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$2.2-million investment nets $48-million return on ACR, says report

Thursday, April 17, 2014   by: Kenneth Armstrong
Accounting firm BDO Canada says that the federal government's $2.2-million investment, in the form of a subsidy to CN Rail to continue the ACR passenger service between Sault Ste. Marie and Hearst, nets an economic impact of $38-million to as much as $48-million annually.
 
Representatives from BDO presented the results of their draft impact assesment to stakeholders Thursday afternoon at the Civic Centre.
 
Tom Dodds, CEO of the Sault Ste. Marie Economic Development Corp. (SSMEDC), said the study offers valuable insight moving forward with attempts to save the passnger service.
 
"Now we have this momentum going, we have to keep pushing and get more stakeholders on board, get the provincial and federal government on board," said Dodds.
 
Dodds said he wants to see the advisory group expanded to include CN Rail, Transport Canada, Ministry of Transportation, Northern Development and Mines and FedNOR.
 
The SSMEDC created the survey, which was made available to stakeholders, and the resuling numbers were compiled by BDO into the draft impact assesment.
 
CN Rail contributed to the study by providing ridership numbers to the SSMEDC.
 
Joe Melisek, associate in charge of advisory services at BDO Canada, said he was pleased by the number of stakeholders who participated in the survey.
 
Melisek said about 500 responded to the SSMEDC survey, amounting to almost 10 percent of yearly riders.
 
Lindsay Fedchyshyn, regional manager of public and government affairs for CN Rail, said that the company is looking forward to hearing what solutions the stakeholders come up with over the next year.
 
"With the subsidy restored CN will continue to operate the service and will assist our stakeholders as they work to determine the future of the passenger train service," said Fedchyshyn.
 
Dodds said the study is a good foundation to go back to government and demonstrate the impact of their investment, and has already forwarded the results to relevant ministers at the provincial and federal level.
 
The city of Sault Ste. Marie contributed $50,000 to the creation of the study, with other affected municipalities and stakeholders agreeing to contribute proportionately, said Dodds.
 
(PHOTO: Sault Ste. Marie Chief Administrative Officer Joe Fratesi addresses stakeholders seeking to save passenger service on the ACR during a meeting April 17, 2014 at the Civic Centre. SooToday.com/Kenneth Armstrong)
 
Previous SooToday.com coverage:

Feds created an 'unnecessary crisis' says Hughes

Raitt says ACR needs private-sector solution

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NEWS RELEASE

ACR PASSENGER SERVICE
WORKING GROUP
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SAULT STE. MARIE - The Federal Government’s $2.2-million investment into the Algoma Central Railway passenger line nets a significant return.

According to a socio-economic impact assessment from BDO Canada – now in its final draft stage – the transportation service generates between $38 and $48 million in annual economic activity, which supports up to 220 jobs and helps deliver more than $5 million in tax revenue to government coffers every year.

“Our position has always been that the ACR passenger service provides a substantial economic benefit for Northern Ontario and the country as a whole, and now that we have this report from BDO, one of Canada’s leading accounting and advisory firms, our position has been confirmed,” said Joe Fratesi, Chair of the ACR Passenger Service Working Group and CAO of the City of Sault Ste. Marie.

“According to the preliminary report, the rail line also supports more than $60 million in property value and provides untold social benefits, making the continued operation of the service of the upmost importance.”

BDO’s impact assessment was created using ridership numbers and industry standards, along with a stakeholder survey prepared by the Sault Ste. Marie Economic Development Corporation, which garnered nearly 500 responses.

The final draft of the report, which uses conservative estimates, is now being shared with Transport Canada, CN Rail and stakeholders who use the rail service.

The document is available online at www.algomapassengerrail.com under the “Reports/Info” section. Stakeholders are invited to send comments and feedback to info@algomapassengerrail.com. The deadline to respond is April 30.

In early-2014, the Federal Government indicated that it was cutting its annual investment into the Sault-to-Hearst rail service. Without the funding, CN Rail, the owner and operator of the line, announced that it was ending the run.

The ACR Passenger Service Working Group, which represents a broad range of concerned stakeholders, has been striving to find solutions to keep the link operating in the short term so that longer-term solutions could be explored.

Earlier this week, the Honourable Lisa Raitt, Minister of Transport, announced that her government was restoring its investment into the ACR passenger line until March 31, 2015.


“Now that the rail service received the one-year extension in funding from Transport Canada, we have an opportunity to further engage stakeholders and all levels of government to come up with sustainable solutions,” said Tom Dodds, CEO of the Sault Ste. Marie Economic Development Corporation and a member of the ACR Passenger Service Working Group.

“We thank all the stakeholders for their efforts so far, and we will continue to work with them on this key transportation initiative in the months to come.”

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Comments
23
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IgnorantNortherner 4/17/2014 4:39:18 PM Report

So if the subsidy was discontinued these guys and gals making AT LEAST 38 million would just call it a day, rather than split the CN cost amongst themselves?

What's an extra 10k when you're making a quarter mil plus (off every Canadian's resources selling them to mostly Americans)?
guestwho 4/17/2014 4:47:43 PM Report

I`m no CEO but if $2.2=$48 and fresh out of kindergarden,I`m thinking that`s a good deal!!
IgnorantNortherner 4/17/2014 4:52:53 PM Report

guestwho I don't think they really care about the money they aren't getting...so 2.2M grosses 5.

....but if you were making $48,000,000 would you be willing to shell out $2,200,000 of your own money to keep the gravy train rolling? I'm guessing you would.
Ski-Dude 4/17/2014 5:07:09 PM Report

Not surprising there is a significant return! A bit surprised it's that high though.

Where are all those crow-eaters? Step up!

Paddlenut 4/17/2014 5:33:46 PM Report

This doesn`t mean CN is reaping those benefits, otherwise it wouldn`t need a subsidy in the first place. It`s regional econimic spin-off, everything from profits made by lodges to the supplies that private camp owners purchase. The test of sustainability is whether the expenditures are equal to or larger than Federal tax revenue generated from the $38-48M in economic activity.
ThinkAgain 4/17/2014 5:56:12 PM Report

10% is a low number to base such a decision. Can't see how it was excepted as good data.
right wing 4/17/2014 6:44:48 PM Report

I have not read the detailed report yet but will.
How many of you have?
Nothing more creative than creative accounting.

I'll save my thoughts until I read the report.
The links are provided.
IgnorantNortherner 4/17/2014 7:28:10 PM Report

First of all, I had no idea BDO did reports like this. It's about 1% accounting. It reads like a Harper Press Release about how many jobs his gov't has created or saved. None of the numbers are real when it comes to totals but predicted outcomes based on the models and I have to say they did a great job and stakeholders got their monies worth.

After reading the report I realize the 38-48M isn't at all what I thought it was when I commented earlier (income directly associated with the rail service). Instead, it is income plus hypothesized income+taxes from consumption. They use terms like "multiplier effects" and "trickle down impacts" and the 220 jobs is also predicted, not actual jobs.

I laughed when I came across this part...Road Access (under 'Social Impact')
-If you consider the roads to your property to be between inaccessible-->fair, then it counts simply as "inaccessible", which is hilarious since we're talking about bush roads. Only 3% of respondents (who have a potential incentive to lie) said roads were "inaccesible", but the report says 75%


I also got the impression that in their models, BDO assumes not a single dollar is saved by any lodge owner, but is in fact "re-invested" into the economy, with added multiplier effects...but I'd love to be wrong on this point.
itsme29 4/17/2014 7:50:12 PM Report

I agree these figures are way out too lunch, if only that much money was being put into our economy by people using the acr.. creative accounting!
Vicci 4/17/2014 10:56:38 PM Report

Passenger rail riders generated 38 to 48 million then every rider averaged $7,300 to $9,300. This seems rather farfetched to me. Reading the report (Executive Summary) the indirect and induced economic impacts seem sketchy. Including property values in this number is iffy. Separating the passenger rail from the freight in the induced number isn’t clear. It looks like every Tom, Dick and Harry is included in the social impact. The suggestion of terminating freight service because of terminated passenger rail service.....really. Reading the report it is very clear who it was written for. I think the report is too over the top to be taken seriously.
learningaswego 4/18/2014 6:08:07 AM Report

Then obviously - let the people who are making the $48 M pay the cost.

It sure as he11 isn't a "good deal" for the people paying for it - the taxpayers.
learningaswego 4/18/2014 6:13:52 AM Report

rw is bang on; you can damn sure there is a lot of "stretching the truth" with these things.
AlwaysAWinner 4/18/2014 7:14:00 AM Report

there is no way that train pulls $48 million a year. no way at ALL

these numbers are a pipe dream
AlwaysAWinner 4/18/2014 7:19:57 AM Report

LOL this is assuming they get MORE tax dollars. they say it in their own report

"It must be further noted that the “induced impact” in the table above includes
significant tax revenue
(estimated using the TREIM model) which accrues to all levels of
Government (estimated at between $5.12M and $6.45M), as well as generating
considerable employment
opportunities to its taxpayers"

Also, they say they made 2.4 million a year (roughly) around 2005. Sorry but things aren't better than they were in 2005, so there's no way you can say you'll make 20x that. 2000% increase

come on now
dadal 4/18/2014 7:22:51 AM Report

I agree. Those numbers include the tourism of the Agawa train and probably freight ontop of that. It also doesn't take into account wages of not only train staff but at the ticket office, rail maintenance, etc. Very very padded numbers.
welcome2 4/18/2014 8:09:07 AM Report

do the math..500 people responded to survey which is approx 10% of users so we are talking about 5000 riders, generating $38-$48 million dollars which equals $8-$10 thousand/rider-I don't think so
that amount of revenue might be closer to the truth if freight revenues are included but we are talking about passenger service here. Obviously the Soo to Hearst passenger revenue is not where it needs to be to continue operation or gov't subsidization would not be needed in the first place.
I know many people disagree w/ me but I do not agree w/ gov't sunsidizing businesses in the first place. A gov'ts role is to attempt to create an economic climate which makes it possible for businesses to be successful. Obviously the gov't has concluded that this passenger service is never going to be successful and that continuing the subsidization is only spending good money after bad. CN has subsequently said that discontinuing of the subsidy will result in financial loss where this service is concerned and wish to cut those losses. I hope a private solution can be found, but I believe that is what it needs to be-a private solution
snowbusman 4/18/2014 9:26:05 AM Report

The real reason as history speaks "CN wants nothing to do with passenger trains". With them (CN) it is all to do with dollars and cents which is good business. It costs a lot of money to run a passenger train. It just a matter of time and whole ACR passenger train gig will be a thing of the past and that includes the tour train. The only way I can see that the trains continue is that they are operated by a private consortium.
right wing 4/18/2014 10:16:07 AM Report

...just as I suspected.
Creative, very creative.
Entity 4/18/2014 11:23:10 AM Report

It's sad that so few of you know what economic activity is.

It's really sad.
Justin_time 4/18/2014 12:42:48 PM Report

It's sad when our transportation system has to be questioned and on the verge of losing in any respect. Sure the big eaters reap the benefits of 2.2 mil to get what they say upto 48 mil. But what about the small property owner who no longer has access to their property, or the supplies delivered each trip to remote areas to just sustain normal living day to day. We just think about the business aspect of it not the necessity of it.

When southern Ontario politicians have to hesitate to assist saying "they already have roads to most of these places why need a train?", then they should come up here and try access some of these areas by road and see what condition they are actually in. Try driving to some of these remote communities in the winter. If you make it your going to kiss the ground after you made it. If you don't well then...guess the bears will get you. If the politicians don't want to bring back the spring bear hunt may as well feed them with stranded travelers right?

But, what about this shortfall that CN says they will have anyway? I'm sure their annual profit statement is not going to be in the red just because one little rail line is losing a bit of money. Like with any business a loss in one area is a write off for another profitable area. But oh no, we can't do that says the rail. We need the poor tax payers money to help us out so we can realize 100 million profit instead of 97.8 million. Ok, so maybe they don't make that much (or do they?) but was to show the point!

As said, do the stakeholders who reap some of this supposed 48 million return help pay back the tax payer coffers? I don't think so. Do we the tax payers benefit from the 48 million return? I don't think so.

Does CN care one way or the other whether they get public money? No, they couldn't give a flying frank whether we had a train here or not. Like I said, why make 97.8 mil when you can cut and save or keep and let public money help you make 100 mil.

Our government surely has priorities in the wrong spot...or good old common sense has gone out the window!
IgnorantNortherner 4/18/2014 12:45:32 PM Report

Entity, how noble of you to deride us for having a definition of a term that does not match your own. Bless your heart! Perhaps you can attempt to reign in that ego of yours this Easter weekend - if not for yourself than for your family.

If you asked a thousand Canadians what 'economic activity' means to them they would virtually all give you a different answer. Does that tell you 99.9% of them have no idea what they're talking about?

How about the usage and meaning of some words has changed so much over time that, presently, their meaning is entirely subjective (or perhaps it always has been)?

IgnorantNortherner 4/18/2014 12:52:47 PM Report

Justin_time, what you've just said is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul.

I'm kidding...but I really don't understand your point. Of course CN cares about 2.2M...why wouldn't they? If every business tossed the fiscal side of things out the window and focused only on the moral good then capitalism would not be possible. If there was an 8 lane highway to Oba then it wouldn't be very remote, now would it?
ThinkAgain 4/18/2014 1:13:18 PM Report

Buy a lotto ticket (I'm going to win big & I'm set for life) is a report I give to my wife every time I spent money.

Numbers just don't add up, so your not fooling me says wife. No more sorry @ss excuses, no more allowance
Comments
23
Note: Comments that appear on the site are not the opinion of SooToday.com. If you see an abusive post, please click the link beside the post to report it.
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