Port of Duluth-Superior
Economic Impact of 2001 Shipping Season

• Prepared for the •

• Prepared by •

Klaers, Powers & Associates

Port of Duluth-Superior
Economic Impact of 2001 Shipping Season

Table of Contents

Summary ~ 2001 Season Impacts

The Port ~ A Brief Description

2001 Season Port Activity

2001 Season Economic Impact

Port Economic Development

Appendix ~ Impact Model

Summary ~ 2001 Season Impacts

The 2001 shipping season and associated waterfront capital investments generated a total economic impact of $210.2 million.

1,227 jobs were directly created by the 2001 shipping season and capital investments
Another 766 jobs were indirectly created for a total employment impact of 1,993 jobs.

Cargo

36.5 million metric tons of cargo was handled by the port in 2001 ? Coal had another record breaking year at 15.1 million tons
Coal / iron ore / grain combined for 90% of total tonnage Inbound forest products from Canada and Europe heralded new trade trends.

Capital Investment

Private and public investment along the waterfront in 2001 for new structures, equipment, dredging, and site improvements equaled $14.443 million
This includes repairs and upgrades to 13 vessels that wintered over in the port.

Taxes

Waterfront facilities paid local property taxes of $2,594,794 on property valued at over $82.1 million
In addition, Superior docks paid local occupation taxes of $948,365.

Economic Activity

Port of Duluth-Superior

The Port ~ A Brief Description

Situated at the westernmost end of the Great Lakes/St. Lawrence Seaway, over 2,300 miles from the Atlantic Ocean, the port of Duluth-Superior accesses a half-a-million square miles of resources and purchasing power. Accessible by rail and road from Denver, Omaha, Winnipeg, Bismarck, and Minneapolis-St. Paul, the port is two to three weeks sailing time from western Europe, the Mediterranean, west Africa, and South America.

The Duluth-Superior harbor features 49 miles of waterfront, covers 19 square miles of land and water, and has 17 miles of dredged channels varying from 23 to 27 feet in depth. It has two entrances – the natural Superior Entry and the man-made Duluth Ship Canal. The waterfront is dotted with major shipping facilities owned and managed by a variety of dock operators.

While primarily a transshipment port serving producers and consumers located far from the harbor, several key portside facilities transform basic commodities into valuable products. The largest local operation converts limestone and salt into agricultural lime, water treatment products, paper additives, agricultural feed, and road salt. Other sites bag bulk agricultural commodities for overseas shipments, screen and grade raw products such as limestone, and screen and sort construction materials.

Duluth-Superior also serves as a vital overland transportation hub for the US and western Canada. This long-standing practice underscores the intrinsic
function of the port to facilitate the cost effective transfer of goods from one mode of transportation to another.

Coal

Port of Duluth-Superior

2001 Season Port Activity

The port of Duluth-Superior handled 36.5 million metric tons in 2001. This was despite low water levels on the Great Lakes which reduced the carrying capacity of vessels and decreased demand for iron ore.

Coal was the leading cargo for the third time in the past century. Midwest Energy Resources Company saw its eighth consecutive record-breaking year handling 15.1 million metric tons.

Coal, taconite, and grain represented over 90% of the port’s total traffic.

Iron ore shipments totaled 13.9 million metric tons while all grain cargoes equaled 3.8 million tons. 1932 was the last year in which iron ore was not the port’s dominant cargo.

The port handled 3.4 million tons of various dry bulk commodities such as cement, limestone, salt, and aggregate.

General cargo which generates the most impact per ton totaled 50,553 tons for the season.

The year saw the handling of in-bound forest product cargoes -- barge-delivered lumber from Thunder Bay, Ontario, wood pulp from Canada, and imported European lumber.

Domestic cargoes, primarily coal and iron ore, dominate port traffic.

Overseas cargoes are primarily outbound grain headed to Europe and the Mediterranean.

An estimated $1.9 billion worth of cargo was handled by the port in 2001.

Although only a minor fraction of total cargoes by tonnage, the per ton value of Other and General Cargo is significantly higher than that of the dominant bulk commodities.

Cruise Ships / Tourism
No passenger cruise vessels called on the port this year although several had been scheduled. Past visits generated local economic impact and greatly enhanced Duluth-Superior’s tourist economy.

Commercial ship traffic is a significant factor in attracting tourists to the Twin Ports. Visitors are drawn to the Duluth Ship Canal to view passing vessels and tour the Maritime Museum. Others ride tour boats viewing docks and loading or unloading vessels.

Port of Duluth-Superior

2001 Season Economic Impact

This report presents the estimated economic impact generated by the 2001 shipping season by the port of Duluth-Superior. This impact was produced by transshipment of cargoes and private and public capital investments in port infrastructure.

This analysis uses the newly developed Port Economic Impact Kit prepared for the U.S. Maritime Administration . The kit is driven by an input-output economic model customized for the port’s region. Cargo and capital investment data required for the model were obtained by Klaers, Powers and Associates. A review of technical information on the model is in the Appendix.

Port of Duluth-Superior

Port Economic Development

Maritime and non-maritime economic development have long been the major focus for the Port Authority. These initiatives occur along the waterfront and at an inland industrial park.

Along the waterfront the Port Authority conducts economic development at the Clure Public Marine Terminal and Garfield Docks C&D. The Airpark industrial park, located near the Duluth International Airport, is the Authority’s inland industrial site. In addition, the Port Authority owns Erie Pier, a confined dredged material disposal and recycling facility.

In 2001 the Port Authority’s economic development agenda centered on increasing opportunities for future development:

A speculative light industrial / assembly building was constructed by the Port Authority in Airpark. By early 2002 the building was fully leased out.

The demolition of the old grain elevators on Garfield Docks C&D was completed making the site available for maritime or non-maritime development.

Construction of the $3.8 million East Warehouse Annex at Clure Public Marine Terminal provided 104,000 square feet for immediate use by Lake Superior Warehousing, the terminal operator.

Federal funds were authorized for the Arthur Avenue which will provide a badly needed parallel truck route along Rices Point. Construction is slated for 2003.

One new business was added at Clure Terminal. The number of businesses at Airpark remained constant during the year.

Port of Duluth-Superior

Appendix ~ Impact Model

This economic impact analysis was prepared using Port Economic Impact Kit model prepared for the U.S. Maritime Administration (MARAD) by A. Strauss-Wieder, Inc. and the Center for Urban Policy Research at the State University of New Jersey Rutgers.

The heart of the kit is an input-output model created by R/Econ (Rutgers Economic Advisory Service) of the Center for Urban Policy Research at Rutgers University. The port sectors of the model were specialized using data collected by A. Strauss-Wieder Inc. The model is based on the national input-output model produced by the U.S. Bureau of Economic Analysis.

An input-output model is based on a detailed level of industrial sector information and a depiction of interindustry relations. Within this model the economy of the area under discussion is mapped in table form with each industry listed across the top as a consuming sector and down the side as a producing sector. A column in the table or “matrix” depicts the inputs needed from every other industry to produce its output. This is the transactions matrix.

“Total economic impacts encompass both direct and multiplier effects. The latter incorporate indirect and induced impacts. The character of the direct impacts of any maritime activity is derived from the recipes of the activities involved: the local spending on terminal operations; steamship, ferry, and cruise operations; port authorities, inland transportation services, passengers and crew, and various types of construction and equipment purchase activities. The process for estimating a given project’s indirect and induced economic impacts is more roundabout. By definition, a project’s first round of indirect impact includes the local purchases of any supplies and/or services that are required to produce the direct effects. Subsequent purchases of supplies and services generate other rounds of indirect impacts. Induced impacts are the purchases that arise, in turn, from the increase in aggregate labor income of households. Aggregate labor income is defined as the sum of wages, salaries, and proprietors’ income. Both the indirect and induced economic impacts demonstrate how the demand for direct requirements reverberates or ripples through an economy.”

The MARAD port model provides a 517-industrial sector input-output model with basic data customized for the state or region being analyzed. In the case of the Port of Duluth-Superior, the data was for the Duluth-Superior Metropolitan Statistical Area (St. Louis County, MN and Douglas County, WI). Local inputs for the model included costs for handling major cargo groups, transportation, and capital investments. Klaers, Powers and Associates gathered this information by surveying dock operators, interviewing port service providers and others knowledgeable of the waterfront, interviewing government agencies, and general research. The level of response was exceptionally high and detailed assuring that the resulting analysis fairly reflected the reality of the port’s economic activity. All information gathered by the consultant was confidential.

Input-output analysis is not without its limitations. First of all, the information represents a snap-shot at a specific time. The core information is updated every five years; in the case of the current model the technical coefficients are based on 1992 information that was updated to 1998 using additional data from the U.S. Bureau of Labor Statistics.

Further, input-output modeling does not account for economies of scale. Thus, the inputs required by an industry do not vary proportionately even though the final demand that is entered in the model varies.

Finally, regional input-output models usually assume that regional technical requirements are the same as those for the nation. For large, diverse regions this assumption is probably valid but for smaller ones the potential for deviation increases. The MARAD model avoids this by providing customized information for each state with deepwater ports

The program running the MARAD model is capable of handling a range of port-related activity including a variety of cargoes (dry bulk, break bulk, liquid, etc.), passenger vessels (ferries and cruise ships), and capital investments. The resulting output can be reviewed and modified according to actual information gained about the port.