas (1998), Feature article, Statistics Canada, XPB, June Transport Institute

18 3.0 Economic Impact Results 3.1 Economic Impact of Rail Transportation Nine rail transportation companies were solicited for this study. Six responded, giving a response rate of 67%. Table 4 identifies the response rate by Class I and Class II railways. While a complete enumeration was not achieved, the major players are included, that is, the Class I railways, CN, CPR and Via Rail 5. Table 4: Target Population and Response Rate of Railway Companies in Manitoba Number in Target Number of Response Rate Population Respondents 6 Class I railways % Class II railways % Total % Railway Revenues Railway transportation revenues in Manitoba during the year 2000 are estimated to be $880 million as illustrated in Table 5. These are total revenues from actual goods and services that are sold locally, and directly attributable to the Manitoba Rail Industry. Railway transportation revenues generated $933 million to Manitoba s GDP in the year The direct impact totaled $463 million, while the indirect and induced impacts totaled $203 million and $267 million, respectively. As illustrated in Table 6, 2.76% of Manitoba s GDP 7 in the year 2000 is attributable to railway transportation activities. Table 7 8 shows that freight is the major revenue earner for Manitoba s railways. Freight represented 96% of railway revenues in Manitoba during the year Passengers contributed 2.4% to railway revenues during this same time period. 5 These companies represent a large majority of Manitoba Rail Industry economic activity. 6 The railways that participated in the study are: CN, CP, Via Rail, Hudson Bay Railway, Prairie Dog Central and Central Manitoba Railway Manitoba GDP at Market Prices is $33, 780 million. See CANSIM Label: D The information presented in Table 7 is based on Question #15 in the Rail Freight Transportation Survey (Survey A in the Appendix). Transport Institute

19 Table 5: Railway Transportation Economic Activity: Railway Revenues Total Revenues $879,516,000 GDP at factor cost Industry Intensity Ratio Increase in GDP at Factor Cost $856,649,000 Ratio: GDP at Factor Cost / GDP at Market Prices Increase in GDP at Market Prices $932,891,000 Direct Impact : $462,714,000 Indirect Impact : $203,370,000 Induced Impact : $266,807,000 Table 6. Impact to Manitoba GDP at Market Prices, 2000 Railway Transportation Contribution to MB's Economy MB GDP at Market Prices (2000) $33,780,000, % - Direct Impact $462,714, % - Indirect Impact $203,370, % - Induced Impact $266,807, % Total Impact of Railway Transportation to GDP $932,891, % Table 7: Rail Transportation Distribution of Revenue, Manitoba % Bulk Carload Intermodal Total Freight Passengers 2.4 Other Total Bulk freight includes commodities like agricultural commodities, chemicals or coal that are transported in open or covered hopper cars or gondola cars. 10 Carload freight is non-bulk traffic of various types (forest products, metallic ores and minerals, motor vehicles and equipment, non metallic minerals and products and other carloads) that are transported in rail cars such as auto racks, box cars, flat cars or gondola cars. 11 Intermodal freight usually consists of time sensitive shipments in containers or trailers. 12 Total freight does not equal the sum of bulk, carload and intermodal totals because it includes a small amount of freight that cannot be broken down. 13 Subsidies, mail and concessions. Transport Institute

20 Table 8 14 identifies the distribution of freight revenues for Manitoba. Grain represents almost half of all revenues earned in Manitoba during 2000, followed by forest products and metals and minerals. Table 8: Railway Distribution of Freight Revenue, Manitoba, Freight % Petroleum and Chemicals 9.7 Metals and Minerals 12.2 Forest Products 16.2 Coal 1.0 Grain 47.8 Fertilizers 8.5 Intermodal 1.4 Automotive 2.8 Other 0.4 Total Railway Labour Income Railway labour income of $285 million is directly attributable to the economic activity of railway transportation. In the year 2000, Manitoba s railways generated impacts to Manitoba s Total Labour Income of $594 million, $308 million of which is over and above the direct labour expenditures of $285 million, as outlined in Table 9. The impacts generated by railway labour expenditures represented 3.44% of the Total Annual Labour Income in Manitoba during ; this is illustrated in Table 10. Based on reported employee numbers, this represents an average annual income of $53, per employee. Average provincial earnings for Transportation and Warehousing industries in Manitoba during 2000 were $37, , a difference of $15, The Transportation and Warehousing industry in Manitoba generated $1,084 million in Total Labour Income 17 ; railway transportation represented 26.31% of this. 14 The information presented in Table 8 is based on Question #16 in the the Rail Freight Transportation Survey (Survey A in the Appendix). 15 For 2000, the total labour income in Manitoba was $17,237 million. See CANSIM Label D Statistics Canada, Cat. No. 72F0023-XIB, Annual Estimates of Employment, Earnings and Hours Based on NAICS. 17 Ibid. Transport Institute

21 Table 9: Railway Transportation Economic Activity: Railway Labour Income Total Railway Revenues $879,516,000 Labour Income Industry Intensity Ratio Impact to Total Manitoba Labour Income $593,674,000 Railway Expenditures on Labour $285,237,000 Increase in Total Manitoba Labour Income $308,437,000 Table 10. Impact to Labour Income, Manitoba, 2000 Railway Transportation Contribution to MB Labour Income Total MB Labour Income $17,237,000, % Total Impact of Rail Transportation to Labour Income $593,674, % MB Transportation and Warehousing Labour Income $1,084,000, % Total Impact of Rail Transportation to T&W Income $285,237, % Railway Employment During the year 2000, the railway companies that participated in this study employed a total of 5,107 person-years of employment as shown in Table 11. This value was obtained by dividing the total hours worked by the average hours worked annually. 18 Table 11. Reported Employment Railway Transportation # of Staff # of Hours Full Time Part Time Seasonal Total TOTAL FULL TIME EQUIVALENCE 5,107 Transport Institute

22 Employment totals are reported in terms of person-years of employment. One personyear of employment is the equivalent of one person, employed full-time for a period of one year. Alternatively, two part-time employees who work 17.5 hours per week are considered to be equivalent to one full-time employee. The employment figures for Manitoba s rail transportation sector are reported in Table 12. In the year 2000, Manitoba s railways contributed 15,462 person-years to Total Manitoba Employment, 10,355 person-years of which is over and above the direct employment contribution of 5,107 person years. Table 12. Railway Transportation Economic Activity: Railway Employment Total Railway Revenues (millions) $880 Employment Industry Intensity Ratio (person-year/$million) Impact to Total Manitoba Employment (person-years) 15,462 MB Railway Employment (person-years) 5,107 Increase in Total Manitoba Employment (person-years) 10,355 Table 13 shows that railway transportation contributed 2.8% to Total Manitoba Employment during 2000, or 18% to employment in Manitoba s Transportation and Warehousing sector. Table 13. Impact to Employment, Manitoba, 2000 Railway Transportation Contribution to MB Employment Total MB Employment (person-years) 554, % Total Impact of Rail Transport to MB Employment 15, % MB Transportation and Warehousing Employment 28, % Impact of Rail Transport to T&W Employment 5, % hours/week x 52 weeks/year = 1820 hours/year for an average annual work year (40 hours/week 1 hour for lunch = 35 hours/week; 52 weeks/year because vacation time is paid for by employers). Transport Institute

23 Table 14 outlines reported rail transportation employment by occupation. Equipment maintenance consumes the highest amount of human resources in the rail transportation sector. Table 14: Rail Transportation Employment, Manitoba, 2000 Full-time Part-time Seasonal Equipment maintenance (equipment, repair, and maintenance 32.6% 65.1% 4.7% personnel) Transportation (locomotive, engineers and traffic supervisor, 21.1% 34.9% 5.9% operations administration) Road maintenance (track inspectors, work equipment operators, 15.3% 89.4% maintainers and mechanics) General (commercial, sales and marketing personnel) 30.9% TOTAL number of employees Rail Transportation Employment Trends Table 15 and Figure 2 presents hourly and total employment in the railway transportation and related services sector in Manitoba, from 1986 to The early part of the decade shows a steady decline in the number of hourly employees, which stablizes in the late 1990 s. Statistics Canada does not provide total employment information after 1996, however, we can assume that it follows a similar trend to hourly employment. Since 1986, both total and hourly employment has steadily decreased. In 1986, a total of 10,823 people worked in the railway transport and related services sector. One decade later this number has declined to 6521 employees, a 40% decrease. Hourly employees represented the majority of rail sector employment near the latter half of the 1980 s. In 1987, hourly employment represented half of total employment. This proportion climbed to about 3/5 of total employment by This data reflects the evolution of the rail sector since the late 1980 s. Transport Institute

24 Table 15: Manitoba Rail Transport and Related Services Employment, Hourly Employees Total Employees n.a. n.a n.a n.a n.a. Source: Statistics Canada, Survey of Employment, Payrolls and Hours, Figure 2 : Manitoba Employment in Railway Transport and Related Services, Hourly Employees Total Employees In contrast, average hourly earnings grew steadily during the 1987 to 1999 time period, from $13.71/hour to $20.90/hour, a 52% increase in 12 years. This is illustrated in Table 16 and Figure 3. During this same period, the consumer price index increased by 35.6%. As a result, the real hourly wage in Manitoba increased by 16.4%. Transport Institute

25 Table 16: Average hourly earnings and weekly hours for hourly employees in rail transport and related services in Manitoba, (nominal $) Average Hourly Earnings Average Weekly Hours (nominal $) n.a. n.a Source: Statistics Canada, Survey of Employment, Payrolls and Hours, Figure 3: Average Hourly Earnings for Hourly Employees in the Railway Transport & Related Services Sector, Manitoba. (nominal $) $ Average Hourly Earnings Transport Institute

26 Figure 4: Average Weekly Hours for Hourly Employees in the Railway Transport and Related Services Sector, Manitoba Hours 40 Average Weekly Hours Average weekly hours of hourly employees fluctuated around 40 hours during the 1987 to 1993 time period, as illustrated in Table 16 and Figure 4. In 1997, average weekly hours increased to 43 hours per week and then decreased again to 40 hours in Railway Taxes Table 17 outlines the taxes paid by Manitoba s railways. During the year 2000, the railways paid $67 million in taxes, $46 million of which stayed in Manitoba. Table 17. Taxes Paid by Railways, Manitoba, Total Municipal Provincial Federal Taxes Paid $66,890,000 $16,273,000 $30,101,000 $20,514, Railway Fuel Consumption Table 18 and Figure 5 show fuel consumption by Class I carrier in Manitoba from 1989 to Prior to 1996, fuel consumption by CN and CPR was relatively constant. There 19 Although average weekly hours in railway transportation fluctuates around 40 hours/week, this study uses 35 hours/week to calculate Full Time Equivalence so that comparisons across industries can be more easily made. Transport Institute

27 was a dramatic decrease in fuel consumption in 1996 followed by a dramatic increase in This is followed by a slight decrease in fuel consumption in 1998 and Through the 90 s, CN and CPR heavily invested in a newer, more efficient locomotive fleet and drastically improved fuel efficiency, explaining the observed trends. Via Rail s fuel consumption is relatively constant, following a sharp decline in Fuel consumption by the Class II operators shows a consistently increasing trend beginning in Table 18: Railway Fuel Consumption in Manitoba, Class I Freight Carriers Passenger Carrier Class II Shortline Rail Year Canadian Canadian VIA Operators TOTAL* National Pacific Rail 000 litres * Includes values for Class II operators and Class I Support Activities (Class III operators). Source: Statistics Canada, Rail in Canada, Transport Institute

28 Figure 5: Fuel Consumption by Manitoba Railways, '000 litres CN CP Via Rail Shortlines Total Table 19 estimates Canadian railways fuel tax payments on diesel consumption in Canadian railways paid $9.9 million in fuel taxes to the Manitoba provincial government and $6.3 million to the federal government. Table 19: Fuel Tax Estimates, Manitoba Federal Total Fuel consumption (litres) Rail diesel tax ($ per liter) Estimated tax payment ( 000) $9,880 $6,273 $16,153 Source : Tax information is derived from Taxation Manitoba, Revenue Canada. Transport Institute

29 3.2. Economic Impact of Rail Support Operations Twenty-one rail support operations companies were solicited for this study. Seven responded 20, giving a response rate of 33%. Table 20 identifies the response rate by operations category. Table 20. Rail Equipment Manufacturing, Sales and Distribution, and Services, Survey Response Rates PROFILE OF RAIL SUPPORT OPERATIONS IN MANITOBA # in Target Population # of Respondents Response Rate Total no. of Manufacturers 8* % Total no. of Service Providers % Leasing % Repair/maintenance % Other % Total no. of companies involved sales or distribution % Distributor of other manufacturers' goods % Selling company's own product % TOTALS % * There are two manufacturing companies who also provide services for their own equipment/products Rail Support Operations Revenues Rail support operations revenues for the year 2000 are estimated to be $65 million 21 as illustrated in Table 21. These are total revenues from actual goods and services that are sold locally and abroad, directly attributable to the Manitoba Rail Industry. Rail support operations generated an increase of $52 million in Manitoba s GDP in the year The direct impact totaled $28 million, while the indirect and induced impacts totaled $8 million and $15 million, respectively. Table 22 shows that rail support operations companies contributed 0.15% to Manitoba s GDP in The seven companies included in the economic impact analysis are: Amsco Cast Products, Acklands- Grainger, Mandak Railway Supply, Griffin Canada, Danella Rental Systems and Midland Vegetation and Cando Contracting. Transport Institute

30 Table 21: Rail Support Operations Economic Activity: Revenues Total Revenues $65,142,000 GDP at factor cost Industry Intensity Ratio Increase in GDP at factor cost $47,358,000 Ratio: GDP at factor cost / GDP at market prices Increase in GDP at market prices $51,573,000 Direct Impact : $28,004,000 Indirect Impact : $8,458,000 Induced Impact : $15,111,000 Table 22. Impact to Manitoba GDP at Market Prices, 2000 Contribution to Rail Support Operations MB's Economy MB GDP at Market Prices (2000) $33,780,000, % - Direct Impact $28,004, % - Indirect Impact $8,458, % - Induced Impact $15,111, % Total Impact of Rail Support Operations to GDP $51,573, % Rail Support Operations Labour Income Rail support operations labour income of $16.1 million is directly attributable to the economic activity of rail support operations. In the year 2000, Manitoba s rail support operations generated impacts to Manitoba s Total Labour Income of $34 million, $18 million of which is over and above the direct labour expenditures of $16 million, as illustrated in Table 23. The impacts generated by rail support operations labour expenditures represented 0.2% of the Total Annual Labour Income in Manitoba during , as illustrated in Table 24. Based on reported employee numbers, average annual income for rail support operations was $43, Average provincial earnings for Transportation Equipment Manufacturing industries in Manitoba during 2000 was 21 This is total revenues estimated for the seven companies that responded to our inquiries. Transport Institute

31 $38,777.96, a difference of $4, The Goods Producing Industries in Manitoba generated $3,433 million in total labour income 23 ; as illustrated in Table 24, these seven rail support companies represented only 0.5% of this. Table 23. Rail Support Operations Economic Activity: Labour Income Total Rail Support Operations Revenues $65,142,000 Labour Income Industry Intensity Ratio Impact to Total Manitoba Labour Income $33,679,000 Rail Support Operations' Expenditures on Labour $16,105,000 Increase in Total Manitoba Labour Income $17,574,000 Table 24. Impact to Labour Income, Manitoba, 2000 Rail Support Operations Contribution to MB Labour Income Total MB Labour Income $17,237,000, % Total Impact of Rail Support Ops. to Labour Income $33,679, % MB Goods Producing Industries Labour Income $3,433,000, % Impact of Rail Support Ops. to GPI Income $16,105, % Rail Support Operations Employment During the year 2000, the rail support operations that participated in this study employed a total of 386 person-years of employment as shown in Table 25. This value was obtained by dividing the total hours worked by the average hours worked annually For 2000, the total labour income in Manitoba was $17,237 million. See CANSIM Label D Statistics Canada, Cat. No. 72F0023-XIB, Annual Estimates of Employment, Earnings and Hours Based on NAICS hours/week x 52 weeks/year = 1820 hours/year for an average annual work year. Transport Institute

32 Table 25. Reported Employment Rail Support Operations # of Staff # of Hours Full Time Part Time Seasonal Total TOTAL FULL TIME EQUIVALENCE 386 Table 26 shows that in the year 2000, Manitoba s rail support operations companies contributed 807 person-years to Total Manitoba Employment, 421 person-years of which is over and above the direct employment contribution of 386 person-years. Table 26. Rail Support Operations Economic Activity: Employment Total Rail Support Operations Revenues (millions) $65 Employment Industry Intensity Ratio (person-year/$million) Impact to Total Manitoba Employment (person-years) 807 MB Rail Support Operations Employment (person-years) 386 Increase in Total Manitoba Employment (person-years) 421 Table 27 shows that the rail support operations companies that participated in this study contributed modestly (0.15%) to Total Manitoba Employment in The contribution to employment in the Transportation Equipment Manufacturing sector by these companies was 3.86%. Table 27. Impact to Employment, Manitoba, 2000 Rail Support Operations Contribution to MB Labour Income Total MB Employment (person-years) 554, % Total Impact of Rail Support Ops. to MB Employment % MB Transportation Equipment Mfg. Employment 10, % Impact of Rail Support to Equip. Mfg. Employment % Transport Institute

33 3.3 Total Economic Impact of the Manitoba Rail Industry Manitoba Rail Industry Revenues The information in sections 3.1 and 3.2 were combined to calculate the total economic impact of the Manitoba Rail Industry. The primary linkages between both groups were subtracted from rail support operations revenues to ensure that double counting does not occur. The rail support operations revenues, excluding the linkages with Manitoba s rail transportation sector were $40 million in 2000, as illustrated in Table 28. This gives a total economic impact of $965 million. The direct economic impact totaled $480 million, while the indirect and induced impacts totaled $209 million and $276 million, respectively. Table 28: Manitoba Rail Industry Economic Activity: Revenues Revenue Railway EI Rail Support EI* Total EI Total Revenues $879,516,000 $40,343,000 $919,859,000 Increase in GDP at factor cost $856,649,000 $29,329,000 $885,978,000 Increase in GDP at market prices $932,890,000 $31,940,000 $964,830,000 Direct Impact : $462,714,000 $17,343,000 $480,057,000 Indirect Impact : $203,370,000 $5,238,000 $208,608,000 Induced Impact : $266,807,000 $9,358,000 $276,165,000 *Excludes primary linkages. The entire Manitoba Rail Industry contributed 2.86% to Manitoba s GDP in This is illustrated in Table 29. Table 29. Impact to Manitoba GDP at Market Prices, 1999 Contribution to Manitoba Rail Industry MB's Economy MB GDP at Market Prices (2000) $33,780,000, % - Direct Impact $480,057, % - Indirect Impact $208,608, % - Induced Impact $276,165, % Total Impact of the Manitoba Rail Industry to GDP $964,830, % Transport Institute

34 3.3.2 Manitoba Rail Industry Labour Income Railway labour income and rail support operations labour income were combined to obtain total Manitoba Rail Industry labour income. Table 30 lists total Manitoba Rail Industry labour income as $293 million. The Manitoba Rail Industry generated impacts to Manitoba s Total Labour Income of $615 million, $321 million of which is over and above the direct labour expenditures of $293 million. Table 30. Manitoba Rail Industry Economic Activity: Labour Income Rail Transportation Rail Support* Total Rail Industry Total Revenues $879,516,000 $40,343,000 $919,859,000 Impact to MB Labour Income $593,674,000 $20,857,000 $614,531,000 Expenditures on Labour $285,237,000 $8,063,000 $293,299,000 Increase in MB Labour Income $308,437,000 $12,795,000 $321,232,000 *Excludes primary linkages The Manitoba Rail Industry contributed 3.6% to Total Manitoba Labour Income, or 27% to Manitoba s Transportation and Warehousing labour income. This is illustrated in Table 31. Table 31. Impact to Labour Income, Manitoba, 2000 Manitoba Rail Industry Contribution to MB Labour Income Total MB Labour Income $17,237,000, % Total Impact of MB Rail Industry to Labour Income $614,531, % MB Transportation & Warehousing Labour Income $1,084,000, % Total Impact of MB Rail Industry to T&W Income $293,299, % Transport Institute

35 3.3.3 Manitoba Rail Industry Employment The combined impact to Total Manitoba Employment of the Manitoba Rail Industry totals 15,959 person-years of employment, as illustrated in Table 32. Table 32. Manitoba Rail Industry Economic Activity: Employment Rail Transport Rail Support* Total Rail Industry Total Revenues $879,516,000 $40,343,000 $919,859,000 Impact to Total MB Employment 15, ,959 *Excludes primary linkages Manitoba s Rail Industry contributed 2.9% to Total Employment in Manitoba during 2000; this is illustrated in Table 33. When the Transportation Services and Equipment Manufacturing sectors are combined, the Manitoba Rail Industry accounts for 14% of employment in this sector in Manitoba. Table 33. Impact to Employment, Manitoba, 2000 Manitoba Rail Industry Contribution to MB Labour Income Total MB Employment (person-years) 554, % Total Impact of MB Rail Industry to MB Employment 15, % MB Transport Svcs & Equipment Mfg. Employment 38, % Impact of MB Rail to Trans. & Equip. Mfg. Employment 5, % Transport Institute

36 3.4 Future Perceptions of Survey Participants Manitoba s freight railways expect a 5% to 10% increase in revenues in the next 3 years. One-third of rail support operations companies expect revenues to remain the same in 2005, 2/3 of rail support companies expect a 25% increase in sales. Their future expected markets are illustrated in Figure 6. Figure 6: Expected Future Markets for Rail Support Operations United States 29% Manitoba 22% Rest of Canada 49% 4.0 Structure of the Manitoba Rail Industry 4.1 Rail Transportation Companies in Manitoba The following section provides background information on the Class I and Class II carriers involved in this study. Canadian National Railway Operates the largest rail network in Canada and the only transcontinental network in North America, almost 18,000 miles of track. The company operates in eight Canadian provinces and 14 U.S. states. CN spans Canada and mid- America from the Atlantic and Pacific oceans to the Gulf of Mexico, serving the ports of Vancouver, Prince Rupert, Thunder Bay, Duluth, Montreal, Halifax, New Orleans and Mobile, and the key cities of Toronto, Buffalo, Chicago, Detroit, Memphis, Minneapolis/St.Paul, St. Louis and Jackson. CN revenues derive from the movement of Transport Institute