The Economic Impacts of the Ports of Indiana

Transcription

1 The Economic Impacts of the Ports of Indiana Study Completed 2015 Prepared for: Martin Associates 941 Wheatland Avenue Suite 203 Lancaster, PA

2 TABLE OF CONTENTS EXECUTIVE SUMMARY... 1 I. INTRODUCTION IMPACT DEFINITIONS METHODOLOGY ECONOMIC IMPACT MODELS SUMMARY OF RESULTS... 9 II. ECONOMIC IMPACTS OF CARGO AND INDUSTRIAL ACTIVITY IMPACT STRUCTURE The Surface Transportation Sector The Maritime Services Sector Port Tenants and Dependent Shipper/Consignees Sector Ports of Indiana COMMODITIES INCLUDED IN THE ANALYSIS MARITIME CARGO EMPLOYMENT IMPACTS Direct Cargo Job Impacts Job Impacts by Category Direct Job Impacts by Commodity Distribution of Direct Jobs by Place of Residency Induced Jobs Indirect Jobs Related User Jobs TOTAL ECONOMIC OUTPUT, BUSINESS REVENUE, INCOME AND TAX IMPACTS Revenue Impact Total Economic Activity Revenue Impacts by Economic Sector/Category Revenue Impacts by Commodity PERSONAL EARNINGS IMPACT TAX IMPACTS APPENDIX A PROPERTY TAXES BY PORT COMPANIES AND TENANTS APPENDIX B PORT TONNAGES BY COMMODITY AND MODE OF TRANSPORTATION APPENDIX C IMPACTS BY REGION APPENDIX D IMPACTS OF BARGE TRAFFIC APPENDIX E IMPACTS OF INTERNATIONAL SEAWAY TRAFFIC APPENDIX F ORIGINS AND DESTINATIONS OF PORTS OF INDIANA CARGOES APPENDIX G COMPARISSON OF IMPACTS TO 2009 ECONOMIC IMPACT STUDY APPENDIX H PEER REVIEW LETTERS Printed April 8, 2016

3 TABLE OF EXHIBITS EXHIBIT ES-1 ECONOMIC IMPACTS OF PORTS OF INDIANA CARGO ACTIVITY*... 2 EXHIBIT ES-2 FLOW OF ECONOMIC IMPACTS OF PORT ACTIVITY THROUGH THE ECONOMY... 3 EXHIBIT I-1A DEPENDENT ECONOMIC IMPACT OF PORTS OF INDIANA CARGO AND INDUSTRIAL ACTIVITY 2014* EXHIBIT I-1B RELATED ECONOMIC IMPACT OF PORTS OF INDIANA CARGO AND INDUSTRIAL ACTIVITY 2014* EXHIBIT II-1 FLOW OF ECONOMIC IMPACTS GENERATED BY MARITIME ACTIVITY EXHIBIT II-2 CARGO EMPLOYMENT IMPACTS BY SECTOR AND JOB CATEGORY* EXHIBIT II-3 DISTRIBUTION OF DIRECT JOB IMPACT BY COMMODITY* EXHIBIT II-4 DISTRIBUTION OF DIRECT JOBS BY PLACE OF RESIDENCY* EXHIBIT II-5 DIRECT REVENUE GENERATED BY PORT CARGO ACTIVITY* EXHIBIT II-6 CARGO REVENUE IMPACTS BY COMMODITY* EXHIBIT II-7 CY2014 DISTRIBUTION OF STATE AND LOCAL TAX REVENUE* EXHIBIT A-1 CY2013 PROPERTY TAXES PAID BY PORTS OF INDIANA TENANTS EXHIBIT B-1 TONS BY MODE OF TRANSPORTATION TO OR FROM PORTS OF INDIANA FACILITIES, 2014* EXHIBIT B-2 TONS BY MODE OF TRANSPORTATION TO OR FROM BURNS HARBOR, 2014* EXHIBIT B-3 TONS BY MODE OF TRANSPORTATION TO OR FROM JEFFERSONVILLE, 2014* EXHIBIT B-4 TONS BY MODE OF TRANSPORTATION TO OR FROM MOUNT VERNON, 2014* EXHIBIT C-1A DEPENDENT ECONOMIC IMPACTS OF PORTS OF INDIANA FACILITIES BY REGION OF PORT, 2014* EXHIBIT C-1B RELATED ECONOMIC IMPACTS OF PORTS OF INDIANA FACILITIES BY REGION OF PORT, 2014* EXHIBIT D-1 ECONOMIC IMPACTS CARGO TRANSITING CHICAGO AREA WATERWAY LOCKS, 2014* EXHIBIT E-1 ECONOMIC IMPACTS CARGO TRANSITING THE SAINT LAWRENCE SEAWAY, 2014* EXHIBIT F-1 CARGO ORIGINS/DESTINATIONS BY COUNTY, EXHIBIT F-2 CARGO ORIGINS/DESTINATIONS BY STATE, EXHIBIT G-1A COMPARISON OF 2009 AND 2014 DEPENDENT ECONOMIC IMPACTS OF THE PORTS OF INDIANA FACILITIES* EXHIBIT G-1B COMPARISON OF 2009 AND 2014 RELATED ECONOMIC IMPACTS OF THE PORTS OF INDIANA FACILITIES*... 39

4 EXECUTIVE SUMMARY Martin Associates was retained by the Ports of Indiana to measure the local, regional and state economic impacts generated by maritime and industrial activity at the Port of Indiana-Burns Harbor, Port of Indiana-Jeffersonville and Port of Indiana-Mount Vernon in the 2014 Calendar Year. Economic impacts generated at the cargo and industrial facilities include the impacts generated by steel products, cement, coal/coke, fertilizer, grain/soybean products, limestone, as well as other dry and liquid bulk cargoes. Companies included in the economic impact analysis operate facilities at Indiana's ports and have a significant connection with port businesses, facilities or harbor operations. This report is based on interviews conducted in 2014 of 106 firms with operations at the ports or providing services for cargo and vessels/barges handled at Ports of Indiana s terminals. These 106 firms represent 99 percent of the business operations in the Ports of Indiana s three port facilities, underscoring the defensibility of the study. While the balance of this report details the economic impact of the Ports of Indiana s facilities, key findings from the CY2014 analysis include the following: 59,932 direct, induced, indirect and related jobs; 40,504 jobs dependent upon marine terminals $3.5 billion of total wages and salaries; $7.8 billion of total economic activity; and $328 million of total state and local taxes. $9.7 million of local property taxes Page 1

5 Exhibit ES-1 Economic Impacts of Ports of Indiana Cargo Activity* 1 BURNS HARBOR JEFFERSONVILLE MOUNT VERNON TOTAL DEPENDENT JOBS 29,825 7,204 3,476 40,504 RELATED JOBS 9,692 5,988 3,748 19,428 TOTAL JOBS 39,516 13,192 7,224 59,932 DEPENDENT PERSONAL INCOME $2,144,532,384 $452,308,989 $225,002,365 $2,821,843,737 RELATED PERSONAL INCOME $344,975,523 $163,498,359 $122,739,227 $631,213,109 TOTAL INCOME $2,489,507,906 $615,807,348 $347,741,592 $3,453,056,847 LOCAL PURCHASES $1,046,033,444 $300,050,518 $57,415,143 $1,403,499,105 DEPENDENT STATE & LOCAL TAXES $203,730,576 $42,969,354 $21,375,225 $268,075,155 RELATED STATE & LOCAL TAXES $32,772,675 $15,532,344 $11,660,227 $59,965,245 TOTAL STATE & LOCAL TAXES $236,503,251 $58,501,698 $33,035,451 $328,040,400 LOCAL PROPERTY TAXES $4,058,019 $4,354,736 $1,309,125 $9,721,880 DEPENDENT VALUE OF ECONOMIC AC $3,410,393,576 $592,967,918 $257,831,729 $4,261,193,223 RELATED VALUE OF ECONOMIC ACTIVI $1,460,735,466 $1,313,174,907 $803,315,110 $3,577,225,483 TOTAL VALUE OF ECONOMIC ACTIVITY $4,871,129,043 $1,906,142,825 $1,061,146,839 $7,838,418,707 *Totals may be rounded. Property Tax Source: Indiana Department of Local Government Finance It must be noted that the property taxes presented above are a subset of the State and Local Tax impact and adding the two together would result in double-counting. The numbers are presented separately to illustrate the property tax contributions made by port companies and tenants. Waterborne cargo activity at a port contributes to the state economy by generating business revenue to local and national firms providing vessel and cargo handling services at the port terminals. These firms, in turn, provide employment and income to individuals, and pay taxes to state and local governments. Exhibit ES-2 shows how activity at port terminals generates impacts throughout the local, state and national economies. As this exhibit indicates, the impact of a port on a local, state or national economy cannot be reduced to a single number, but instead, the port activity creates several impacts. These are the revenue impact, employment impact, personal income impact, and tax impact. These impacts are non-additive. For example, the income impact is a part of the revenue impact, and adding these impacts together would result in double-counting. 1 The total impacts include related jobs which are not dependent upon the port marine terminals to the same extent as are the direct, induced and indirect jobs since it is the demand for the final products which creates the demand for the employment with these related shippers/consignees, not the use of a particular port or maritime terminal, and therefore these firms can, and do use other ports. Page 2

6 Exhibit ES-2 Flow of Economic Impacts of Port Activity through the Economy Port Activity Value of Imports/Exports Business Revenue Related User Output Payroll Retained Earnings, Dividends & Investments Local Purchases Related User Personal Income Direct Jobs Re-spending Induced Jobs Indirect Jobs Related User Jobs State & Local Taxes The following university professors provided input and peer reviews of the analysis (Letters of Endorsement can be found in Appendix G): - Bruce Jaffee, Professor/Chairperson, Dept. of Economics & Public Policy, Indiana University - Richard Jensen, Professor of Economics, Dept. of Economics, University of Notre Dame - Amlan Mitra, Professor of Economics, Dept. of Finance and Economics, Purdue University Calumet; Member, Transportation Research Board, National Academy of Sciences Page 3

7 I. INTRODUCTION Martin Associates was retained by the Ports of Indiana to measure the local, regional and state economic impacts generated by maritime and industrial activity at the Port of Indiana-Burns Harbor, Port of Indiana-Jeffersonville and Port of Indiana-Mount Vernon. Economic impacts generated at the cargo and industrial facilities include the impacts generated by steel products, cement, coal/coke, fertilizer, grain/soybean products, limestone, as well as other dry and liquid bulk cargoes. Companies included in the economic impact analysis operate facilities at Indiana's ports and have a significant connection with port businesses, facilities or harbor operations. For the purpose of this study, "port companies" are defined as those companies which have one of the following business connections to Indiana's three ports: They lease property from the Ports of Indiana; They own real property and operate a facility within the general footprints of the ports, or federal harbor, or use the Burns International Waterway to access their docks; They lease and operate a facility on property owned by another company within the general footprints of the ports or federal harbor; They operate a facility on subleased property from a company that leases from the Ports of Indiana; or They occupy port-owned facilities under an operating agreement with the ports. The analysis did not include non-operating tenants and certain other companies which have contractual business agreements with the Ports of Indiana but do not have a significant connection with port businesses, facilities or harbor operations. It is important to note that this analysis is part of a larger study to measure the economic impacts of maritime activity occurring throughout the State of Indiana. The impacts presented in this report are only for firms and tenants using the Burns International Waterway, and public docks at Mount Vernon and Jeffersonville. Firms at these three ports constitute a subset of firms engaged in maritime shipping on Indiana waterways and thus the impacts presented in this report are, as would be expected, less than the impacts presented in the statewide report. It is also important to note that, due to data availability limitations, the statewide report is based upon 2013 tonnages while the impacts for Ports of Indiana facilities are based upon 2014 tonnages. Furthermore, it should be emphasized that the impacts presented in both reports represent snapshots in time following a multi-year economic recession that significantly impacted maritime shipments and related economic activities. As the economy continues to recover, demand for commodities and goods moving via Indiana waterways will increase as will the economic impacts associated with that cargo. This report is based on interviews conducted in 2014 with 106 firms providing services to the cargo and vessels/barges handled at Ports of Indiana s terminals. These 106 firms represent the defined population firms in the Ports of Indiana s port community, underscoring the defensibility of the study. Page 4

8 Furthermore, the impacts can be traced back to the individual firm. The data collected from these interviews is used to develop operational models of the terminals located at each of the Ports of Indiana s facilities 2. Data collected from these interviews includes, but is not limited to: Percentage of dependency on Port of Indiana s docks; Number of full-time and part-time employees; Average wage of full-time and part-time employees; County of residency of employees; Revenue (gross or by ton); In-state expenditures by category (e.g. fuel, maintenance, goods/parts, etc.); and Percentage of inbound/outbound commodities that are destined for or originate in Indiana. The study employs a methodology and definitions that have been used by Martin Associates to measure the economic impacts of port activity at more than 500 ports in the United States and Canada, and at the leading airports in the United States. It is to be emphasized that only measurable impacts are included in this study. In order to ensure defensibility, Martin Associates approach to economic impact analysis is based on data developed through an extensive interview and telephone survey program of the port tenants and the firms providing cargo and logistics services at the Ports of Indiana. Specific respending models have been developed for the Indiana area to reflect the unique economic and consumer profiles of the regional economy. To further underscore the defensibility of the study, standardized impact models, such as the MARAD Port Kit are not used. Instead, the resulting impacts reflect the uniqueness of the individual port operations, as well as the surrounding regional economy. 2 All data collected by Martin Associates from the individual firm is gathered under confidentiality and is not available to Ports of Indiana or any other private or public entity. Similarly, all economic impact models developed in this study are the sole property of John C. Martin Associates, LLC and not provided to Ports of Indiana or any private or public entity. Page 5

9 1. IMPACT DEFINITIONS The impacts are measured separately for the ports cargo activity and industrial activity. The impacts are measured in terms of: Jobs (direct, induced, indirect and related users); Personal income; Business revenue; and State and local taxes. Each impact measurement is described below: Direct, Induced, Indirect and Related jobs Direct jobs are those that would not exist if activity at the ports cargo and industrial facilities were to cease. Direct jobs created by maritime cargo activity at the Port s terminals are those jobs with the firms directly providing cargo handling and vessel services, including trucking companies, terminal operators and stevedores, members of the International Longshoremen s Association (ILA), International Union of Operating Engineers, International Brotherhood of Teamsters and United Steelworkers, vessel agents, pilots and tug assist companies. Induced jobs are jobs created in Indiana by the purchases of goods and services by those individuals directly employed by each of the port s lines of business. These jobs are based on the local purchase patterns of each port s area residents. The induced jobs are jobs with grocery stores, restaurants, health care providers, retail stores, local housing/construction industry, and transportation services, as well as with wholesalers providing the goods to the retailers. Indirect jobs are created throughout the area as the result of purchases for goods and services by the firms directly impacted by Ports of Indiana activity, including the tenants, terminal operators and the firms providing services to cargo which includes steel, general cargo, dry bulks and liquid bulks. The indirect jobs are measured based on actual local purchase patterns of the directly dependent firms, and occur with such industries as utilities, office supplies, contract service providers, maintenance and repair, and construction. Related User jobs are jobs with shippers and consignees (exporters and importers) including the state s manufacturing, farming, retail, wholesale, distribution industries, and the in-state industries supporting the movement and distribution of cargo imports and exports using the port terminals for shipment and receipt of cargo. While these impacts occur for all commodities, the majority of Ports of Indiana shippers and consignees impacts involve the import and export of steel, coal, grain, fertilizers, salt, limestone and miscellaneous dry and Page 6

10 liquid bulk commodities. A large number of dependent steel users are already accounted for in the port tenant/dependent user category due to the fact that the Ports of Indiana s Burns Harbor and Jeffersonville facilities maintain a large steel manufacturing and processing presence. Related jobs are not dependent upon the port marine terminals to the same extent as are the direct, induced and indirect jobs since it is the demand for the final products, which creates the demand for the employment with these shippers/consignees, not the use of a particular port or maritime terminal, and therefore these firms can, and do use other ports. For example, when hurricane devastation renders a port s container and break bulk terminals inoperable, essentially suspending operations at the port, the direct, induced and indirect jobholders are immediately affected with similar consequence. However, the jobs held with related users such as manufacturing as well as wholesale and retail distribution throughout the unaffected areas of state will continue to operate. These firms are required to find alternative ports to ship and receive cargo in order to maintain given levels of operation. Therefore, viable port operations are essential to long-term retention of import and export related jobs throughout the state. Personal income impact consists of wages and salaries received by those directly employed by port activity, and includes a re-spending impact which measures the personal consumption activity in Indiana of those directly employed as the result of Ports of Indiana cargo and industrial activity. Indirect personal income measures the wages and salaries received by those indirectly employed. Business revenue consists of total business receipts by firms providing services in support of the cargo activity. Local purchases for goods and services made by the directly impacted firms are also measured. These local purchases by the dependent firms create the indirect impacts. Revenues from port tenants and dependent shippers and consignees are included. State and local taxes include taxes paid by individuals as well as firms dependent upon Ports of Indiana cargo and industrial tenant activity. 2. METHODOLOGY The impacts of Ports of Indiana presented in this report were estimated based on telephone and personal interviews with 106 firms in the respective port facility regions Burns Harbor (Portage), Jeffersonville and Mount Vernon. This represents the universe of the cargo and industrial tenant related businesses (with the exception of trucking firms) in the port regions, as defined in the Ports of Indiana tenant directories for each port facility. It is to be emphasized that a 99% response rate was achieved from these firms located in the port directory and port tenant listings. The direct impacts are measured at the firm level of detail, and aggregated to develop the impacts for each of the port s lines of business. Each firm surveyed provided Martin Associates with detailed employment levels (both full time and part time), annual payroll, local purchases and the residence by county of the employees. Data collected Page 7

11 from the Ports of Indiana includes: Ports of Indiana employment, vessel and barge tonnage, vessel and barge calls, and port revenues and expenditures to estimate the 2014 impacts. The induced impacts are based on the regional current expenditure profile of residents for Indiana, as estimated by the U.S. Bureau of Labor Statistics, "Consumer Expenditure Survey." This survey indicates the distribution of consumer expenditures over key consumption categories for Indiana residents. The consumption categories are: Food at Home; Food at Restaurants; Housing; Home Furnishings; Apparel; Transportation equipment and Services; Entertainment; and Health Care. The re-spending impact is developed by deriving an implied marginal propensity to consume from income multipliers for the water transportation industry, as developed by the Bureau of Economic Analysis. The estimated consumption expenditure generated as a result of the re-spending impact is distributed across the above consumption categories. Associated with each consumption category is the relevant retail and wholesale industry. Jobs to sales ratios in each industry are then computed for Indiana, and induced jobs are estimated for the relevant consumption categories. It is to be emphasized that induced jobs are only estimated at the retail and wholesale level, since these jobs are most likely generated in each port area. Further levels of induced jobs are not estimated since it is not possible to defensibly identify geographically where the subsequent rounds of purchasing occur. The Consumer Expenditure Survey does not include information to estimate the job impact with supporting business services, legal, social services, state and local governments, and educational services. To estimate this induced impact, a ratio of state of Indiana employment in these key service industries to total state of Indiana employment is developed. This ratio is then used with the direct and induced consumption jobs to estimate induced jobs with business/financial services, legal, educational, governmental and other social services. The indirect impacts are estimated based on the local purchases by the directly dependent firms, combined with indirect job, income and revenue coefficients for the supplying industries in the state of Indiana as developed for Martin Associates by the U.S. Bureau of Economic Analysis, Regional Input/Output Modeling System (RIMS II). Page 8

12 3. ECONOMIC IMPACT MODELS The impacts are measured for 2014, and computer models for cargo and industrial operations have been developed to test the sensitivity of the impacts to changes in economic conditions and facility utilization. It is to be emphasized that this study is designed to provide a framework which Ports of Indiana can use in formulating and guiding the future development of port facilities. The cargo impact model is designed to test the sensitivity of impacts to changes in such factors as maritime tonnage levels, port productivity and work rules, new port facilities development, inland distribution patterns of cargo, number of vessel/barge calls and the introduction of new carrier service. The cargo impact model can also be used to assess the impact of developing a parcel of land as a maritime terminal versus other non-cargo land uses. Finally, the maritime cargo impact model can be used to assess the economic benefits of increased maritime activity due to infrastructure development and the opportunity cost of not undertaking specific maritime investments such as dredging, new terminal development, or warehouse development. 4. SUMMARY OF RESULTS Exhibits I-1a and I-1b provide a breakdown by port for the economic impact analysis of the Ports of Indiana facilities. In Table I-1a, only dependent jobs, income, revenue and tax impacts are included. If access to port marine terminals were to be cut off, the 40,504 direct, induced and indirect job holders would be immediately affected. Table I-1b includes related impacts in addition to the dependent direct, induced, and indirect impacts. The related job holders are employed in industries such as steel processing, agriculture and construction. They would not suffer the same level of disruption if activity at the Ports of Indiana terminals were to cease because they would have the ability to route their cargo through other ports. When these impacts are included there are 59,932 jobs that are in some way related to, but not necessarily dependent upon, Ports of Indiana marine terminal activity. These impact summaries are shown separately to emphasize the fact that related jobs are not dependent upon the Ports of Indiana marine terminals to the same extent as the direct, induced and indirect impacts. The 19,428 related job holders benefit from lower shipping costs afforded by using the Ports of Indiana marine terminals and could suffer longer term disruptions if terminal activity were to cease. However, due to their ability to use other ports, they are not considered to be dependent upon the Ports of Indiana. Page 9

13 Exhibit I-1a Dependent Economic Impact of Ports of Indiana Cargo and Industrial Activity 2014* BURNS HARBOR JEFFERSONVILLE MOUNT VERNON TOTAL JOBS DIRECT 7,219 2,349 1,403 10,970 INDUCED 9,592 2,290 1,266 13,148 INDIRECT 13,014 2, ,386 TOTAL JOBS 29,825 7,204 3,476 40,504 PERSONAL INCOME DIRECT $413,058,255 $92,056,397 $49,794,050 $554,908,701 INDUCED/RESPENDING $1,186,138,084 $264,349,150 $142,988,593 $1,593,475,827 INDIRECT $545,336,045 $95,903,442 $32,219,721 $673,459,209 TOTAL PERSONAL INCOME $2,144,532,384 $452,308,989 $225,002,365 $2,821,843,737 VALUE OF ECONOMIC ACTIVITY BUSINESS SERVICES REVENUE $481,567,976 $134,863,960 $160,626,290 $777,058,227 TENANT/DEPENDENT SHIPPER REVENUE $2,928,825,600 $458,103,957 $97,205,439 $3,484,134,996 TOTAL VALUE OF ECONOMIC ACTIVITY $3,410,393,576 $592,967,918 $257,831,729 $4,261,193,223 LOCAL PURCHASES $1,046,033,444 $300,050,518 $57,415,143 $1,403,499,105 STATE & LOCAL TAXES $203,730,576 $42,969,354 $21,375,225 $268,075,155 Exhibit I-1b Related Economic Impact of Ports of Indiana Cargo and Industrial Activity 2014* 3 BURNS HARBOR JEFFERSONVILLE MOUNT VERNON TOTAL JOBS DIRECT 7,219 2,349 1,403 10,970 INDUCED 9,592 2,290 1,266 13,148 INDIRECT 13,014 2, ,386 RELATED JOBS 9,692 5,988 3,748 19,428 TOTAL JOBS 39,516 13,192 7,224 59,932 PERSONAL INCOME DIRECT $413,058,255 $92,056,397 $49,794,050 $554,908,701 INDUCED/RESPENDING $1,186,138,084 $264,349,150 $142,988,593 $1,593,475,827 INDIRECT $545,336,045 $95,903,442 $32,219,721 $673,459,209 RELATED INCOME $344,975,523 $163,498,359 $122,739,227 $631,213,109 TOTAL PERSONAL INCOME $2,489,507,906 $615,807,348 $347,741,592 $3,453,056,847 VALUE OF ECONOMIC ACTIVITY BUSINESS SERVICES REVENUE $481,567,976 $134,863,960 $160,626,290 $777,058,227 TENANT/DEPENDENT SHIPPER REVENUE $2,928,825,600 $458,103,957 $97,205,439 $3,484,134,996 PORTS OF INDIANA SUBTOTAL $3,410,393,576 $592,967,918 $257,831,729 $4,261,193,223 RELATED OUTPUT $1,460,735,466 $1,313,174,907 $803,315,110 $3,577,225,483 TOTAL VALUE OF ECONOMIC ACTIVITY $4,871,129,043 $1,906,142,825 $1,061,146,839 $7,838,418,707 LOCAL PURCHASES $1,046,033,444 $300,050,518 $57,415,143 $1,403,499,105 STATE & LOCAL TAXES DIRECT, INDUCED AND INDIRECT $203,730,576 $42,969,354 $21,375,225 $268,075,155 RELATED TAXES $32,772,675 $15,532,344 $11,660,227 $59,965,245 TOTAL STATE AND LOCAL TAXES $236,503,251 $58,501,698 $33,035,451 $328,040,400 *Totals may be rounded. In 2014, there were 59,932 jobs that were in some way related to the Ports of Indiana facilities. Of the 59,932 jobs 40,504 jobs were supported by port and tenant activity. 10,970 jobs are directly 3 The total impacts include related jobs which are not dependent upon the port marine terminals to the same extent as are the direct, induced and indirect jobs since it is the demand for the final products which creates the demand for the employment with these related shippers/consignees, not the use of a particular port or maritime terminal, and therefore these firms can, and do use other ports. Page 10

14 created by port cargo and tenant activities, while another 13,148 induced jobs are generated in the state as a result of local purchases made by those directly employed by Ports of Indiana cargo and tenant activity. There are 16,386 indirect jobs supported in Indiana as the result of $1.4 billion of local purchases. In addition, there are 19,428 related jobs supported throughout the state of Indiana by waterborne cargo moving via the Ports of Indiana facilities. The majority of these jobs are associated with the processing and movement of steel products, ore, fertilizer, grain and dry bulk cargoes at the individual ports. The 10,970 direct jobs received $554.9 million of income as wages and salaries, for average earnings of $50,583 per direct employee. As a result of local purchases with this $554.9 million of direct wages and salaries, an additional $1.6 billion of income and local consumption expenditures were created throughout the state. It is this re-spending impact that supported the 13,148 induced jobs. 4 The 16,386 indirect jobs holders received $673.5 million in personal income. In total, nearly $2.8 billion of personal income was created as the result of Ports of Indiana operations. In addition, related user jobs in the state received another $631.2 million of personal income. Local businesses involved with cargo and vessel movements received $777.1 million of revenue as a result of port activity, while the tenants of the Port and dependent shippers generated nearly $3.5 billion of revenue from processing and manufacturing activities at the port facilities. In addition, nearly $3.6 billion of output was supported throughout the state by related users using port facilities for shipment and receipt of cargo. As a result of the cargo and industrial activity at Ports of Indiana facilities, $268.1 million of state and local tax revenue was generated by direct, induced and indirect jobholders, while another $60 million was attributed to related users throughout the state. The balance of the report describes the impacts created by cargo and industrial activity at Ports of Indiana facilities in Portage (Burns Harbor), Jeffersonville and Mount Vernon. 4 The induced income impact also includes local consumption expenditures and should not be divided by induced jobs to estimate the average salary per induced job. This re-spending throughout the region is estimated using a regional personal earnings multiplier, which reflects the percentage of purchases by individuals that are made within Indiana. For instance, when a dockworker purchases groceries, the entire value of his purchase is included in the re-spending impact, but only a portion of that amount is used to pay the wages of grocery store employees. The rest of that money is applied to the wholesale cost of goods purchased, used to pay the grocery store s utility bills, etc. Hence, to divide the re-spending by induced employees would result in an overestimated average salary. Page 11

15 II. ECONOMIC IMPACTS OF CARGO AND INDUSTRIAL ACTIVITY Waterborne cargo activity at a port contributes to the state economy by generating business revenue to local and national firms providing vessel and cargo handling services at the port terminals. These firms, in turn, provide employment and income to individuals, and pay taxes to state and local governments. Exhibit II-1 shows how activity at port terminals generates impacts throughout the local, state and national economies. As this exhibit indicates, the impact of a port on a local, state or national economy cannot be reduced to a single number, but instead, the port activity creates several impacts. These are the revenue impact, employment impact, personal income impact, and tax impact. These impacts are non-additive. For example, the income impact is a part of the revenue impact, and adding these impacts together would result in double-counting. Exhibit II-1 shows graphically how activity at Ports of Indiana s maritime terminals generates the four impacts. Exhibit II-1 Flow of Economic Impacts Generated by Maritime Activity Port Activity Value of Imports/Exports Business Revenue Related User Output Payroll Retained Earnings, Dividends & Investments Local Purchases Related User Personal Income Direct Jobs Re-spending Induced Jobs Indirect Jobs Related User Jobs State & Local Taxes At the outset, activity at the port generates business revenue for firms which provide services. This business revenue impact is dispersed throughout the economy in several ways. It is used to hire people to provide the services, to purchase goods and services, and to make federal, state and local tax payments. The remainder is used to pay stock-holders, retire debt, make investments, or is held as retained earnings. It is to be emphasized that the only portions of the revenue impact that can be definitely identified as remaining in the local/regional economy are those portions paid out in salaries to local employees, for local purchases by individuals and businesses directly dependent on the port, in contributions to state and local taxes, in lease payments to Ports of Indiana by tenants, and wharfage and dockage fees paid to the fort. Page 12

16 The employment impact of port activity consists of four levels of job impacts: Direct employment impact -- jobs directly generated by port activity. Direct jobs generated by cargo include jobs with railroads and trucking companies moving cargo between inland origins and destinations and the port terminals, longshoremen and dockworkers, steamship agents, freight forwarders, stevedores, etc. It is to be emphasized that these are classified as directly generated in the sense that these jobs would experience near term dislocation if the activity at Ports of Indiana maritime terminals were to be discontinued. Induced employment impact -- jobs created throughout the local economy because individuals directly employed due to port activity spend their wages locally on goods and services such as food, housing and clothing. These jobs are held by residents located throughout the region, since they are estimated based on in-state purchases. Indirect Jobs -- are jobs created locally due to purchases of goods and services by firms, not individuals. These jobs are estimated directly from local purchases data supplied to Martin Associates by the companies interviewed as part of this study, and include jobs with local office supply firms, maintenance and repair firms, parts and equipment suppliers, etc. Related shipper/consignee (related user) jobs -- jobs with shippers and consignees (exporters and importers) supported in the state s manufacturing, agriculture, construction, energy, retail and wholesale distribution industries, and the in-state industries supporting the movement and distribution of all commodities, primarily steel, coal, grain, fertilizer, limestone and salt imports and exports using the port terminals. Related jobs are not dependent upon the port marine terminals to the same extent as are the direct, induced and indirect jobs. It is the demand for the final products, which creates the demand for the employment with these shippers/consignees, not the use of a particular port or maritime terminal, and therefore these firms can and do use other ports. For example, when hurricane devastation renders a port s container and break bulk terminals inoperable, essentially suspending operations at the port, the direct, induced and indirect jobholders are immediately affected with similar consequence. However, the jobs held with related users such as manufacturing as well as wholesale and retail distribution throughout the unaffected areas of the state will continue to operate. These firms are required to find alternative ports to ship and receive cargo in order to maintain given levels of operation. Therefore, viable port operations are essential to long-term retention of import and export related jobs throughout the state. Page 13

17 The personal earnings impact is the measure of employee wages and salaries (excluding benefits) received by individuals directly employed due to port activity. Re-spending of these earnings throughout the regional economy for purchases of goods and services is also estimated. This, in turn, generates additional jobs -- the induced employment impact. This re-spending throughout the region is estimated using a regional personal earnings multiplier, which reflects the percentage of purchases by individuals that are made within each port facility area. The re-spending effect varies by region -- a larger re-spending effect occurs in regions that produce a relatively large proportion of the goods and services consumed by residents, while lower re-spending effects are associated with regions that import a relatively large share of consumer goods and services (since personal earnings "leak out" of the region for these out-of-region purchases). The direct earnings are a measure of the local impact since they are received by those directly employed by port activity. Tax impacts are payments to the state and local governments by firms and by individuals whose jobs are directly dependent upon and supported (induced jobs) by activity at the port terminals. 1. IMPACT STRUCTURE Economic impacts are created throughout various business sectors of the state and local economies. Specifically, four distinct economic sectors are impacted as a result of activity at the port terminals. These are the: Surface Transportation Sector; Maritime Services Sector; Port Tenants and Dependent Shippers/Consignees Sector; and Ports of Indiana (Central Office/Administration). Within each sector, various participants are involved. Separate impacts are estimated for each of the participants. A discussion of each of the economic impact sectors is provided below, including a description of the major participants in each sector The Surface Transportation Sector The surface transportation sector consists of both the railroad and trucking industries. The trucking firms and railroads are responsible for moving the various cargoes between the port terminals and the inland origins and destinations The Maritime Services Sector This sector consists of numerous firms and participants performing functions related to the following maritime services: Page 14

18 Maritime Cargo Transportation; Vessel Operations; Cargo Handling; and Federal, State and Local Government Agencies. A brief description of the major participants in each of these four categories is provided below: Maritime Cargo Transportation Participants in this category are involved in providing and arranging for inland and water transportation for inbound and outbound freight. For example, a freight forwarder/customs house broker arranges for the freight to be delivered between the terminals and inland destinations, as well as the freight transportation, while the line haul barge operator provides the transportation on the river system to the port facilities. Vessel/Barge Maritime Service Operations This category consists of several participants. The steamship agents provide a number of services for the vessel as soon as it enters the port. The agents arrange for medical and dental care of the crew, for ship supplies as well as payment of various expenses including Ports of Indiana charges. The agents are also responsible for vessel documentation. In addition to the steamship agents arranging for vessel services, those providing the services include: - Chandlers - supply the vessels with ship supplies (food, clothing, nautical equipment, etc.); - Towing firms - provide the tug service to guide the vessel to and from port; - Pilots - assist in navigating the vessels to and from Port of Indiana-Burns Harbor maritime terminals; - Bunkering firms - provide fuel to the vessels; - Barge Fleeting/Cleaning provide fleeting services for barges at Burns Harbor and the river ports of Jeffersonville and Mount Vernon; - Marine surveyors - inspect the vessels/barges and the cargo; and - Shipyards/marine construction firms - provide repairs (either emergency or scheduled) as well as marine pier construction and dredging. Page 15

19 Cargo Handling This category involves the physical handling of the cargo at the terminals between the land and the vessel/barge. Included in this category are the following participants: - Longshoremen & dockworkers - include members of the International Longshoremen's Association (ILA), International Union of Operating Engineers, International Brotherhood of Teamsters and United Steelworkers as well as those dockworkers with no union affiliation that are involved in the loading and unloading of cargo from the vessels/barges, as well as handling the cargo prior to loading and after unloading; - Stevedoring firms - manage the longshoremen and cargo handling activities; - Cargo terminal operators - provide services to operate the maritime terminals, track cargo movement and provide security where cargo is loaded and offloaded; - Warehouse operators - store cargo after discharge or prior to loading and consolidate cargo units into shipment lots. In many cases the freight forwarders and consolidators are also involved in warehousing activity. - Foreign Trade Zone (FTZ) tenants - operate facilities in the Ports of Indiana Foreign Trade Zone. Government Agencies This service sector involves federal, state and local government agencies that perform services related to cargo handling and vessel/barge operations at the port. Department of Homeland Security (DHS), which includes Customs and Border Protection (CBP), U.S. Immigration and Customs Enforcement (ICE) and U.S. Coast Guard, U.S. Department of Agriculture (grain inspection) and the U.S. Army Corps of Engineers, are involved Port Tenants and Dependent Shipper/Consignees Sector Port tenant jobs consist of jobs with dependent shippers/consignees and port tenants shipping and receiving cargo through the terminals at Ports of Indiana facilities. The Ports of Indiana is unique in the fact that many of the tenants of each facility, specifically at Burns Harbor and Jeffersonville, are users of the waterborne cargo handled at the ports docks. Furthermore, many of the operations Page 16

20 performed by these tenants, specifically in steel manufacturing and steel processing, are inter-dependent of each other. It is to be noted that only a portion of the raw materials and finished products used and produced by the ports tenants is received/shipped via vessel or barge. There is also a large portion of this cargo that enters/leaves the port via rail and truck. However, it is the advantage of having the availability of the Great Lakes and Inland River System and the low cost option of vessel and barge shipments, as well as the presence of other complementary tenants that is a key attribute in attracting and maintaining such a strong tenant base at the Ports of Indiana facilities. The Ports of Indiana has, over the years, been successful in creating a steel processing campus at both Burns Harbor and Jeffersonville, therefore for the purpose of this analysis, all of the port tenant jobs are included Ports of Indiana The Ports of Indiana includes those individuals employed by the port whose purpose is to oversee port activity at the port s cargo and industrial terminals. 2. COMMODITIES INCLUDED IN THE ANALYSIS A major use of an economic impact analysis is to provide a tool for port development planning. As a port grows, available land and other resources for port facilities become scarce, and decisions must be made as to how to develop the land and utilize the resources in the most efficient manner. Various types of facility configurations are associated with different commodities. For example, containers, automobiles and RoRo require a large amount of paved, open storage space, while certain types of break bulk cargoes such as steel coils, lumber and plywood may require covered storage. Perishable commodities require temperature controlled warehouses and some dry bulk cargo requires covered storage and special dust removing equipment, while tank farms are needed to store liquid bulk cargo. An understanding of the commodity's relative economic value in terms of employment and income to the local community, the cost of providing the facilities, and the relative demand for the different commodities is essential in making future port development plans. Because of this need for understanding relative commodity impacts, economic impacts are estimated for the following commodities handled at the public and private cargo terminals: Steel coils; Ore; Steel slabs; Plate and other steel; Coal and coke; Project Cargo and miscellaneous break bulk; Grain and soybeans; Bulk metals and scrap; Fertilizer; Page 17

21 Cement; Limestone and other dry bulks; Salt; and Other liquid bulks. It should be emphasized that commodity-specific impacts are not estimated for each of the economic sectors described in the last section. Specific impacts could not be allocated by individual commodities with any degree of accuracy for maritime construction, ship repair, or the state and federal government due to the fact that it is difficult to estimate the percentage of resources that are dedicated to one commodity over another. For example, maritime construction may occur at a terminal that is multi-use and cannot be attributed to a specific commodity. Similarly, law enforcement and security operations cannot be attributed to a single commodity. 3. MARITIME CARGO EMPLOYMENT IMPACTS The employment generated by maritime cargo activity at Ports of Indiana is estimated. First, the total employment that is in some way related to the activities at the individual ports is estimated from the 2014 interview process of 106 tenants and service providers as well as 2014 data provided by the Ports of Indiana as described in the methodology; Second, the subset of total employment that is judged to be totally dependent (i.e., direct jobs) on port activity is analyzed as follows: - The direct job impact is estimated by detailed job category, i.e., trucking, dockworkers, barge operators, liner services, chandlers/surveyors, etc; - The direct job impact is estimated for each of the key commodities/commodity groups; - The direct job impact is estimated based on the residency of those directly employed; Induced and indirect jobs are estimated; Finally, jobs related to the maritime activity at the cargo terminals are described. It is estimated that 40,504 jobs are directly or indirectly generated by port activities at the cargo terminals at the Ports of Indiana three port facilities Burns Harbor, Jeffersonville and Mount Vernon. Of the 40,504 jobs: 10,970 jobs are directly generated by activities at the cargo terminals and if such activities should Page 18

22 cease, these jobs would be discontinued over the short term. 13,148 induced jobs are supported by the local purchases of the 10,970 individuals directly employed by port activity at the cargo terminals. An additional 16,386 indirect jobs were supported by the nearly $1.4 billion of purchases in the state of Indiana by firms providing direct cargo handling and vessel/barge services. 19,428 jobs are related to inbound and outbound cargoes through Ports of Indiana facilities. These jobs are supported in the state s processing, manufacturing, farming, construction, retail, wholesale and distribution industries, and the in-state industries supporting the movement and distribution of all commodities, primarily concentrated with steel, ore, coal, grain, limestone, salt and fertilizer cargo imports and exports using the port terminals Direct Cargo Job Impacts In 2014, a total of 45.9 million tons of cargo and raw materials moved in and out of the Ports of Indiana s three facilities. This includes all modes of barge, ship, truck, and rail. Of that 45.9 million tons, 15.7 million tons of waterborne cargo moved via vessel and barge through Burns Harbor, Mount Vernon, and Jeffersonville. As a result of the 45.9 million tons of cargo activity, 10,970 full-time jobs were directly created 5. In this section the jobs are analyzed in terms of: Distribution by job category; Distribution by commodity group; and Distribution by county and state of residency. These distributions are developed in more detail below Job Impacts by Category Exhibit II-2 presents the distribution of the 10,970 direct jobs by type of job. The exhibit indicates that the majority of direct jobs are with dependent tenants at each facility, trucking jobs moving cargo to and from the terminals, barge operators, terminal operators/stevedores, ILA/dockworkers, and then terminal rail jobs. 5 Jobs are measured in terms of full-time worker equivalents. If a worker is employed only 50 percent of the time by activity at Ports of Indiana cargo terminals, then this worker is counted as.5 jobs. Page 19

23 Exhibit II-2 Cargo Employment Impacts by Sector and Job Category* BURNS HARBOR JEFFERSONVILLE MOUNT VERNON TOTAL SURFACE TRANSPORTATION RAIL TRUCK 1, ,603 MARITIME SERVICES TERMINAL EMPLOYEES DOCKWORKERS PILOTS 16 N/A N/A 16 MARITIME SERVICE PROVIDERS WAREHOUSING 45 N/A N/A 45 GOVERNMENT 46 N/A N/A 46 LINER SERVICES TENANTS AND DEPENDENT SHIPPERS 4,739 1, ,376 PORTS OF INDIANA TOTAL 7,219 2,349 1,403 *Totals may be rounded. 10, Direct Job Impacts by Commodity Most of the 10,970 jobs considered to be generated directly by port activity can be associated with the handling of specific commodities or commodity groups. Certain port tenants and employment categories such as government employees and maritime construction firms cannot be identified with a specific commodity. As a result, employment in these groups (which totaled 1,224) was not allocated to specific commodity. Exhibit II-3 presents the relative employment impacts in terms of commodity groups. Page 20

24 Exhibit II-3 Distribution of Direct Job Impact by Commodity* BURNS HARBOR JEFFERSONVILLE MOUNT VERNON TOTAL STEEL COILS 2, ,604 ORE 1, ,841 PLATE/OTHER STEEL SLAB COAL/COKE OTHER BREAKBULK/PROJECT CARGO GRAIN/SOYBEANS ,141 BULK METALS/SCRAP FERTILIZER CEMENT LIMESTONE/OTHER DRY BULK SALT LIQUID BULKS NOT COMMODITY SPECIFIC ,224 TOTAL 7,219 2,349 1,403 *Totals may be rounded. 10,970 *Impacts represented in NOT COMMODITY SPECIFIC are those that cannot be attributed to a single commodity described in the previous line items The movement of steel coils and associated industrial activity creates the largest number of direct jobs, (3,604) followed by the movement of iron ore pellets, including associated steel production jobs, (1,841 jobs,) followed by movement of grain and soybeans, (1,141 jobs.) Again, it is necessary to stress that these job figures include companies located at the ports that are associated with the manufacturing and processing of these commodities, in addition to the physical movement and distribution of the commodities Distribution of Direct Jobs by Place of Residency To underscore the geographic scope of the impacts generated by the cargo terminals, Exhibit II- 4 presents the distribution of the 10,970 direct jobs by place of residency. The geographic employment analysis is based on the results of the interviews with 106 firms in the Ports of Indiana maritime and industrial community. As this exhibit indicates, 31.6% of the direct job holders reside in Porter County, followed by 14.3% residing in LaPorte County, 13.2% in Lake County, 10.8% live in Clark County, and Posey County accounts for 8.7% of the total jobs at the three ports. Page 21

25 Exhibit II-4 Distribution of Direct Jobs by Place of Residency* BURNS HARBOR JEFFERSONVILLE MOUNT VERNON TOTAL STEEL COILS 2, ,604 ORE 1, ,841 PLATE/OTHER STEEL SLAB COAL/COKE OTHER BREAKBULK/PROJECT CARGO GRAIN/SOYBEANS ,141 BULK METALS/SCRAP FERTILIZER CEMENT LIMESTONE/OTHER DRY BULK SALT LIQUID BULKS NOT COMMODITY SPECIFIC ,224 TOTAL 7,219 2,349 1,403 *Totals may be rounded. 10, Induced Jobs The 10,970 directly employed individuals received $554.9 million in wages and salaries, a part of which was used to purchase local goods and services such as food, housing, clothing, transportation Page 22

26 services, etc. As a result of these local purchases, 13,148 induced jobs in the regional economy were supported. The majority of the induced jobs are with private sector, social services, business services, educational services, and state and local government agencies, followed by jobs in the food and restaurant sector, and then jobs in the construction and home furnishings sector Indirect Jobs In addition to the induced jobs generated by the purchases by directly employed individuals, the firms providing the direct services and employing the 10,970 direct jobs make in-state purchases and capital expenditures for goods and services. These purchases generate additional Indiana jobs indirect jobs. Based on interviews with the 106 firms, these firms made just over $1.4 billion of in-state purchases and capital expenditures in These purchases and capital expenses created an additional 16,386 indirect jobs in the state economy Related User Jobs It is estimated that about 19,428 jobs are supported in Indiana with shippers/consignees that use the three Ports of Indiana facilities Burns Harbor, Jeffersonville and Mount Vernon. These related jobs are estimated based on the value-per-ton of the cargo moved via the port facilities and the associated weighted job-to-value of output ratio for relevant manufacturing and consuming industries in the state of Indiana, as developed from the Bureau of Economic Analysis Regional Input-Output Modeling System (RIMS II). These jobs-per-shipment values for the inbound and outbound cargoes were multiplied by value of the cargo moving via the public marine terminals, to estimate the related user jobs. Direct, induced and indirect jobs were then subtracted from the total related job count for each commodity to avoid double-counting. These are related jobs, and would not likely disappear if the marine terminals were rendered inoperable or closed to marine cargo and vessel/barge activity. However, given a level of demand for the cargo, the cargo would most likely shift to another port and there is the possibility that some related jobs could shift over time. It is to be further emphasized that when the impact models are used for planning purposes and sensitivity analysis, related jobs should not be used to judge the economic benefits of a particular project. Related jobs are not estimated with the same degree of defensibility as are the direct, induced and indirect jobs. Therefore, only these three types of job impacts should be used in evaluating port investments. The purpose of the related jobs estimate is to provide a proxy for the magnitude of the more general economic development impact of the private and public port facilities. 4. TOTAL ECONOMIC OUTPUT, BUSINESS REVENUE, INCOME AND TAX IMPACTS Commodities such as steel, general cargo and bulk (dry and liquid) cargo handled at the Ports of Indiana cargo terminals and tenants included in the study generated revenue for firms in each of the economic sectors. For example, revenue is received by the railroads and the trucking companies within the surface transportation sector as a result of moving outbound cargo to the port terminals and Page 23

27 distributing the inbound commodities inland after receipt at the cargo terminals. The firms in the maritime services sector receive revenue from arranging for transportation services, cargo handling, providing services to vessels/barges in port and repairs to vessels/barges calling on the port facilities. The Ports of Indiana receives revenue from terminal leases and port charges such as wharfage and dockage assessed on cargo and vessels. In addition, revenue is received by dependent shippers/consignees from the sales of cargo shipped or received via the port cargo terminals and from the sales of products made with raw materials received through the terminals. Since this chapter is concerned with the revenue generated from providing maritime services, the shipper/consignee revenue (i.e., the value of the cargo shipped or received through the port terminals, as well as the value of the products produced by the port-dependent shippers/consignees) will be excluded from the remaining discussion. The revenue generated by port activity consists of many components. For example, gross revenue is used to pay employee salaries and taxes, it is distributed to stockholders of the companies providing the vessel and cargo handling services, and it is used for the purchases of equipment and maintenance services. Of these components, only three can be isolated geographically with any degree of accuracy. These are the personal income component of revenue, which can be traced to geographic locations based on the residence of those receiving the income, the payment of state and local taxes, and the local purchases made by firms dependent upon the maritime activity. The balance of the revenue is distributed in the form of payments to firms located outside the state of Indiana in exchange for goods and services, and for the distribution of company profits to shareholders. Many of these firms and owners are located outside of the state of Indiana and, thus, it is difficult to trace the ultimate location of the distributed revenue (other than personal income, taxes and local purchases). The value of output created by in-state related shippers/consignees of the port is attributed to the state of Indiana, and the local purchases from other firms within the state are also included in this user output measure, as defined by the in-state output coefficients (for the user industries) developed from the U.S. Bureau of Economic Analysis, Regional Input-Output Modeling System (RIMS II) Revenue Impact Total Economic Activity The revenue impact is a measure of the total economic activity in the state that is generated by the cargo moving via the Ports of Indiana. In 2014, maritime cargo and industrial tenant activity at the ports generated a total of $4.3 billion of total economic activity in the state. Of the $4.3 billion, $777.1 million is the business revenue received by the firms directly dependent upon the ports and providing maritime services and inland transportation services to the cargo handled at the maritime terminals and the vessels calling on the ports while the remaining $3.5 billion of revenue is generated by the port tenants and on-site dependent shippers/consignees. The balance of the discussion focuses on the $777.1 million of direct business revenue generated from the provision of services to the cargo and vessels/barges handled at the Ports of Indiana s facilities. Page 24

28 Revenue Impacts by Economic Sector/Category Exhibit II-5 presents the total revenue estimated to have been generated by port activity in This revenue includes the revenue received by firms providing services to the cargo and vessel activity at the terminals, and includes revenue received by trucking firms, stevedores, Ports of Indiana, chandlers, agents, pilots, towing companies, etc. Not included is the revenue from the use/value of the cargo moving via the maritime terminals, as this is included in the related shipper/consignee output. The rail transportation sector receives the largest revenue impact, followed by trucking operations, liner services, and then terminal operations/stevedoring. Exhibit II-5 Direct Revenue Generated by Port Cargo Activity* BURNS HARBOR JEFFERSONVILLE MOUNT VERNON TOTAL SURFACE TRANSPORTATION RAIL $168,915,400 $29,159,160 $48,329,687 $246,404,248 TRUCK $137,541,466 $39,689,251 $26,750,214 $203,980,932 MARITIME SERVICES TERMINAL EMPLOYEES $47,017,364 $7,719,828 $12,459,786 $67,196,978 PILOTS $2,361,033 N/A N/A $2,361,033 MARITIME SERVICE PROVIDERS $11,037,598 $16,709,930 $17,992,651 $45,740,179 WAREHOUSING $11,323,499 N/A N/A $11,323,499 GOVERNMENT N/A N/A N/A N/A LINER SERVICES $96,157,717 $38,331,990 $51,902,852 $186,392,558 PORTS OF INDIANA $7,213,900 $3,253,800 $3,191,100 $13,658,800 TOTAL $481,567,976 $134,863,960 $160,626,290 *Totals may be rounded. $777,058, Revenue Impacts by Commodity Exhibit II-6 shows the direct revenue impact by commodity. It is to be emphasized that the revenue received by shippers/consignees from the sales of the products (value of the commodities) moving via the port terminals is not included, since product value is determined by the demand for the product, not the use of the cargo terminals. Page 25

29 Exhibit II-6 Cargo Revenue Impacts by Commodity* BURNS HARBOR JEFFERSONVILLE MOUNT VERNON TOTAL STEEL COILS $186,900,438 $34,524,802 $5,052,245 $226,477,485 ORE $90,272,968 $0 $0 $90,272,968 PLATE/OTHER STEEL $69,977,434 $7,319,349 $0 $77,296,783 SLAB $20,165,613 $0 $0 $20,165,613 COAL/COKE $38,525,421 $53,453 $42,399,011 $80,977,885 OTHER BREAKBULK/PROJECT CARGO $2,511,378 $1,333,003 $76,988 $3,921,368 GRAIN/SOYBEANS $14,387,796 $62,546,621 $86,968,305 $163,902,722 BULK METALS/SCRAP $13,679,041 $4,894,748 $1,817,718 $20,391,506 FERTILIZER $2,114,914 $10,794,749 $5,783,755 $18,693,418 CEMENT $0 $0 $3,506,165 $3,506,165 LIMESTONE/OTHER DRY BULK $26,241,651 $47,525 $2,828,162 $29,117,338 SALT $3,080,900 $6,328,245 $262,914 $9,672,059 LIQUID BULKS $1,435,386 $1,087,963 $8,739,928 $11,263,277 NOT COMMODITY SPECIFIC $12,275,038 $5,933,503 $3,191,100 $21,399,641 TOTAL $481,567,976 $134,863,960 $160,626,290 *Totals may be rounded. $777,058,227 As this exhibit indicates steel coils generate the largest direct revenue impacts, followed by grain/soybean products, and iron ore. 5. PERSONAL EARNINGS IMPACT The income impact is estimated by multiplying the average annual earnings (excluding benefits) of each port participant, i.e., truckers, steamship agents, pilots, towing firm employees, longshoremen, warehousemen, etc., by the corresponding number of direct jobs in each category. The individual annual earnings in each category multiplied by the corresponding job impact resulted in $554.9 million in personal wage and salary earnings. It is important to emphasize that the average annual earnings of a port-dependent job is about $50,583. By comparison, based on data supplied by the Bureau of Labor Statistics (BLS), the annual mean wage for all occupations in Indiana was $41,470 in Therefore, these relatively high paying jobs will have a much greater economic impact in the local economy through stimulating induced jobs than will a job paying the average wage. The impact of the re-spending of this direct income for local purchases is estimated using a personal earnings multiplier. The personal earnings multiplier is based on data supplied by the Bureau of Economic Analysis (BEA), Regional Input-Output Modeling System (RIMS II). The BEA estimates that for every one dollar earned by direct employees, an additional $2.87 of personal income and consumption expenditures would be created as a result of re-spending the direct income for purchases of goods and services produced locally. Hence, a personal earnings multiplier of $3.87 was used to estimate the total income and consumption impact of nearly $1.6 billion, inclusive of the re-spending effect. This additional re-spending of the direct income generates the 13,148 induced job impacts. 6 May 2013, State Occupational Employment and Wage Estimates, Indiana. Bureau of Labor Statistics. Page 26

30 The 16,386 indirect job holders earned $673.5 million in indirect wages and salaries. Therefore, the total personal income impact and consumption impact created by Ports of Indiana cargo and industrial activity is estimated at nearly $2.8 billion. In addition, the 19,428 related shipper/consignee jobs of the cargo moving via the ports received about $631.2 million of personal income. 6. TAX IMPACTS State and local tax impacts are based on per employee tax burdens which are developed at the state and local jurisdictional levels. These tax per employee burdens are essentially tax indices that are used to allocate total taxes at each level of government to economic activity generated by the cargo terminals. To estimate the per employee tax indices, total taxes received at each governmental level in Indiana was developed by applying indices from the Tax Foundation 7 to dependent and related incomes. These indices represent total state and local taxes paid by residents as a percent of total personal income. Cargo and tenant activity generated $268.1 million of state, county and local taxes. As a result of the economic activity created by the related users, an additional $59.9 million of state and local taxes were generated for a total cargo-related tax impact of $328 million. The State of Indiana receives approximately 64.4% of the tax revenues, while the local governments received 35.6% of the tax impact as illustrated in Exhibit II-7. 8 Exhibit II-7 CY2014 Distribution of State and Local Tax Revenue* TAXES BY CATEGORY STATE LOCAL TOTAL DIRECT, INDUCED & INDIRECT $172,640,400 $95,434,755 $268,075,155 RELATED $38,617,618 $21,347,627 $59,965,245 TOTAL TAXES $211,258,018 $116,782,383 *Totals may be rounded. $328,040,400 7 Tax Foundation, Indiana s State and Local Tax Burden, < 8 United States Census Bureau, 2012 Census of Governments: State & Local Finances. Page 27

31 APPENDIX A PROPERTY TAXES BY PORT COMPANIES AND TENANTS Exhibit A-1 shows that Ports of Indiana companies and tenants generated nearly $10 million in property taxes in Due to the timing of this report, it should be noted that 2013 was the most recent year for which all tax data was available. It is important to note that the figures presented below are a subset of state and local taxes depicted in Exhibit II-7. Adding these figures to the state and local taxes previously described would result in double-counting. This table simply isolates the property tax impact from the total, using data provided by the Ports of Indiana through the Indiana Department of Local Government Finance. It must be further noted that tenants are located in Tax Increment Financing (TIF) Districts. These are specially designated districts created to capture the growth in new property taxes within a specific area and invest those captured new property tax revenues into infrastructure and incentives to encourage additional growth and investment. In general, TIF revenues can only be used for capital expenditures in, serving or benefitting the TIF Area. The City captures all of the property tax revenues generated from the incremental value of real property for companies residing at the Port (i.e. - the increase in assessed value due to economic development and growth since the area was established, or base value). In some cases, the property taxes paid by tenants in TIF districts are used to pay the debt service that had been assumed to attract such businesses. Exhibit A-1 CY2013 Property Taxes paid by Ports of Indiana Tenants BURNS HARBOR JEFFERSONVILLE MOUNT VERNON TOTAL Property Taxes $4,058,019 $4,354,736 $1,309,125 Source: Indiana Department of Local Government Finance $9,721,880 Page 28

32 APPENDIX B PORT TONNAGES BY COMMODITY AND MODE OF TRANSPORTATION Exhibit B-1 breaks out the 46 million tons of various commodities handled at Ports of Indiana facilities. It is important to note that many commodities are handled multiple times, and thus this method can duplicate counts of certain commodities. For instance, steel coils may be trucked in, processed and then trucked out, or grain may be received by truck and shipped out by water. The table reflects the total waterborne and inland moves at Ports of Indiana facilities and is included to provide the reader with greater context concerning movement of cargoes to and from Port properties. Exhibit B-1 Tons by Mode of Transportation to or from Ports of Indiana Facilities, 2014* TONNAGES (1,000): PORTS OF INDIANA WATER PORTS OF INDIANA TRUCK PORTS OF INDIANA RAIL STEEL COILS ,288 3,103 ORE 6, PLATE/OTHER STEEL 377 1,380 1,947 SLAB COAL/COKE 2, ,396 OTHER BREAKBULK/PROJECT CARGO GRAIN/SOYBEANS 2,897 3,448 1,996 BULK METALS/SCRAP FERTILIZER CEMENT LIMESTONE/OTHER DRY BULK 1, SALT LIQUID BULKS TOTAL 15,722 18,718 *Totals may be rounded. 11,524 Source: Ports of Indiana; Martin Associates, confidential interviews Page 29

33 Exhibit B-2 Tons by Mode of Transportation to or from Burns Harbor, 2014* TONNAGES (1,000): BURNS HARBOR WATER BURNS HARBOR TRUCK BURNS HARBOR RAIL STEEL COILS 503 9,101 2,640 ORE 6, PLATE/OTHER STEEL 286 1,103 1,943 SLAB COAL/COKE ,390 OTHER BREAKBULK/PROJECT CARGO GRAIN/SOYBEANS BULK METALS/SCRAP FERTILIZER CEMENT LIMESTONE/OTHER DRY BULK 1, SALT LIQUID BULKS TOTAL 9,280 13,154 *Totals may be rounded. 6,786 Source: Ports of Indiana; Martin Associates, confidential interviews Exhibit B-3 Tons by Mode of Transportation to or from Jeffersonville, 2014* TONNAGES (1,000): JEFFERSONVILLE WATER JEFFERSONVILLE TRUCK JEFFERSONVILLE RAIL STEEL COILS 148 1, ORE PLATE/OTHER STEEL SLAB COAL/COKE OTHER BREAKBULK/PROJECT CARGO GRAIN/SOYBEANS 1, BULK METALS/SCRAP FERTILIZER CEMENT LIMESTONE/OTHER DRY BULK SALT LIQUID BULKS TOTAL 2,265 2,667 *Totals may be rounded. 1,176 Source: Ports of Indiana; Martin Associates, confidential interviews Page 30

34 Exhibit B-4 Tons by Mode of Transportation to or from Mount Vernon, 2014* TONNAGES (1,000): MOUNT VERNON WATER MOUNT VERNON TRUCK MOUNT VERNON RAIL STEEL COILS ORE PLATE/OTHER STEEL SLAB COAL/COKE 2, ,004 OTHER BREAKBULK/PROJECT CARGO GRAIN/SOYBEANS 1,310 2,253 1,283 BULK METALS/SCRAP FERTILIZER CEMENT LIMESTONE/OTHER DRY BULK SALT LIQUID BULKS TOTAL 4,176 2,897 *Totals may be rounded. 3,561 Source: Ports of Indiana; Martin Associates, confidential interviews Page 31

35 APPENDIX C IMPACTS BY REGION Exhibit C-1 presents the economic impacts the economic impacts of the Ports of Indiana facilities by region. The Lake Michigan region included those impacts associated with cargo movements in the federal waterway of Burns Harbor, while the Ohio River region includes the impacts associated with the Ports of Indiana facilities located within the Ports of Jeffersonville and Mount Vernon. Exhibit C-1a Dependent Economic Impacts of Ports of Indiana Facilities by Region of Port, 2014* LAKE MICHIGAN OHIIO RIVER TOTAL JOBS DIRECT 7,219 3,752 10,970 INDUCED 9,592 3,556 13,148 INDIRECT 13,014 3,372 16,386 TOTAL JOBS 29,825 10,680 40,504 PERSONAL INCOME DIRECT $413,058,255 $141,850,447 $554,908,701 INDUCED/RESPENDING $1,186,138,084 $407,337,743 $1,593,475,827 INDIRECT $545,336,045 $128,123,164 $673,459,209 TOTAL PERSONAL INCOME $2,144,532,384 $677,311,354 $2,821,843,737 VALUE OF ECONOMIC ACTIVITY BUSINESS SERVICES REVENUE $481,567,976 $295,490,251 $777,058,227 TENANT/DEPENDENT SHIPPER REVENUE $2,928,825,600 $555,309,396 $3,484,134,996 TOTAL VALUE OF ECONOMIC ACTIVITY $3,410,393,576 $850,799,647 $4,261,193,223 LOCAL PURCHASES $1,046,033,444 $357,465,661 $1,403,499,105 STATE & LOCAL TAXES $203,730,576 $64,344,579 $268,075,155 *Totals may be rounded. Page 32

36 Exhibit C-1b Related Economic Impacts of Ports of Indiana Facilities by Region of Port, 2014* LAKE MICHIGAN OHIIO RIVER TOTAL JOBS DIRECT 7,219 3,752 10,970 INDUCED 9,592 3,556 13,148 INDIRECT 13,014 3,372 16,386 RELATED JOBS 9,692 9,736 19,428 TOTAL JOBS 39,516 20,416 59,932 PERSONAL INCOME DIRECT $413,058,255 $141,850,447 $554,908,701 INDUCED/RESPENDING $1,186,138,084 $407,337,743 $1,593,475,827 INDIRECT $545,336,045 $128,123,164 $673,459,209 RELATED INCOME $344,975,523 $286,237,586 $631,213,109 TOTAL PERSONAL INCOME $2,489,507,906 $963,548,940 $3,453,056,847 VALUE OF ECONOMIC ACTIVITY BUSINESS SERVICES REVENUE $481,567,976 $295,490,251 $777,058,227 TENANT/DEPENDENT SHIPPER REVENUE $2,928,825,600 $555,309,396 $3,484,134,996 PORTS OF INDIANA SUBTOTAL $3,410,393,576 $850,799,647 $4,261,193,223 RELATED OUTPUT $1,460,735,466 $2,116,490,017 $3,577,225,483 TOTAL VALUE OF ECONOMIC ACTIVITY $4,871,129,043 $2,967,289,664 $7,838,418,707 LOCAL PURCHASES $1,046,033,444 $357,465,661 $1,403,499,105 STATE & LOCAL TAXES DIRECT, INDUCED AND INDIRECT $203,730,576 $64,344,579 $268,075,155 RELATED TAXES $32,772,675 $27,192,571 $59,965,245 TOTAL STATE AND LOCAL TAXES $236,503,251 $91,537,149 *Totals may be rounded. $328,040,400 Page 33

37 APPENDIX D IMPACTS OF BARGE TRAFFIC Exhibit D-1depicts the economic impacts generated by barge traffic at the Ports of Indiana Burns Harbor. In 2014, just over 1 million tons of cargo was shipped to or from Burns Harbor by barge through the Chicago Area Waterway System (CAWS.) Barge tonnage moving via the CAWS was isolated based on interviews with terminal operators/tenants, Ports of Indiana barge data, and historical United States Army Corps of Engineers Waterborne Commerce Statistics. The isolated tonnages for each were then used as the input in the Martin Associates sensitivity model to attain these impacts. These results can be interpreted as the immediate impact that would occur should the CAWS be closed to barge traffic. It is important to note that subtracting the CAWS and St. Lawrence Seaway (Appendix E) impact subsets from the total Burns Harbor impact does not equate to the laker impact. Due to the complexities of the port industries, especially steel manufacturing, multiple modes may be used to source materials or deliver finished product. Also, these impact summary tables do not include related impacts since they are not dependent upon maritime activity to the same extent as the direct, induced and indirect impacts. For instance, we cannot assume that steel manufacturers or grain farmers would cease operating in the short term due to the loss of the ability to ship their products by river barge. By diverting their goods to rail or truck, they would be subjected to higher transportation costs. Over the medium to long term these costs could render their operations less competitive which could result in dislocation of Indiana jobs, however these impacts cannot be measured defensibly. Exhibit D-1 Economic Impacts Cargo Transiting Chicago Area Waterway Locks, 2014* BURNS HARBOR CAWS IMPACT JOBS DIRECT 1,596 INDUCED 1,865 INDIRECT 2,561 TOTAL JOBS 6,022 PERSONAL INCOME DIRECT $78,279,438 INDUCED/RESPENDING $224,787,233 INDIRECT $107,754,366 TOTAL PERSONAL INCOME $410,821,036 VALUE OF ECONOMIC ACTIVITY BUSINESS SERVICES REVENUE $155,799,909 TENANT/DEPENDENT SHIPPER REVENUE $322,170,816 TOTAL VALUE OF ECONOMIC ACTIVITY $477,970,725 LOCAL PURCHASES $213,019,992 STATE & LOCAL TAXES $39,027,998 *Totals may be rounded. Page 34

38 APPENDIX E IMPACTS OF INTERNATIONAL SEAWAY TRAFFIC Exhibit E-1depicts the economic impacts generated by international salties at the Ports of Indiana Burns Harbor. In 2014, over 835,000 tons of cargo moved on internationally-flagged salties via the Saint Lawrence Seaway. Salty tonnages moving through the Seaway were isolated based on interviews with terminal operators/tenants, Ports of Indiana barge data, and historical United States Army Corps of Engineers Waterborne Commerce Statistics. The isolated tonnages for each were then used as the input in the Martin Associates sensitivity model to attain these impacts. These results can be interpreted as the immediate impact that would occur should the Saint Lawrence Seaway be closed to international salty traffic. It is important to note that subtracting the CAWS (Appendix D) and St. Lawrence Seaway impact subsets from the total Burns Harbor impact does not equate to the laker impact. Due to the complexities of the port industries, especially steel manufacturing, multiple modes may be used to source materials or deliver finished product. Also, these impact summary tables do not include related impacts since they are not dependent upon maritime activity to the same extent as the direct, induced and indirect impacts. For instance, we cannot assume that steel manufacturers or grain farmers would cease operating in the short term due to the loss of the ability to ship their products through the Seaway. By diverting their goods to rail or truck, they would be subjected to higher transportation costs. Over the medium to long term these costs could render their operations less competitive which could result in dislocation of Indiana jobs, however these impacts cannot be measured defensibly. Exhibit E-1 Economic Impacts Cargo Transiting the Saint Lawrence Seaway, 2014* BURNS HARBOR SALTY IMPACT JOBS DIRECT 1,479 INDUCED 1,722 INDIRECT 2,374 TOTAL JOBS 5,575 PERSONAL INCOME DIRECT $72,224,037 INDUCED/RESPENDING $207,398,546 INDIRECT $99,864,260 TOTAL PERSONAL INCOME $379,486,843 VALUE OF ECONOMIC ACTIVITY BUSINESS SERVICES REVENUE $166,819,941 TENANT/DEPENDENT SHIPPER REVENUE $266,523,130 TOTAL VALUE OF ECONOMIC ACTIVITY $433,343,070 LOCAL PURCHASES $197,422,013 STATE & LOCAL TAXES $36,051,250 *Totals may be rounded. Page 35

39 APPENDIX F ORIGINS AND DESTINATIONS OF PORTS OF INDIANA CARGOES Exhibits F-1 and F-2 show the Indiana counties and U.S. states, respectively, from which Ports of Indiana tenants source their raw materials or to which they ship their intermediate or finished goods. This information was obtained during the interview process and is intended to be used anecdotally to illustrate the regions that directly ship cargoes to or receive cargoes from Burns Harbor, Jeffersonville and Mount Vernon. Without a detailed commodity flow analysis (which was not part of this economic impact analysis), economic impact figures cannot be linked to the various regions shown in these maps. Exhibit F-1 Cargo Origins/Destinations by County, 2014 Source: Ports of Indiana Page 36

40 Exhibit F-2 Cargo Origins/Destinations by State, 2014 Source: Ports of Indiana Page 37

41 APPENDIX G COMPARISSON OF IMPACTS TO 2009 ECONOMIC IMPACT STUDY Martin Associates also conducted the 2009 Economic Impact Study of the Ports of Indiana using the same methodology described above. This permits for a comparison to be made between the two studies that show the changes in the impacts over time. Table G-1a demonstrates a summary of the changes in all dependent impact categories over the study periods. Table G-1b shows the changes including the related impacts, which as has been discussed extensively throughout this report, are impacts that are driven by demand for the cargoes moving over the docks at Ports of Indiana facilities, but are not dependent upon the use of those facilities. Exhibit G-1a Comparison of 2009 and 2014 Dependent Economic Impacts of the Ports of Indiana Facilities* 2009 PORTS OF INDIANA TOTAL 2014 PORTS OF INDIANA TOTAL CHANGE JOBS DIRECT 8,129 10,970 2,841 INDUCED 10,624 13,148 2,524 INDIRECT 8,619 16,386 7,767 TOTAL JOBS 27,372 40,504 13,132 PERSONAL INCOME DIRECT $346,339,691 $554,908,701 $208,569,010 INDUCED/RESPENDING $1,177,347,147 $1,593,475,827 $416,128,680 INDIRECT $366,158,046 $673,459,209 $307,301,163 TOTAL PERSONAL INCOME $1,889,844,884 $2,821,843,737 $931,998,853 VALUE OF ECONOMIC ACTIVITY BUSINESS SERVICES REVENUE $577,360,643 $777,058,227 $199,697,584 TENANT/DEPENDENT SHIPPER REVENUE $2,759,184,240 $3,484,134,996 $724,950,756 TOTAL VALUE OF ECONOMIC ACTIVITY $3,336,544,884 $4,261,193,223 $924,648,340 LOCAL PURCHASES $731,859,311 $1,403,499,105 $671,639,794 STATE AND LOCAL TAXES $177,645,419 $268,075,155 $90,429,736 *Totals may be rounded Page 38

42 Exhibit G-1b Comparison of 2009 and 2014 Related Economic Impacts of the Ports of Indiana Facilities* PORTS OF INDIANA TOTAL 2014 PORTS OF INDIANA TOTAL CHANGE JOBS DIRECT 8,129 10,970 2,841 INDUCED 10,624 13,148 2,524 INDIRECT 8,619 16,386 7,767 RELATED JOBS 16,372 19,428 3,056 TOTAL JOBS 43,744 59,932 16,188 PERSONAL INCOME DIRECT $346,339,691 $554,908,701 $208,569,010 INDUCED/RESPENDING $1,177,347,147 $1,593,475,827 $416,128,680 INDIRECT $366,158,046 $673,459,209 $307,301,163 RELATED INCOME $490,679,797 $631,213,109 $140,533,312 TOTAL PERSONAL INCOME $2,380,524,681 $3,453,056,847 $1,072,532,166 VALUE OF ECONOMIC ACTIVITY BUSINESS SERVICES REVENUE $577,360,643 $777,058,227 $199,697,584 TENANT/DEPENDENT SHIPPER REVENUE $2,759,184,240 $3,484,134,996 $724,950,756 PORTS OF INDIANA SUBTOTAL $3,336,544,884 $4,261,193,223 $924,648,340 RELATED USER OUTPUT $2,081,066,635 $3,577,225,483 $1,496,158,848 TOTAL VALUE OF ECONOMIC ACTIVITY $5,417,611,519 $7,838,418,707 $2,420,807,188 LOCAL PURCHASES $731,859,311 $1,403,499,105 $671,639,794 STATE AND LOCAL TAXES DIRECT, INDUCED AND INDIRECT $177,645,419 $268,075,155 $90,429,736 RELATED USER TAXES $46,123,901 $59,965,245 $13,841,344 TOTAL STATE AND LOCAL TAXES 223,769, ,040,400 *Totals may be rounded $104,271,080 It should be noted that all dollar amounts in Exhibit G-1a and G-1b are in current dollars in order to maintain consistency with the figures as they were originally published in When adjusted all figures to 2014 dollars, using Midwest Urban CPI as published by the Bureau of Labor Statistics, total related income grew by $823.3 million while the total value of related economic activity grew by $1.9 billion dollars. In real terms, local purchases increased by $595.0 million and related state and local taxes grew by $80.8 million. 9 The total impacts include related jobs which are not dependent upon the port marine terminals to the same extent as are the direct, induced and indirect jobs since it is the demand for the final products which creates the demand for the employment with these related shippers/consignees, not the use of a particular port or maritime terminal, and therefore these firms can, and do use other ports. Page 39

43 APPENDIX H PEER REVIEW LETTERS Page 40

44 Page 41

45 Page 42