Comparing business investment and operating costs in Calgary and selected cities. EY Location Cost Index overview and results

Transcription

1 Comparing business investment and operating costs in Calgary and selected cities EY Location Cost Index overview and results

2 Contents Section Page 1. Executive summary Introduction & overview Food & beverage processing Component manufacturing Communications & nav equipment mfg Drone manufacturing Medical device manufacturing Distribution & logistics Research & development Back/middle office financial services Appendix Methodology details 51-84

3 Executive summary

4 Study overview How does Calgary compare in terms of business operating costs? EY s Location Cost Index is a high-level comparative cost estimate to be used by CED to compare business development and operating costs in Calgary to selected metro areas. The index expresses key variable business costs in Calgary, relative to cities that compete for investment (selected comparison jurisdictions). With CED, EY selected factors that are most relevant across the target sectors related to: Labour Utilities Taxes, credits, and financial incentives Real estate Transportation Key goal: Understand Calgary s relative business cost competitiveness, outside of the oil & gas sector. In all sectors, Calgary, Edmonton, & Toronto are generally very competitive and within the same range Page 4

5 Key findings Key areas of competitiveness Key areas for improvement Favorable US/Canadian dollar exchange rate (1 CAD = 0.76 USD). Lower average wage rates for supervisors/production management positions Lower wages for less-skilled positions (call centre/customer service; team assemblers) Lower provincial & local tax burden on business (no provincial GST; low metro area property tax) Manufacturing personal property tax exemption Electricity rates Capital Investment Tax Credit (CITC) program Scientific Research & Experimental Development (SR&ED) tax credit Higher wages for skilled production occupations (machinists) Higher engineering wages than other Canadian cities (below US due to FX) Higher industrial lease rates (Toronto, Saskatoon and Grand Rapids are very competitive) Industrial land prices (Canadian cities are generally higher than US) CITC set to sunset in 2018 Page 5

6 Comparison cities Included metropolitan areas: Canadian cities: US cities: Calgary, Alberta Edmonton, Alberta Saskatoon, Saskatchewan Toronto, Ontario Vancouver, British Columbia Albany, New York Chicago, Illinois Columbus, Ohio Grand Rapids, Michigan Milwaukee, Wisconsin Minneapolis, Minnesota Salt Lake City, Utah San Jose, California (Silicon Valley) Seattle, Washington Note: Each target sector index includes a subset of the listed cities. Page 6

7 Calgary s overall rank and index value All target sectors; Locations indexed to Calgary (Calgary = 100) Target sector Calgary Rank City with the lowest index value Index value for first place city Food & beverage processing 1 st Calgary 100 Drone manufacturing 1 st Calgary 100 R&D 1 st Calgary 100 Component manufacturing 2 nd Toronto 91 Communications & nav equipment mfg. 2 nd Toronto 98 Medical device manufacturing 3 rd Toronto 80 Distribution & logistics 3 rd Toronto 98 Back/middle office financial services 3 rd Vancouver 90 Note: The analysis does not consider the potential impacts of US tax reform. However, a reduction in the US federal rate would not have a material impact on the rankings for Canadian cities vs. US cities. Page 7

8 Introduction & overview

9 Project scope and objectives Calgary Economic Development (CED) is interested in attracting businesses in sectors beyond oil and gas, especially transportation and logistics, renewable energy, financial services, and technology and innovation. In order to provide tailored value propositions for potential investors, EY was commissioned by CED to create a cost benchmark providing high-level insight on the key cost factors companies face in Calgary and other cities. This study provides a broad overview on Calgary s attractiveness as a location for an average investment by a North American business in 4 types of activities and 8 sectors. The benchmark compares Calgary to 13 cities in Canada and the United States. Manufacturing: Food & beverages processing, Component manufacturing, Drone manufacturing, Navigation equipment manufacturing, and Medical device manufacturing Research & Development Distribution & logistics - Distribution centre Back-office operations for the financial sector A separate cost location index was calculated for each of the sectors, each with distinct assumptions on capital investment, job creation, and operating parameters. The model reflects data on the location-specific cost factors and industry-specific parameters drawn from publicly available sources and private databases. The data were harmonized and an overall index score was calculated for each target sector. It is important to note that this index is not an overall measure of the total business operating costs in each location. Instead, this index considers just the relative costs associated with selected factors, which are not comprehensive of the total investment and operating costs that would be faced by a company. This analysis selected factors that would typically make up the largest share of non-raw material costs (labour, tax, utilities, transportation, etc.). The EY index does not consider cost variations in raw materials, which vary significantly across sectors. The analysis uses an exchange rate of 1 CAD = 0.76 USD. Page 9

10 Calgary Location Cost Index Methodology overview Objective Approach EY developed a comparative cost estimate index to be used by CED to compare business development and operating costs in Calgary to other selected metropolitan statistical areas (MSAs). The scope outlined below was designed to approximate the relative ranking of jurisdictions considering the financial implication of each cost factor in present value terms, but does not purport to be a detailed financial model with complete income statement and balance sheet build-up. Step 1: Construction of representative industry profiles EY developed representative facility development and operating profiles for eight (8) sectors, reflecting CED s target sectors matched to standardized industry classifications. Financial and economic data for each industry were reviewed to determine the relative importance of major cost items, as compared with the all-industry average. Industry profiles were constructed based on a standardized set of parameters and industrial datasets from the US Internal Revenue Service (IRS), US Bureau of Labor Statistics (BLS), US Bureau of Economic Analysis (BEA), Statistics Canada (StatCan), and other sources. This information was used to derive weights for specific cost factors for each industry based on the calculated present value of each of the cost factors over the life of a representative facility based on industry average information. Step 2: Incentives analysis EY conducted an analysis of the key incentives programs available in each jurisdiction, as validated during the kick-off meeting. EY applied a fixed set of assumptions across all jurisdictions to obtain a comparison of available benefits. Tax incentive benefits were calculated separately for each location, including statutory and discretionary programs with a high-likelihood of being awarded. As such, the list of incentives analyzed does not cover all incentives that are offered in each location, but rather an estimate of the incentives an investor has a medium / high likelihood of obtaining for a project in the industries analyzed. The same eligible capital expenditure, job creation and Research & Development (R&D) expenditure amounts were assumed for all locations in each industry. For discretionary programs, conservative high-level estimates (volume and duration) applied based on historical awards to projects with similar parameters. Step 3: Identify comparison cities Each target sector index includes Calgary and six (6) or seven (7) selected comparison cities. Data on industry employment levels, recent employment growth trends, and employment concentration (location quotient) was used to refine the initial city list provided by CED and to suggest additional cities that should be considered. The included cities were selected based on this analysis and certain assumptions: include cities that match for more than one target sector, include 2-3 cities of a similar size to Calgary, include at least one additional Canadian city. Step 4: Populate location-specific cost factors The location cost index includes 18 factors for each target sector. Information on each data source and methodology is included in the appendix. Page 10

11 Composition of the Location Cost Index Category weights Index category weights reflect the relative mix of selected variable operating costs for an average businesses in each target sector. Labour costs are a key driver, generally comprising 50-60% of the overall index score. Labour costs carry the most weight for R&D (83%). Labour Taxes Real estate Utilities Transport C&I Food & bev manufacturing 37% 16% 13% 7% 27% 1% Component manufacturing 61% 15% 10% 2% 10% 2% Comm. & nav equip. 69% 14% 10% 1% 3% 3% Drone mfg 60% 12% 14% 2% 8% 3% Medical device mfg 60% 11% 10% 1% 16% 2% Logistics 53% 11% 32% 4% 0% 0% R&D 83% 3% 12% 1% 1% 1% Back/middle office FS 58% 30% 11% 0% 0% 1% Page 11

12 Labour costs Calgary competitive vs. US, but less so within Canada Lower-wage positions (lower-skilled/general labour) Generally competitive Relatively competitive for general production jobs (e.g. team assemblers) and back office (e.g. customer service/account representatives) Higher-wage positions (semi-skilled & high skill) Generally less competitive Science and engineering wages in Calgary compare favorably to those of US comparison cities, but not as well to other Canadian cities Wages in engineering occupations (electrical, aerospace, industrial, etc.) are 15% or more above the Canadian comparison city median This may be a result of Calgary s high concentration of skilled engineers Benefits costs Competitive In the US, employers face significant costs for employee health insurance premiums to cover basic medical and supplemental In Canada, employers typically only offer supplementary coverage, which can present significant cost savings Page 12

13 Transportation costs Approximating inbound and outbound transport costs Inbound transportation costs Competitive Inbound costs reflect differentials in wages for local trucking to reflect differences in last mile costs for inputs. Outbound transportation costs Less competitive A company s outbound product delivery costs will be most influenced by the distance that a final product has to be shipped to reach the market. The analysis proxies this cost as the distance radius to capture a 10 million resident population. Page 13

14 Taxes Property taxes Competitive Lower property tax rates than many comparison cities Exemption of personal property for manufacturers Property tax rates are based on centre city and surrounding metro area Average 1.3% rate for Calgary area Sales tax/gst - Competitive No provincial tax (most competitive) = lower acquisition costs Corporate income tax rates Competitive Low combined corporate tax rate for all sectors (23-26%) compared to all comparison cities (US starts at 35% federal rate) This advantage is more pronounced when compared to US comparison cities, which tend to have combined corporate tax rates in excess of 40% Overall tax burden Competitive Page 14

15 Utilities Electricity rates Competitive Calgary has the lowest average industrial electricity rates (US$0.05/kWh) Attractive for electricity-intensive operations. Natural gas rates Less competitive Calgary has one of the highest industrial natural gas rates out of all comparison cities (US$3.77/mcf). This is partially driven by a Carbon levy designed to shift consumption towards renewable energy. This levy is approximately equal to $0.77 USD/ GJ. Page 15

16 Real estate construction, rental & land Construction costs Competitive Construction cost differentials driven by exchange rate Would be less competitive at USD/CAD parity Commercial property Competitive Rental rates: Commercial rental rates are fairly similar between the US and Canada, with belowaverage rates in Calgary (gross rent C$30-35 psf; US$23-27) Land prices: Below average list prices for commercial parcels Industrial property Less competitive Rental rates: In general, industrial rental rates in Canada trended higher than similar properties in the US (around C$9 psf; US$7) Land prices: List prices for industrial land in Canada are generally much higher than the observed values in the US. Page 16

17 Credits and incentives Manufacturing incentives Competitive* Most US states provide incentives for capital investment and job creation in manufacturing *Calgary will become less competitive in this area if the CITC is allowed to sunset in 2018, as scheduled. R&D incentives -- Competitive Canada s Scientific Research & Experimental Development (SR&ED) credit program (federal & provincial) provides 15% - 25% of credit against eligible R&D costs. Impact is limited by tax liability. Other programs / considerations Less competitive Some jurisdictions offer incentives for projects in specific industries e.g. Minnesota (agriculture), Washington (airspace industry), California (high-tech industries), Vancouver (international financial services) While incentives can be awarded under various forms (e.g. tax credits, grants, or in-kind assistance), this analysis only considers tax credits and cash grants generally available to projects of usual size (i.e. not mega projects). Page 17

18 Credits and incentives, cont. Financial incentives are only one component of a company s decision on where to locate and expand operations. A one-size-fits-all analysis of incentives is a complex exercise due to the fact that every investment project and company operating model is unique. When companies apply for incentives, they follow specific strategies that depend on factors including industry, the corporate investment plan, ramp-up plan, tax structuring, etc. Incentives are awarded for a variety of reasons such as to: overcome differences in taxes and costs between different jurisdictions, encourage employment of target populations, and help the local economy grow. Incentives can be awarded under various forms, including tax exemptions or tax credit, cash, in-kind assistance (e.g. free or discounted land, financing of training through local colleges). Canada s Scientific Research & Experimental Development (SR&ED) tax credit offers a significantly higher tax credit for operations with a strong component of R&D and innovation, than what is available in any of the US cities analyzed in this study. The SR&ED program s provincial component in Alberta provides a higher credit percentage than in some other provinces (British Columbia, Ontario). Locations in Alberta (Calgary, Edmonton) are the only Canadian locations analyzed that provide an investment tax credit the Alberta Capital Investment Tax Credit program. This program provides a higher dollar amount of income tax credit based on the capital investment than the other Canadian cities analyzed. The Canada-Alberta Training Grant provides a reimbursement of 100% of training costs up to a C$15,000 per employee, while other Canadian provinces analyzed offer a reimbursement of 2/3 of training costs. US jurisdictions rely on a variety of discretionary incentives providing either cash or income tax credits at all levels (federal, state and local) which favor manufacturing investment and job creation projects which may be oriented towards specific industries. In particular, the US cities analyzed have areas which are eligible for the federal New Market Tax Credit which, if awarded, offers manufacturers a considerable benefit. Depending on the industry, the award for New Market Tax Credit was estimated in this cost benchmark of up to US$1.94 million over a 7-year period. Local US jurisdictions offer abatements, exemptions on property taxes, or tax increment financing, which allows the use of property taxes as public and/or private project funding. Since property tax incentives are directly dependent on the local property tax rate, a high benefit in terms of property tax incentives is automatically offset in the long term through higher property taxes. For more details regarding the calculation of incentives and sources, please refer to the Appendix Categories of incentives Statutory: automatic ( as of right ) - statutory tax credits that are provided to companies as of right if they meet defined statutory requirements. No pre-certification or prior approval is required in order to perceive the incentive Statutory pre-approval or prior certification required: statutory tax credits & incentives that require companies to meet additional approval qualifications within specific regulations Discretionary: Customized financial incentive packages that are negotiated with federal, state and local government agencies. Discretionary incentives allow governments to use money towards projects they consider strategic e.g. because the projects creates a high number of jobs, includes plans for significant future expansion or have other extraordinary benefits for local economic development (high-growth industry, high innovation intensity etc.). Discretionary incentives typically have a but for condition, meaning that they would not be awarded unless the company would consider different locations. Page 18

19 How might US tax reform impact the results of this study? The cost-model for this report was prepared in August 2017, four months before the bill was presented to US Congress for the final vote. At the time of writing the report, the final vote on the bill had not yet occurred. However, there was anticipation that the final legislation would include following provisions: Lower income tax rates. US tax reform proposals include a significant reduction in the business tax rate as well as individual tax rates. Any final legislation is expected to include a significant reduction in at least some statutory rates. Broader tax base. To pay for the proposed lower rates, US tax reform proposals include a wide array of base broadening provisions (e.g., limitations on deductions), although the border adjustment proposal is off the table. The base broadening proposals would extend to both business and individual taxation (and would come with a series of complex transition rules). New international tax system. There was consensus within the majority in moving towards a territorial system of taxation, with the imposition of a transition tax or toll charge on previously untaxed accumulated foreign earnings with the rate determined by whether the earnings are in cash or noncash assets. This measure is expected to create an incentive for US companies to repatriate assets accumulated abroad. If the final legislation includes the above-mentioned provisions, there could be two possible impacts on the results of the study: The corporate income tax rate has a small weight in the overall index (generally 1-5%, with the exception of Financial services where it accounts for 12% of the overall index). Therefore, a drop in the US federal rate would not have a material impact on the rankings for Canadian cities vs. US cities. Increased investment into the US could lead to further appreciation of the US Dollar, relative to the Canadian Dollar. This would increase the exchange rate differential and therefore cost differential between the US and Canada. Page 19

20 Food & beverage processing City Rank (1=best) Overall index Calgary s key assets Calgary Edmonton Toronto Saskatoon Grand Rapids Milwaukee Chicago Minneapolis Construction cost (16% below US comparison city average) No provincial/local sales tax and lowest property tax rate of all 8 cities (0.7%) Low electricity retail purchase prices (33% below median power price in sample) Competitive wages for supervisors (11% below median of sample) Capital Investment Tax Credit (CITC) program

21 Food & beverage processing Location index overview Food & beverage Summary Info Calgary s score Key findings Areas for improvement OVERALL Calgary is the most cost-competitive city in the analysis for food & beverage processing, consistently being among the lowest-cost options across every major cost factor, due to a favorable USD/CAD exchange rate. Calgary s cost advantage is sensitive to changes in the exchange rate. Non-cost business factors remain important if the Canadian dollar were to strengthen relative to the US dollar. Labour Calgary ranks 3 rd overall for labour costs, with lower overall industry wages and employer benefit costs across the Canadian cities. The average wage for machinists in Calgary is over 13% greater than the median wage for this occupation across all comparison locations. Real estate Calgary ranks just above the median real estate index, with lower construction costs. Industrial lease and land listings ranked among the highest cities. Taxes Calgary ranks 1 st overall for taxes, with no provincial/local sales tax and a personal property tax exemption for manufacturers. Though still relatively low compared to the other jurisdictions, the provincial CIT rate in Alberta is higher than Saskatchewan, which provides a rate reduction for manufacturers. Incentives Calgary ranks 5 th in terms of incentives. The benefit is driven by the CITC and Canada-Alberta Job Training Grant. In other cities analyzed, for a broader range of incentives. In the US jurisdictions, these include federal programs (NMTC) as well as property tax incentives. Transportation Calgary ranks 2 nd for transportation costs, benefiting from lower-cost local delivery services (local transportation sector wages). Canadian cities in general are hurt by low population density, which could mean higher outbound transport costs. Utilities Calgary ranks 1 st overall for utility costs, of the comparison cities, with the lowest average electricity rates. The average natural gas rate in Calgary is the 2 nd highest out of all comparison cities, partially due to the Carbon Levy. Page 21

22 Weights & index scores Food & beverage processing Food & beverage Index scores Factors Factor weight Sub-factor weight Index scores Calgary Edmonton Toronto Saskatoon Grand Rapids Milwaukee Chicago Minneapolis INDEX TOTAL 100% 100% Labour 37% Industry average wages 18% Labour cost (Supervisors) 5% Labour cost (Machinists) 11% Labour cost (Operators) 3% Payroll taxes - Federal * Health care - Employer * Real estate 13% Construction cost index 8% Real estate -- Rental rates 5% Real estate -- Land rates 0% Taxes 16% GST/HST or Sales tax rate 1% Corporate income tax rate 5% Local property tax rate 2% Taxes, % of GDP 8% Incentives 1% Estimated incentives benefit 1% Transportation 27% Transportation - Wages 22% Transportation - Pop. Proximity 5% Utilities 7% Electricity, US cents/kwh 4% Natural Gas, US dollars/mcf 3% Water, US dollars/1000 gallons 1% *Added to industry wages; Note: Figures may not sum due to rounding. Page 22

23 Absolute costs Food & beverage processing Food & beverage Factors Values Geography Units Labour Calgary Edmonton Toronto Saskatoon Grand Rapids Milwaukee Chicago Minneapolis Combined weighted average wages $39,654 $38,393 $37,803 $39,884 $49,126 $56,436 $52,137 $50,145 MSA USD / empl. Industry average wages $35,426 $34,248 $37,120 $33,709 $46,210 $55,183 $48,378 $42,896 MSA USD / empl. Labour cost (Supervisors) $55,158 $61,643 $50,364 $66,010 $59,790 $62,690 $62,070 $62,830 MSA USD / empl. Labour cost (Machinists) $48,095 $41,174 $44,079 $43,169 $35,222 $41,713 $39,129 $45,659 MSA USD / empl. Labour cost (Operators) $28,396 $25,569 $20,557 $28,784 $25,540 $30,406 $28,899 $31,385 MSA USD / empl. Payroll taxes - Federal $2,120 $2,053 $1,983 $2,133 $3,549 $4,069 $3,753 $3,647 Federal USD / empl. Health care - Employer $736 $713 $1,413 $740 $4,680 $4,666 $4,814 $4,320 State USD / empl. Real estate Taxes Construction cost index MSA Relative to US Real estate -- Rental rates $7.26 $7.62 $4.67 $6.46 $3.50 $4.30 $4.79 $6.67 MSA USD / sqft Real estate -- Land rates $527,112 $427,500 $698,412 $418,000 $42,371 $79,913 $210,309 $217,800 MSA USD / acre GST/HST or Sales tax rate 5.0% 5.0% 13.0% 11.0% 6.0% 5.5% 7.1% 7.1% Fed, state, loc. Statutory rate Corporate income tax rate 23.0% 23.0% 23.8% 20.9% 35.3% 35.0% 35.8% 35.4% Fed, state, loc. Statutory rate Local property tax rate 0.7% 0.8% 2.2% 1.5% 2.6% 1.3% 2.7% 2.0% MSA Statutory rate Taxes, % of GDP 22.0% 22.0% 27.4% 24.0% 24.8% 25.6% 25.5% 26.4% Fed, state, loc. Taxes/GDP Incentives Estimated incentives benefit -$1,434,801 -$1,434,801 -$89,500 -$820,038 -$3,687,907 -$2,482,992 -$3,436,266 -$2,544,322 MSA 30-yr NPV Transportation Transportation - Wages $41,944 $41,502 $35,365 $43,572 $51,163 $49,908 $52,410 $51,342 MSA USD/ empl. Transportation - Pop. Proximity MSA Miles Utilities Electricity, US cents/kwh MSA US cents/kwh Natural Gas, US dollars/mcf $3.77 $2.81 $2.60 $2.93 $3.33 $3.28 $2.40 $5.10 MSA USD/Mcf Water, US dollars/1000 gallons $8.97 $5.33 $9.61 $5.39 $3.42 $3.71 $7.64 $9.20 MSA USD/1000 gal *Added to industry wages; Note: Figures may not sum due to rounding. Page 23

24 Renewable energy component manufacturing City Rank (1=best) Overall index Toronto 1 91 Calgary Grand Rapids Chicago Milwaukee Columbus Calgary s key assets Construction cost (16% below US comparison city average) No provincial/local sales tax and low property tax rate (0.9%) Low electricity retail purchase prices (30% below median power price in sample) Competitive wages for team assemblers (17% below median of sample) Capital Investment Tax Credit (CITC) program Albany 7 131

25 Renewable energy component manufacturing Location index overview Ren. energy Summary Info Calgary s score Key findings Areas for improvement OVERALL Calgary is the second most cost-competitive city in the analysis for renewable energy component manufacturing, with comparatively lower wages, taxes, and utility costs. Calgary s cost advantage is sensitive to changes in the exchange rate. Non-cost business factors remain crucial in case the Canadian dollar were to strengthen relative to the US dollar. Labour Calgary ranks 2 nd for overall labour costs, with lower overall industry wages and employer benefit costs across comparison cities. The average wage for machinists in Calgary was the secondhighest among comparison cities. Real estate Calgary has the highest real estate costs among the comparison cities, due to high industrial lease and land rates. These rental rates are not offset by competitive construction costs. Industrial lease rates ranked 2 nd highest among comparison cities. Taxes Calgary ranks 1 st overall for taxes, with no provincial/local sales tax and a personal property tax exemption for manufacturers. Calgary has the lowest state/provincial CIT rate among the included jurisdictions, but should consider how this rate compares to other Canadian cities in the future. Incentives Calgary ranks 1 st in terms of incentives. The high score is driven by a combination of the Capital Investment Tax Credit (CITC) and the Scientific Research & Experimental Development credit. The sunset of the CITC is currently in Transportation Calgary has the highest transportation costs of the comparison cities, which is largely driven by outbound transportation costs (distance to consumers). Although transportation wages are competitive across comparison cities, Calgary s distance from population centres places it at a disadvantage compared to other cities. Utilities Calgary ranks 1 st overall for utility costs, of the comparison cities, with the lowest average electricity rates. The average natural gas rate in Calgary is the highest out of all comparison cities, partially due to the Carbon Levy. Page 25

26 Weights & index scores Renewable energy component manufacturing Ren. energy Index scores Factors Factor weight Sub-factor weight Index scores Toronto Calgary Grand Rapids Chicago Milwaukee Columbus Albany INDEX TOTAL 100% 100% Labour 61% Industry average wages 30% Labour cost (Supervisors) 4% Labour cost (Machinists) 13% Labour cost (Team assemblers) 14% Payroll taxes - Federal * Health care - Employer * Real estate 10% Construction cost index 4% Real estate -- Rental rates 5% Real estate -- Land rates 0% Taxes 15% GST/HST or Sales tax rate 1% Corporate income tax rate 5% Local property tax rate 1% Taxes, % of GDP 8% Incentives 2% Estimated incentives benefit 2% Transportation 10% Transportation - Wages 6% Transportation - Pop. Proximity 4% Utilities 2% Electricity, US cents/kwh 2% Natural Gas, US dollars/mcf 1% *Added to industry wages; Note: Figures may not sum due to rounding. Page 26

27 Absolute costs Renewable energy component manufacturing Ren. energy Factors Values Geography Units Labour Toronto Calgary Grand Rapids Chicago Milwaukee Columbus Albany Combined weighted average wages $42,040 $52,126 $58,804 $59,064 $63,061 $64,219 $70,995 MSA USD / empl. Industry average wages $39,608 $57,151 $63,521 $61,448 $65,723 $67,274 $75,135 MSA USD / empl. Labour cost (Supervisors) $50,364 $55,158 $59,790 $62,070 $62,690 $58,740 $72,060 MSA USD / empl. Labour cost (Machinists) $44,079 $48,095 $35,222 $39,129 $41,713 $41,099 $51,627 MSA USD / empl. Labour cost (Team assemblers) $24,983 $25,530 $30,305 $30,860 $36,053 $39,130 $32,290 MSA USD / empl. Payroll taxes - Federal $2,205 $2,787 $4,236 $4,245 $4,540 $4,618 $5,059 Federal USD / empl. Health care - Employer $1,571 $967 $4,680 $4,814 $4,666 $4,718 $5,298 State USD / empl. Real estate Taxes Construction cost index MSA Relative to US Real estate -- Rental rates $4.67 $7.26 $3.50 $4.79 $4.30 $3.75 $5.50 MSA USD / sqft Real estate -- Land rates $638,400 $261,594 $42,371 $210,309 $79,913 $97,232 $58,642 MSA USD / acre GST/HST or Sales tax rate 13.0% 5.0% 6.0% 7.1% 5.5% 7.4% 7.8% Fed, state, loc. Statutory rate Corporate income tax rate 23.8% 23.0% 35.3% 35.8% 35.0% 35.3% 36.0% Fed, state, loc. Statutory rate Local property tax rate 1.2% 0.9% 2.4% 2.5% 1.2% 1.7% 2.9% MSA Statutory rate Taxes, % of GDP 27.4% 22.0% 24.8% 25.5% 25.6% 24.7% 28.1% Fed, state, loc. Taxes/GDP Incentives Estimated incentives benefit -$4,774,437 -$6,692,097 -$3,529,083 -$3,036,235 -$2,568,937 -$3,332,211 -$4,249,567 MSA 30-yr NPV Transportation Transportation - Wages $35,365 $41,944 $51,163 $52,410 $49,908 $46,298 $50,857 MSA USD/ empl. Transportation - Pop. Proximity MSA Miles Utilities Electricity, US cents/kwh MSA US cents/kwh Natural Gas, US dollars/mcf $2.60 $3.77 $3.33 $2.40 $3.28 $3.65 $2.33 MSA USD/Mcf Page 27

28 Communication & navigation equip. manufacturing City Rank (1=best) Overall index Toronto 1 98 Calgary Albany Grand Rapids Salt Lake City Seattle Calgary s key assets Construction cost (16% below US comparison city average) No provincial/local sales tax and low property tax rate (0.7%) Low electricity retail purchase prices (23% below median power price in sample) Competitive team assembler wages (19% below median of sample) Capital Investment Tax Credit (CITC) program San Jose 7 177

29 Communication & navigation equip. manufacturing Location index overview Com. & nav. Summary Info Calgary s score Key findings Areas for improvement OVERALL Calgary is the second most cost-competitive city in the analysis for communication & navigational equipment manufacturing, with comparatively lower wages, taxes, utility costs, and higher incentives benefits. Calgary s cost advantage is sensitive to changes in the exchange rate. Non-cost business factors remain crucial in case the Canadian dollar were to strengthen relative to the US dollar. Labour Calgary ranks 2 nd overall for labour costs, with lower overall industry wages, team assembler wages, and employer benefit costs across comparison cities. The average wages for electrical engineers and machinists are close to the median wage across all comparison cities. Real estate Calgary ranks 5 th for real estate costs, with low construction costs. 3 rd highest industrial rental rate out of all comparison cities. Taxes Calgary ranks 1 st overall for taxes, with no provincial/local sales tax and a personal property tax exemption for manufacturers. Although Calgary still possesses the lowest state/provincial corporate income tax rate, it will need to consider how this rate compares to other Canadian cities in the future. Incentives Calgary ranks 1st in terms of incentives. The high score is driven by a combination of the Capital Investment Tax Credit (CITC) and the Scientific Research & Experimental Development credit. The sunset of the CITC is currently in Transportation Calgary has the highest transportation costs out of comparison cities, which is largely driven by its outbound transportation costs. Although transportation wages are below the average across comparison cities, Calgary s distance from population centres places it at a disadvantage compared to other cities. Utilities Calgary ranks 1 st overall for utility costs, of the comparison cities, with the lowest average electricity rates. The average natural gas rate in Calgary is the highest out of all comparison cities, partially due to the Carbon levy. Page 29

30 Weights & index scores Communication & navigation equip. manufacturing Com. & nav. Index scores Factors Factor weight Sub-factor weight Index scores Toronto Calgary Albany Grand Rapids Salt Lake City Seattle San Jose INDEX TOTAL 100% 100% Labour 69% Industry average wages 34% Labour cost (Electrical engineers) 10% Labour cost (Machinists) 15% Labour cost (Team assemblers) 9% Payroll taxes - Federal * Health care - Employer * Real estate 10% Construction cost index 6% Real estate -- Rental rates 4% Real estate -- Land rates 0% Taxes 14% GST/HST or Sales tax rate 1% Corporate income tax rate 5% Local property tax rate 1% Taxes, % of GDP 7% Incentives 3% Estimated incentives benefit 3% Transportation 3% Transportation - Wages 1% Transportation - Pop. Proximity 1% Utilities 1% Electricity, US cents/kwh 0% Natural Gas, US dollars/mcf 0% *Added to industry wages; Note: Figures may not sum due to rounding. Page 30

31 Absolute costs Communication & navigation equip. manufacturing Com. & nav. Factors Values Geography Units Labour Toronto Calgary Albany Grand Rapids Salt Lake City Seattle San Jose Combined weighted average wages $55,320 $60,950 $70,293 $74,650 $84,035 $90,853 $113,024 MSA USD / empl. Industry average wages $56,712 $65,399 $62,262 $83,902 $96,192 $93,296 $132,245 MSA USD / empl. Labour cost (Electrical engineers) $73,133 $83,590 $102,356 $77,618 $87,492 $112,769 $131,750 MSA USD / empl. Labour cost (Machinists) $44,079 $48,095 $51,627 $35,222 $42,497 $57,131 $51,038 MSA USD / empl. Labour cost (Team assemblers) $24,983 $25,530 $32,290 $30,305 $31,458 $38,262 $36,631 MSA USD / empl. Payroll taxes - Federal $2,901 $2,950 $5,009 $5,362 $6,035 $6,469 $8,079 Federal USD / empl. Health care - Employer $2,067 $1,137 $5,298 $4,680 $4,596 $5,314 $4,822 State USD / empl. Real estate Taxes Construction cost index MSA Relative to US Real estate -- Rental rates $4.67 $7.26 $5.50 $3.50 $5.41 $9.24 $11.74 MSA USD / sqft Real estate -- Land rates $698,412 $527,112 $58,642 $42,371 $251,064 $541,923 $759,240 MSA USD / acre GST/HST or Sales tax rate 13.0% 5.0% 7.8% 6.0% 6.5% 9.7% 8.4% Fed, state, loc. Statutory rate Corporate income tax rate 23.8% 23.0% 36.0% 35.3% 37.5% 35.3% 37.5% Fed, state, loc. Statutory rate Local property tax rate 2.2% 0.7% 3.2% 2.7% 1.5% 1.5% 1.3% MSA Statutory rate Taxes, % of GDP 27.4% 22.0% 28.1% 24.8% 23.8% 24.1% 25.5% Fed, state, loc. Taxes/GDP Incentives Estimated incentives benefit -$12,511,251 -$15,404,218 -$8,109,139 -$6,704,441 -$5,026,638 -$4,137,961 -$4,279,674 MSA 30-yr NPV Transportation Transportation - Wages $35,365 $41,944 $50,857 $51,163 $44,121 $49,318 $59,787 MSA USD/ empl. Transportation - Pop. Proximity MSA Miles Utilities Electricity, US cents/kwh MSA US cents/kwh Natural Gas, US dollars/mcf $2.60 $3.77 $2.33 $3.33 $2.98 $3.58 $2.84 MSA USD/Mcf Page 31

32 Drone manufacturing City Rank (1=best) Overall index Calgary Toronto Grand Rapids Salt Lake City Albany Seattle Calgary s key assets Construction cost (16% below US comparison city average) No provincial/local sales tax and competitive property tax rate (0.6%) Low electricity retail purchase prices (23% below median power price in sample) Competitive engineering wages (23% below median of sample) Capital Investment Tax Credit (CITC) program San Jose 7 176

33 Drone manufacturing Location index overview Drones Summary Info Calgary s score Key findings Areas for improvement OVERALL Calgary is the most cost-competitive city in the analysis for drone manufacturing, with comparatively lower wages, taxes, utility costs, and more generous incentives than the other comparison cities. Calgary s cost advantage is sensitive to changes in the exchange rate. Non-cost business factors remain crucial in case the Canadian dollar were to strengthen relative to the US dollar. Labour Calgary ranks 1 st overall for labour costs, with lower overall industry wages, engineering wages, and employer benefit costs across comparison cities. The average wage for machinists in Calgary ranked 4 th out of all seven comparison cities. Real estate Calgary ranks the 4 th for real estate costs, with low construction costs. Industrial lease rates are nearly 32% higher than the median rate across all cities. Taxes Calgary ranks 1 st overall for taxes, with no provincial/local sales tax and a personal property tax exemption for manufacturers. Although Calgary still possesses the lowest state/provincial corporate income tax rate, it will need to consider how this rate compares to other Canadian cities in the future. Incentives Calgary ranks 1st in terms of incentives. The high score is driven by a combination of the Capital Investment Tax Credit (CITC) and the Scientific Research & Experimental Development credit. The sunset of the CITC is currently in Transportation Calgary has the third highest transportation costs out of comparison cities, which is largely driven by its outbound transportation costs. Although transportation wages are competitive across comparison cities, Calgary s distance from population centres places it at a disadvantage compared to other cities. Utilities Calgary ranks 1 st overall for utility costs, of the comparison cities, with the lowest average electricity rates. The average natural gas rate in Calgary is the highest out of all comparison cities, partially due to the Carbon Levy. Page 33

34 Weights & index scores Drone manufacturing Drones Index scores Factors Factor weight Sub-factor weight Index scores Calgary Toronto Grand Rapids Salt Lake City Albany Seattle San Jose INDEX TOTAL 100% 100% Labour 60% Industry average wages 30% Labour cost (Aerospace engineers) 13% Labour cost (Machinists) 6% Labour cost (Team assemblers) 11% Payroll taxes - Federal * Health care - Employer * Real estate 14% Construction cost index 8% Real estate -- Rental rates 6% Real estate -- Land rates 0% Taxes 12% GST/HST or Sales tax rate 1% Corporate income tax rate 3% Local property tax rate 2% Taxes, % of GDP 6% Incentives 3% Estimated incentives benefit 3% Transportation 8% Transportation - Wages 5% Transportation - Pop. Proximity 3% Utilities 2% Electricity, US cents/kwh 2% Natural Gas, US dollars/mcf 1% *Added to industry wages; Note: Figures may not sum due to rounding. Page 34

35 Absolute costs Drone manufacturing Drones Factors Values Geography Units Labour Calgary Toronto Grand Rapids Salt Lake City Albany Seattle San Jose Combined weighted average wages $48,324 $49,848 $62,327 $69,718 $69,769 $96,220 $92,389 MSA USD / empl. Industry average wages $37,706 $42,798 $49,555 $61,042 $46,506 $87,048 $84,814 MSA USD / empl. Labour cost (Aerospace engineers) $66,732 $61,164 $86,420 $85,250 $107,539 $119,822 $116,630 MSA USD / empl. Labour cost (Machinists) $48,095 $44,079 $35,222 $42,497 $51,627 $57,131 $51,038 MSA USD / empl. Labour cost (Team assemblers) $25,530 $24,983 $30,305 $31,458 $32,290 $38,262 $36,631 MSA USD / empl. Payroll taxes - Federal $2,584 $2,614 $4,487 $5,018 $4,972 $6,850 $6,613 Federal USD / empl. Health care - Employer $897 $1,863 $4,680 $4,596 $5,298 $5,314 $4,822 State USD / empl. Real estate Taxes Construction cost index MSA Relative to US Real estate -- Rental rates $7.26 $4.67 $3.50 $5.41 $5.50 $9.24 $11.74 MSA USD / sqft Real estate -- Land rates $527,112 $698,412 $42,371 $251,064 $58,642 $541,923 $759,240 MSA USD / acre GST/HST or Sales tax rate 5.0% 13.0% 6.0% 6.5% 7.8% 9.7% 8.4% Fed, state, loc. Statutory rate Corporate income tax rate 23.0% 23.8% 35.3% 37.5% 36.0% 35.4% 37.5% Fed, state, loc. Statutory rate Local property tax rate 0.6% 2.2% 2.4% 1.5% 2.8% 1.5% 1.3% MSA Statutory rate Taxes, % of GDP 22.0% 27.4% 24.8% 23.8% 28.1% 24.1% 25.5% Fed, state, loc. Taxes/GDP Incentives Estimated incentives benefit -$9,708,451 -$7,366,385 -$8,186,943 -$4,986,900 -$9,076,452 -$4,222,790 -$6,267,672 MSA 30-yr NPV Transportation Transportation - Wages $41,944 $35,365 $51,163 $44,121 $50,857 $49,318 $59,787 MSA USD/ empl. Transportation - Pop. Proximity MSA Miles Utilities Electricity, US cents/kwh MSA US cents/kwh Natural Gas, US dollars/mcf $3.77 $2.60 $3.33 $2.98 $2.33 $3.58 $2.84 MSA USD/Mcf Page 35

36 Medical device manufacturing City Rank (1=best) Overall index Toronto 1 80 Vancouver 2 89 Calgary Albany Grand Rapids Salt Lake City Calgary s key assets Construction cost (16% below US comparison city average) No provincial/local sales tax and competitive property tax rate (0.8%) Low electricity retail purchase prices (30% below median power price in sample) Competitive team assembler wages (19% below median of sample) Capital Investment Tax Credit (CITC) program Minneapolis 7 139

37 Medical device manufacturing Location index overview Med. dev. Summary Info Calgary s score Key findings Areas for improvement OVERALL Calgary is the third most cost-competitive city in the analysis for medical device manufacturing, with comparatively lower taxes and utility costs, and higher incentives benefits. Calgary s cost advantage is sensitive to changes in the exchange rate. Non-cost business factors remain crucial in case the Canadian dollar were to strengthen relative to the US dollar. Labour Calgary ranks 3 rd for overall labour costs, with lower average wages for team assemblers and employee benefits payments. For both supervisors and industrial engineers, the average wage in Calgary is nearly equal to the median wage across all comparison cities. Real estate Calgary ranks 5 th for real estate costs, with low construction costs. Lease rates are >30% higher than the median rates across comparison cities. Taxes Calgary ranks 1 st overall for taxes, with no provincial/local sales tax and a personal property tax exemption for manufacturers. Although Calgary still possesses the lowest state/provincial corporate income tax rate, it will need to consider how this rate compares to other Canadian cities in the future. Incentives Calgary ranks 1st in terms of incentives. The high score is driven by a combination of the Capital Investment Tax Credit (CITC) and the Scientific Research & Experimental Development credit. The sunset of the CITC is currently in Transportation Calgary has the highest transportation costs out of comparison cities, which is largely driven by its outbound transportation costs. Although transportation wages are competitive across comparison cities, Calgary s distance from population centres places it at a disadvantage compared to other cities. Utilities Calgary ranks 1 st overall for utility costs, of the comparison cities, with the lowest average electricity rates. The average natural gas rate in Calgary is the highest out of all comparison cities, partially due to the Carbon Levy. Page 37

38 Weights & metrics Medical device manufacturing Med. dev. Index scores Factors Factor weight Sub-factor weight Index scores Toronto Vancouver Calgary Albany Grand Rapids Salt Lake City Minneapolis INDEX TOTAL 100% 100% Labour 60% Industry average wages 30% Labour cost (Industrial engineers) 5% Labour cost (Supervisors) 19% Labour cost (Team assemblers) 5% Payroll taxes - Federal * Health care - Employer * Real estate 10% Construction cost index 5% Real estate -- Rental rates 5% Real estate -- Land rates 0% Taxes 11% GST/HST or Sales tax rate 1% Corporate income tax rate 4% Local property tax rate 1% Taxes, % of GDP 5% Incentives 2% Estimated incentives benefit 2% Transportation 16% Transportation - Wages 3% Transportation - Pop. Proximity 13% Utilities 1% Electricity, US cents/kwh 1% Natural Gas, US dollars/mcf 0% *Added to industry wages; Note: Figures may not sum due to rounding. Page 38

39 Absolute costs Medical device manufacturing Med. dev. Factors Values Geography Units Labour Toronto Vancouver Calgary Albany Grand Rapids Salt Lake City Minneapolis Combined weighted average wages $36,369 $41,335 $46,561 $51,092 $55,617 $59,253 $71,894 MSA USD / empl. Industry average wages $28,448 $32,357 $46,288 $34,876 $49,643 $55,317 $75,791 MSA USD / empl. Labour cost (Industrial engineers) $71,091 $73,920 $77,562 $88,125 $78,554 $82,556 $93,073 MSA USD / empl. Labour cost (Supervisors) $50,364 $47,819 $55,158 $72,060 $59,790 $58,690 $62,830 MSA USD / empl. Labour cost (Team assemblers) $24,983 $35,250 $25,530 $32,290 $30,305 $31,458 $32,884 MSA USD / empl. Payroll taxes - Federal $1,907 $2,210 $2,490 $3,644 $4,010 $4,274 $5,192 Federal USD / empl. Health care - Employer $1,359 $767 $864 $5,298 $4,680 $4,596 $4,320 State USD / empl. Real estate Taxes Construction cost index MSA Relative to US Real estate -- Rental rates $4.67 $7.49 $7.26 $5.50 $3.50 $5.41 $6.67 MSA USD / sqft Real estate -- Land rates $698,412 $991,524 $527,112 $58,642 $42,371 $251,064 $217,800 MSA USD / acre GST/HST or Sales tax rate 13.0% 12.0% 5.0% 7.8% 6.0% 6.5% 7.1% Fed, state, loc. Statutory rate Corporate income tax rate 23.8% 21.9% 23.0% 36.0% 35.3% 37.5% 35.4% Fed, state, loc. Statutory rate Local property tax rate 2.2% 1.4% 0.8% 3.5% 2.9% 1.5% 2.2% MSA Statutory rate Taxes, % of GDP 27.4% 25.9% 22.0% 28.1% 24.8% 23.8% 26.4% Fed, state, loc. Taxes/GDP Incentives Estimated incentives benefit -$4,479,610 -$5,400,181 -$6,050,759 -$3,899,368 -$3,209,163 -$1,966,717 -$2,541,709 MSA 30-yr NPV Transportation Transportation - Wages $35,365 $42,567 $41,944 $50,857 $51,163 $44,121 $51,342 MSA USD/ empl. Transportation - Pop. Proximity MSA Miles Utilities Electricity, US cents/kwh MSA US cents/kwh Natural Gas, US dollars/mcf $2.60 $1.69 $3.77 $2.33 $3.33 $2.98 $5.10 MSA USD/Mcf Page 39

40 Distribution & logistics City Rank (1=best) Overall index Toronto 1 98 Saskatoon 2 99 Calgary Salt Lake City Edmonton Vancouver Chicago Calgary s key assets Competitive operator wages (17% below median of sample) Low construction costs (16% below US comparison city average) No provincial/local sales tax and low property tax rate (1.3%) Lowest electricity retail purchase prices (30% below median power price in sample) Seattle 8 136

41 Distribution Location index overview Distribution Summary Info Calgary s score Key findings Areas for improvement OVERALL Calgary is the third most cost-competitive city in the analysis for distribution, consistently being among the lowest-cost options across every major cost factor. Calgary s cost advantage is sensitive to changes in the exchange rate. Non-cost business factors remain crucial in case the Canadian dollar were to strengthen relative to the US dollar. Labour Calgary ranks 3 rd overall for labour costs, with lower average wages for operators and employee benefits payments. Average wages for supervisors and drivers are close to the median wage across all comparison cities, bringing the industry average wage up in Calgary. Real estate Calgary ranks 5 th for real estate costs, but maintains low construction costs. Industrial rental and land rates in Calgary are about 10% higher than the median comparison city. Taxes Calgary ranks 1 st overall for taxes, with no provincial/local sales tax. Though still relatively low, the provincial corporate tax rate in Alberta is still higher than that of Saskatoon, Toronto, and Vancouver. Incentives Calgary ranks 4th in terms of incentives. The Canada-Alberta Job Training grant is the only applicable incentives program of those analyzed. US cities analyzed for this sector offer a broader range of incentives, including e.g. federal programs (NMTC), or property tax incentives. Transportation Calgary ranks 3 rd for overall transportation costs, benefiting from lower-cost local delivery services (local transportation wages). Canadian cities in general are hurt by low population density, which could mean higher outbound transport costs. Utilities Calgary ranks 1 st overall for utility costs, with the lowest average electricity rates. The average natural gas rate in Calgary is the highest out of all comparison cities, partially due to the Carbon Levy. Page 41

42 Weights & index scores Distribution Distribution Index scores Factors Factor weight Sub-factor weight Index scores Toronto Saskatoon Calgary Salt Lake City Edmonton Vancouver Chicago Seattle INDEX TOTAL 100% 100% Labour 53% Industry average wages 26% Labour cost (Supervisors) 4% Labour cost (Drivers) 17% Labour cost (Operators) 6% Payroll taxes - Federal * Health care - Employer * Real estate 32% Construction cost index 8% Real estate -- Rental rates 23% Real estate -- Land rates 0% Taxes 11% GST/HST or Sales tax rate 2% Corporate income tax rate 2% Local property tax rate 2% Taxes, % of GDP 6% Incentives 0% Estimated incentives benefit 0% Transportation 0% Transportation - Wages 0% Transportation - Pop. Proximity 0% Utilities 4% Electricity, US cents/kwh 4% Natural Gas, US dollars/mcf 0% *Added to industry wages; Note: Figures may not sum due to rounding. Page 42

43 Absolute costs Distribution Distribution Factors Values Geography Units Labour Toronto Saskatoon Calgary Salt Lake City Edmonton Vancouver Chicago Seattle Combined weighted average wages $39,743 $39,991 $43,314 $49,587 $46,267 $45,688 $56,053 $62,849 MSA USD / empl. Industry average wages $27,821 $29,283 $39,457 $40,924 $36,660 $37,147 $44,760 $52,707 MSA USD / empl. Labour cost (Supervisors) $42,486 $38,021 $43,403 $55,197 $45,632 $38,944 $58,106 $63,148 MSA USD / empl. Labour cost (Drivers) $34,941 $45,138 $41,947 $41,500 $44,011 $41,861 $49,210 $48,530 MSA USD / empl. Labour cost (Operators) $48,346 $46,378 $40,034 $39,109 $51,821 $51,585 $47,966 $52,992 MSA USD / empl. Payroll taxes - Federal $2,084 $2,138 $2,316 $3,587 $2,474 $2,443 $4,031 $4,479 Federal USD / empl. Health care - Employer $1,485 $742 $804 $4,596 $859 $848 $4,814 $5,314 State USD / empl. Real estate Taxes Construction cost index MSA Relative to US Real estate -- Rental rates $4.67 $6.46 $7.26 $5.41 $7.62 $7.49 $4.79 $9.24 MSA USD / sqft Real estate -- Land rates $698,412 $418,000 $527,112 $251,064 $427,500 $991,524 $210,309 $541,923 MSA USD / acre GST/HST or Sales tax rate 13.0% 11.0% 5.0% 6.5% 5.0% 12.0% 7.1% 9.7% Fed, state, loc. Statutory rate Corporate income tax rate 25.4% 24.9% 25.8% 39.5% 25.8% 24.9% 42.6% 44.7% Fed, state, loc. Statutory rate Local property tax rate 2.2% 1.5% 1.3% 1.5% 1.5% 1.4% 4.1% 1.5% MSA Statutory rate Taxes, % of GDP 27.4% 24.0% 22.0% 23.8% 22.0% 25.9% 25.5% 24.1% Fed, state, loc. Taxes/GDP Incentives Estimated incentives benefit -$125,838 -$125,838 -$188,420 -$472,077 -$188,420 -$129,547 -$415,632 -$606,543 MSA 30-yr NPV Transportation Transportation - Wages $35,365 $43,572 $41,944 $44,121 $41,502 $42,567 $52,410 $49,318 MSA USD/ empl. Transportation - Pop. Proximity MSA Miles Utilities Electricity, US cents/kwh MSA US cents/kwh Natural Gas, US dollars/mcf $2.60 $2.93 $3.77 $2.98 $2.81 $1.69 $2.40 $3.58 MSA USD/Mcf Page 43

44 Research and development City Rank (1=best) Overall index Calgary s key assets Calgary Vancouver Saskatoon Albany Columbus Seattle San Jose Competitive natural science manager wages (43% below median of sample) and engineer wages (9% below median of sample) Construction cost (16% below US comparison city average) 3rd lowest commercial rental rates out of all 7 comparison cities. No provincial/local sales tax Low electricity retail purchase prices (42% below median power price in sample)

45 Research and development Location index overview R&D Summary Info Calgary s score Key findings Areas for improvement OVERALL Calgary is the most cost-competitive city in the analysis for research and development, consistently being among the lowestcost options across nearly every major cost factor. Calgary s cost advantage is sensitive to changes in the exchange rate. Non-cost business factors remain crucial in case the Canadian dollar were to strengthen relative to the US dollar. Labour Calgary ranks 3 rd for overall labour costs, with lower overall industry wages, wages for natural science managers and engineers, and employer benefits costs. The average wage for lab technicians is about 7% higher than the median wage for this occupation across all comparison cities. Real estate Calgary ranks 3 rd for real estate costs, with low commercial rental rates. Commercial land rates are 70% higher in Calgary than the median comparison city. Taxes Calgary ranks 1 st overall for taxes, with no provincial/local sales tax and a competitive local property tax rate. Calgary s provincial corporate tax rate is higher than that of Saskatoon and Vancouver. Incentives Calgary ranks 6th in terms of incentives. The positive impact of the SR&ED program is limited by a low estimated tax liability for an R&D centre. In other cities analyzed, R&D centres are eligible for a broader range of incentives, e.g. investment tax credits, job-based incentives. Transportation Calgary has the lowest transportation cost index out of all comparison cities, which is largely driven by its competitive inbound transportation costs. Canadian cities are placed at a comparative disadvantage to US cities for outbound transportation costs due to their lower population density. Utilities Calgary ranks 1 st overall for utility costs, of the comparison cities, with the lowest average electricity rates. The average natural gas rate in Calgary is the 3 rd highest out of all comparison cities, partially due to the Carbon Levy. Page 45

46 Weights & index scores Research and development R&D Index scores Factors Factor weight Sub-factor weight Index scores Calgary Vancouver Saskatoon Albany Columbus Seattle San Jose INDEX TOTAL 100% 100% Labour 83% Industry average wages 41% Labour cost (Natural science managers) 12% Labour cost (Mechanical engineers) 16% Labour cost (Technicians) 13% Payroll taxes - Federal * Health care - Employer * Real estate 12% Construction cost index 1% Real estate -- Rental rates 11% Real estate -- Land rates 0% Taxes 3% GST/HST or Sales tax rate 0% Corporate income tax rate 1% Local property tax rate 0% Taxes, % of GDP 1% Incentives 1% Estimated incentives benefit 1% Transportation 1% Transportation - Wages 1% Transportation - Pop. Proximity 0% Utilities 1% Electricity, US cents/kwh 0% Natural Gas, US dollars/mcf 0% *Added to industry wages; Note: Figures may not sum due to rounding. Page 46

47 Absolute costs Research and development R&D Factors Values Geography Units Labour Calgary Vancouver Saskatoon Albany Columbus Seattle San Jose Combined weighted average wages $61,441 $60,032 $61,082 $98,387 $99,201 $115,903 $162,673 MSA USD / empl. Industry average wages $48,786 $54,538 $56,047 $78,568 $94,427 $110,248 $182,514 MSA USD / empl. Labour cost (Natural science managers) $71,383 $68,031 $66,646 $155,060 $124,320 $149,460 $170,350 MSA USD / empl. Labour cost (Mechanical engineers) $75,862 $65,443 $59,756 $92,890 $83,300 $96,360 $121,470 MSA USD / empl. Labour cost (Technicians) $53,772 $43,133 $50,204 $50,184 $46,389 $53,449 $65,889 MSA USD / empl. Payroll taxes - Federal $2,950 $2,950 $2,950 $7,005 $7,104 $8,249 $9,912 Federal USD / empl. Health care - Employer $1,147 $1,119 $1,140 $5,298 $4,718 $5,314 $4,822 State USD / empl. Real estate Taxes Construction cost index MSA Relative to US Real estate -- Rental rates $27.21 $31.56 $31.16 $16.90 $22.62 $35.36 $66.11 MSA USD / sqft Real estate -- Land rates $1,023,286 $1,931,185 $513,000 $141,135 $297,298 $611,280 $3,125,000 MSA USD / acre GST/HST or Sales tax rate 5.0% 12.0% 11.0% 7.8% 7.4% 9.7% 8.4% Fed, state, loc. Statutory rate Corporate income tax rate 24.0% 23.3% 23.3% 38.3% 41.7% 63.3% 39.4% Fed, state, loc. Statutory rate Local property tax rate 1.3% 1.4% 1.5% 2.7% 1.6% 1.5% 1.3% MSA Statutory rate Taxes, % of GDP 22.0% 25.9% 24.0% 28.1% 24.7% 24.1% 25.5% Fed, state, loc. Taxes/GDP Incentives Estimated incentives benefit -$1,786,563 -$1,752,917 -$2,018,403 -$5,063,808 -$4,498,792 -$4,001,150 -$4,562,355 MSA 30-yr NPV Transportation Transportation - Wages $41,944 $42,567 $43,572 $50,857 $46,298 $49,318 $59,787 MSA USD/ empl. Transportation - Pop. Proximity MSA Miles Utilities Electricity, US cents/kwh MSA US cents/kwh Natural Gas, US dollars/mcf $3.77 $1.69 $2.93 $2.56 $4.36 $4.11 $3.12 MSA USD/Mcf Page 47

48 Back/middle office financial services City Rank (1=best) Overall index Vancouver 1 90 Edmonton 2 93 Calgary Toronto Salt Lake City Calgary s key assets Competitive back office wages (11% below median of sample) Construction cost (16% below US comparison city average) No provincial/local sales tax and low property tax rate (1.3%) Low electricity retail purchase prices (32% below median power price in sample) Columbus Chicago 7 172

49 Back/middle office financial services Location index overview Fin. Services Summary Info Calgary s score Key findings Areas for improvement OVERALL Calgary is the third most cost-competitive city in the analysis for back/middle office financial services, with comparatively lower taxes and utility costs. Calgary s cost advantage is sensitive to changes in the exchange rate. Non-cost business factors remain crucial in case the Canadian dollar were to strengthen relative to the US dollar. Labour Calgary ranks 4 th overall for labour costs, with lower overall industry wages and employer benefit costs across comparison cities. The average wages for supervisors and customer service representatives are close to the median wages in these occupations across all comparison cities. Real estate Calgary ranks 1 st for real estate costs, with low construction costs and rental rates. Land rates in Calgary are about equal to the median rental rate across all cities. Taxes Calgary ranks 1 st overall for taxes, with no provincial/local sales tax and a competitive combined corporate income tax rate. Although Calgary still has a low combined corporate income tax rate, Vancouver and Toronto have even lower rates. Incentives Calgary ranks 4th in terms of incentives. The Canada-Alberta Job Training grant is the only applicable incentives program of those analyzed. Other cities analyzed for this sector offer a broader range of incentives (e.g. value based on job creation, withholding tax credits, and income tax exemptions). Transportation Calgary ranks 3 rd for transportation costs, which is largely driven by its outbound transportation costs. Canadian cities are at a competitive disadvantage to US cities for outbound transportation costs due to lower population density. Utilities Calgary ranks 1 st overall for utility costs, of the comparison cities, with the lowest average electricity rates. The average natural gas rate in Calgary is the 3 rd highest out of all comparison cities, partially due to the Carbon Levy. Page 49

50 Weights & index scores Back/middle office financial services Fin. services Index scores Factors Factor weight Sub-factor weight Index scores Vancouver Edmonton Calgary Toronto Salt Lake City Columbus Chicago INDEX TOTAL 100% 100% Labour 58% Industry average wages 29% Labour cost (Supervisors) 11% Labour cost (Back office) 15% Labour cost (Customer service) 4% Payroll taxes - Federal * Health care - Employer * Real estate 11% Construction cost index 7% Real estate -- Rental rates 3% Real estate -- Land rates 0% Taxes 30% GST/HST or Sales tax rate 1% Corporate income tax rate 12% Local property tax rate 2% Taxes, % of GDP 15% Incentives 1% Estimated incentives benefit 1% Transportation 0% Transportation - Wages 0% Transportation - Pop. Proximity 0% Utilities 0% Electricity, US cents/kwh 0% Natural Gas, US dollars/mcf 0% *Added to industry wages; Note: Figures may not sum due to rounding. Page 50

51 Absolute costs Back/middle office financial services Fin. services Factors Values Geography Units Labour Vancouver Edmonton Calgary Toronto Salt Lake City Columbus Chicago Combined weighted average wages $39,626 $37,857 $43,323 $41,788 $62,963 $72,238 $82,429 MSA USD / empl. Industry average wages $42,608 $39,954 $43,668 $48,002 $62,834 $77,329 $92,096 MSA USD / empl. Labour cost (Supervisors) $35,758 $34,558 $43,479 $33,115 $55,197 $55,563 $58,106 MSA USD / empl. Labour cost (Back office) $27,978 $25,865 $24,838 $22,885 $41,833 $43,198 $46,630 MSA USD / empl. Labour cost (Customer service) $28,130 $28,283 $34,724 $25,644 $37,963 $42,325 $47,508 MSA USD / empl. Payroll taxes - Federal $2,119 $2,024 $2,317 $2,192 $4,538 $5,188 $5,906 Federal USD / empl. Health care - Employer $735 $703 $804 $1,562 $4,596 $4,718 $4,814 State USD / empl. Real estate Taxes Construction cost index MSA Relative to US Real estate -- Rental rates $29.11 $25.44 $24.50 $24.69 $28.94 $22.62 $28.24 MSA USD / sqft Real estate -- Land rates $1,931,185 $874,000 $1,023,286 $1,915,966 $324,189 $297,298 $6,318,037 MSA USD / acre GST/HST or Sales tax rate 12.0% 5.0% 5.0% 13.0% 6.5% 7.4% 7.1% Fed, state, loc. Statutory rate Corporate income tax rate 23.3% 24.0% 24.0% 23.6% 38.8% 37.8% 39.8% Fed, state, loc. Statutory rate Local property tax rate 1.4% 1.5% 1.3% 2.2% 1.5% 2.0% 3.0% MSA Statutory rate Taxes, % of GDP 25.9% 22.0% 22.0% 27.4% 23.8% 24.7% 25.5% Fed, state, loc. Taxes/GDP Incentives Estimated incentives benefit -$7,007,478 -$403,758 -$403,758 -$269,172 -$1,116,075 -$4,834,755 -$295,019 MSA 30-yr NPV Transportation Transportation - Wages $42,567 $41,502 $41,944 $35,365 $44,121 $46,298 $52,410 MSA USD/ empl. Transportation - Pop. Proximity MSA Miles Utilities Electricity, US cents/kwh MSA US cents/kwh Natural Gas, US dollars/mcf $1.69 $3.12 $3.77 $2.60 $4.00 $4.36 $3.20 MSA USD/Mcf Page 51

52 APPENDIX Methodology details

53 Metropolitan area definitions Metropolitan Statistical Area (MSA) UNITED STATES Albany-Schenectady-Troy Chicago-Naperville-Elgin Columbus Grand Rapids Milwaukee-Waukesha-West Allis Minneapolis-St Paul-Bloomington Salt Lake City San Jose Seattle-Tacoma-Bellevue CANADA Counties/Key Cities NY: Albany, Rensselaer, Saratoga, Schenectady, Schoharie IL: Cook, DeKalb, DuPage, Grundy, Kane, Kendall, Lake, McHenry, Will; IN: Jasper, Lake, Newton, Porter; WI: Kenosha OH: Delaware, Fairfield, Franklin, Hocking, Licking, Madison, Morrow, Perry, Pickaway, Union MI: Barry, Kent, Montcalm, Ottawa WI: Milwaukee, Ozaukee, Washington, Waukesha MN: Anoka, Carver, Chisago, Dakota, Hennepin, Isanti, Le Sueur, Mille Lacs, Ramsey, Scott, Sherburne, Sibley, Washington, Wright; WI: Pierce, St. Croix UT: Salt Lake, Tooele CA: San Benito, Santa Clara WA: King, Pierce, Snohomish Edmonton Key cities: Edmonton, Fort Saskatchewan, Leduc, Spruce Grove, St. Albert, Calgary Saskatoon Toronto Vancouver Key cities: Airdrie, Calgary, Chestermere Key cities: Martensville, Saskatoon, Warman Key cities: Brampton, Markham, Mississauga, Pickering, Toronto, Vaughan Key cities: Burnaby, Coquitlam, Langley, Maple Ridge, New Westminster, North Vancouver, Pitt Meadows, Port Coquitlam, Port Moody, Richmond, Surrey, Vancouver, White Rock Source: Bureau of Labor Statistics, May 2016 Metropolitan and Nonmetropolitan Area Definitions; StatCan, Statistical Area Classification by Province and Territory - Variant of SGC Page 53

54 Exchange rate The analysis uses the following exchange rate: 1 Canadian Dollar = 0.76 US Dollar Page 54

55 Labour Industry average wages Average per worker Labour Info United States Canada CED Pillar Industry Name NAICS code(s) Source US Census County Business Patterns, Average employee earnings 2015 data (most recent available) Average annual salary, by sector StatCan Labour Force Survey (LFS), Employee earnings by type of work 2015 data (to match US); Custom data order Average weekly salary, by sector Agri-business Renewable energy Food & beverage processing Renewable energy component manufacturing 311, Estimate Aggregated average based on total number of full- and part-time employees 3-digit NAICS Converted to annual (* 52 weeks) Aggregated average based on total number of full- and part-time employees 3-digit NAICS Clean energy technology Professional services Research & development Back/middle office financial services , 522 Industry Private sector Private sector Transportation & Logistics Distribution centre 493 Geography MSA MSA Advanced Manufacturing Communication & navigation equipment 334 Notes Suppressed (non-disclosed) data were imputed from disclosed prior years and adjusted for inflation. Suppressed (non-disclosed) data were imputed from disclosed prior years and adjusted for inflation. Advanced Manufacturing Medical Device Manufacturing Drone manufacturing Medical device manufacturing Page 55

56 Labour Occupational wages Average per worker Labour Info United States Canada Source Estimate Industry Geo Notes BLS Occupational Employment Survey 2016 data (most recent available) Average annual salary, by sector Aggregated average based on total number of full- and part-time employees BLS reports industry employment by occupation, nationally. Three representative occupations were chosen for each target sector, composing at least 5% of the total employment and falling near the 25 th, 50 th, and 75 th percentile. StatCan MSA MSA Suppressed (non-disclosed) data were imputed from disclosed prior years and adjusted for inflation. Labour Force Survey (LFS), Employee earnings by type of work 2016 data (most recent available); Custom data order Average weekly salary, by sector Converted to annual (* 52 weeks) Aggregated average based on total number of full- and part-time employees EY used the ERI Platform Library SOC NOC cross-walk to match US occupations with Canadian occupations. EY then compared occupation profiles, including wages and job descriptions to further match between codes. Suppressed (non-disclosed) data were imputed from disclosed prior years and adjusted for inflation. Target sector Food & beverage processing Renewable energy component mfg Comm & navigation equip mfg Drone mfg Medical device mfg Distribution centre Back/middle office financial services R&D Representative occupations Packaging & filling machine operators Machinists First-line supervisors of production workers Team Assemblers Machinists First-line supervisors of production workers Team assemblers Machinists Electrical engineers Team assemblers Machinists Aerospace engineers Team assemblers First-line supervisors of production workers Industrial engineers Industrial truck operators Heavy & tractor-trailer truck drivers First-line supervisors of labourers Customer service representatives Bill & account collectors First-line supervisors of office & admin workers Biological technicians Mechanical engineers Natural sciences managers Page 56

57 Labour Employer-paid payroll taxes & health Average per worker Labour Info United States Canada United States Source Estimate EY research, current rates Kaiser Foundation, Medical Expenditure Panel Survey, 2015 Average employer-paid payroll tax and private health insurance contribution EY research, current rates Average employer-paid payroll tax and private health insurance contribution Statutory tax rate Maximum base threshold Social Security 6.20% $118,500 Medicare 1.45% N/A Industry N/A N/A Geography Nationwide State Nationwide Provincial (Ontario only see note below) Federal Unemployment Tax 6.00% $7,000 Notes Estimated payroll tax obligations are based on industry average compensation and statutory federal payroll tax rates/ maximum wage thresholds. The employer portion of the average single premium per enrolled employee is used to estimate employer-based healthcare costs for employees. Estimated payroll tax obligations are based on industry average wages and statutory federal payroll tax rates/ maximum wage thresholds. Only Ontario has a provincial-wide payroll tax for healthcare (Ontario Employer Health Tax). A 1.95% rate applied to estimated payroll was used to determine the average EHT obligation for each employee in Ontario. We estimate that approximately 2% of the industry average compensation amounts to the typical employer portion of Canadian private health insurance contributions. Canada Canadian Pension Plan Unemployment Insurance Statutory tax rate Maximum base threshold 4.95% C$51, % C$50,800 Page 57

58 Real estate Construction cost Construction materials & installation costs, relative to the US avg. Real estate Info United States Canada Source Estimate Industry Geography Notes RSMeans City Cost Indexes 2016 report City cost index, a percentage ratio of a specific city s cost to the US national average cost in the USD N/A N/A City City Index values compare the costs of materials and installation of construction inputs across a composite of 9 types of buildings (including factories and offices). All values were calculated in local currencies so that applying current exchange rates to the percentage ratios will provide an accurate cost adjustment between locales. RSMeans City Cost Indexes 2016 report City cost index, a percentage ratio of a specific city s cost to the US national average cost in the CAD City Index, USD 2016 Albany-Schenectady-Troy 102 Calgary 84 Chicago-Naperville-Elgin 118 Columbus 94 Edmonton 84 Grand Rapids 92 Milwaukee-Waukesha-West Allis 102 Minneapolis-St Paul-Bloomington 109 Salt Lake City 89 San Jose 118 Saskatoon 78 Seattle-Tacoma-Bellevue 103 Toronto 84 Vancouver 80 Page 58

59 Real estate Average rental rates USD per square foot Real estate Info United States Canada Source CBRE Commercial Reports (Q3 2017) Minneapolis: JLL Commercial Report (Q3 2017) JLL Industrial Reports (Q1/Q2 2017) Albany: CoStar Industrial Statistics (Q2 2017) CBRE Commercial Reports (Q3 2017) JLL Industrial Reports (Q1/Q2 2017) Saskatoon: Colliers Industrial Market (Q3 2017) and Colliers Office Market (Q2 2017) Reported average asking rent for each market Reported average asking rent for each market Estimate Industrial = Net rent Commercial = Gross rent Industrial = Net rent Commercial = Gross rent Manufacturing: Industrial; Suburbs Manufacturing: Industrial; Suburbs Logistics: Industrial; Suburbs Logistics: Industrial; Suburbs Industry R&D Commercial: Class A Office; Downtown & Suburbs R&D Commercial: Class A Office; Downtown & Suburbs Back Office Commercial: Class A Office; Suburbs Back Office Commercial: Class A Office; Suburbs Geography Notes MSA MSA Based on most recent reports Breakdown of industrial properties between manufacturing and warehouse space was not available in the Canadian reports. Therefore, the index uses the overall industrial average for both manufacturing & logistics. Page 59

60 Real estate Land list/sale prices USD per acre Real estate Info United States Canada Source CoStar COMPS reports Realnet (Altusgroup) Saskatoon: Cushman & Wakefield Median listing (or sales) price Median listing (or sales) price Estimate Manufacturing: Industrial Manufacturing: Industrial Industry Logistics: Industrial Commercial: Commercial Logistics: Industrial Commercial: Commercial MSA MSA Geography Notes Based on most recent reports (accessed Q3 2017) Based on most recent reports (accessed Q4 2017) Page 60

61 Taxes Sales, GST/HST/PST rates Statutory rates Taxes Info United States Canada Source Estimate N.Y. Tax Law, 1110 (New York) Wisconsin (Wisconsin) Mich. Comp. Laws (1) (Michigan) Minn. State 27A.62(1) and (1a), Minn Const Art. XI, 15 (Minnesota) Utah Code Ann (2) (Utah) Wash. Rev. Code (Washington) Ohio Rev. Code Ann (Ohio) 35 ILCS 105/3-10 (Illinois) Cal. Rev. & Tax Code 6051, Cal. Rev. & Tax Code , Cal. Const. art. XIII, 35, Cal. Const. art. XIII, 36, Cal. Rev. & Tax Code , Cal. Rev. & Tax Code , Cal. Rev. & Tax Code 6201, Cal. Rev. & Tax Code , Cal. Rev. & Tax Code , Cal. Gov. Code (California) Average combined federal, state, and local sales & use tax rate across all counties within a given MSA. Industry N/A N/A Geography MSA MSA Canada Revenue Agency, GST and HST Rates (Alberta, Saskatchewan, Ontario, British Columbia) Reflects GST, PST, and HST where applicable. Notes Current statutory rate Current statutory rate Combined sales tax rate Albany-Schenectady-Troy 7.80% Calgary 5.00% Chicago-Naperville-Elgin 7.09% Columbus 7.38% Edmonton 5.00% Grand Rapids 6.00% Milwaukee-Waukesha-West Allis 5.48% Minneapolis-St Paul-Bloomington 7.11% Salt Lake City 6.53% San Jose 8.38% Saskatoon 11.00% Seattle-Tacoma-Bellevue 9.67% Toronto 13.00% Vancouver 12.00% Page 61

62 Taxes Corporate income tax rates Statutory rates Taxes Info United States Canada Source Sec. 210, Tax Law (New York) Sec , Wis. Stats (Wisconsin) Sec (1) (Michigan) Sec (1), MN Stats. (Minnesota) Sec , Utah Code Ann.; Sec , Utah Code Ann (Utah) Sec , Ohio R.C. (Ohio) 35 ILCS 5/201(b)(13) and (14); 35 ILCS 5/201(d) (Illinois) Sec , Rev. & Tax. Code (California) Canada Revenue Agency, Corporation Tax Rates Albany-Schenectady- Troy Combined CIT rate General Combined CIT rate Mfg. 41.5% 41.5% Calgary 27.0% 27.0% Chicago-Naperville-Elgin 44.5% 44.5% Columbus 37.5% 37.5% Edmonton 27.0% 27.0% Grand Rapids 42.5% 42.5% Milwaukee-Waukesha- West Allis Minneapolis-St Paul- Bloomington 42.9% 35.4% 44.8% 44.8% Salt Lake City 40.0% 40.0% Estimate Combined federal, state, and local tax rate. Includes local tax of central city, if applicable. Industry N/A N/A Geography MSA MSA Combined federal and provincial tax rate. Notes Current statutory rate, as of Q Current statutory rate as of Q San Jose 43.8% 43.8% Saskatoon 26.0% 25.8% Seattle-Tacoma- Bellevue 35.0% 35.0% Toronto 26.5% 25.0% Vancouver 26.0% 26.0% Page 62

63 Taxes Local property tax rates Statutory rates and effective tax rates Taxes Info United States Canada Source Estimate Industry EY property tax team analysis of local property tax returns Average effective property tax rates (aggregate property taxes paid for commercial or industrial property / aggregate market value of this property) Manufacturing: Reflects statutory exemptions on personal property for manufacturers, where applicable Logistics: Full property tax Commercial: Full property tax Geography MSA MSA Notes EY real estate team analysis based on local property tax rates Statutory property tax rates Manufacturing: Reflects statutory exemptions on personal property for manufacturers, where applicable Logistics: Full property tax Commercial: Specific rates apply within applicable locations The average property tax rate for the Calgary area includes the City of Calgary property tax and an estimate of the average effective Calgary Business Tax rate. Local property tax rate Albany-Schenectady-Troy 5.82% Calgary 1.30% Chicago-Naperville-Elgin 5.01% Columbus 3.40% Edmonton 1.50% Grand Rapids 4.87% Milwaukee-Waukesha-West Allis 2.34% Minneapolis-St Paul-Bloomington 3.90% Salt Lake City 1.53% San Jose 1.28% Saskatoon 1.50% Seattle-Tacoma-Bellevue 1.48% Toronto 2.20% Vancouver 1.40% Page 63

64 Taxes Effective tax rates Total tax collections as a % of GDP Taxes Info United States Canada Source Estimate US Census Bureau, 2016 Annual Survey of State Government Tax Collections US Census Bureau, 2014 State and Local Government Finances Survey Congressional Budget Office, An Update to the Budget and Economic Outlook: 2017 to 2027, June 2017 US Bureau of Economic Analysis, National Income and Product Accounts Tables (NIPA), Statewide local taxes / State GDP + State taxes / State GDP + Federal taxes / National GDP Total taxes, % of GDP Industry N/A N/A StatCan, Table : Revenue, expenditure and budgetary balance - General governments, provincial and territorial economic accounts StatCan, Table : Gross domestic product, income-based, provincial and territorial Provincial-wide local taxes / Provincial GDP + Provincial taxes / Provincial GDP + Federal taxes / National GDP Total taxes, % of GDP Total taxes, % of GDP Albany-Schenectady-Troy 28.13% Calgary 21.96% Chicago-Naperville-Elgin 25.49% Columbus 24.74% Edmonton 21.96% Grand Rapids 24.83% Milwaukee-Waukesha-West Allis 25.60% Minneapolis-St Paul-Bloomington 26.44% Salt Lake City 23.76% San Jose 25.45% Saskatoon 24.01% Seattle-Tacoma-Bellevue 24.13% Toronto 27.40% Vancouver 25.93% Geography State Province Notes Statewide local tax collections from 2014 (most recent available) State and federal tax collections from 2016 (most recent available) Federal, provincial, and province-wide local tax collections from 2015 (most recent available) Page 64

65 Incentives Provincial/state & local benefits NPV over 30-years Incentives Info United States Canada Source Assumptions Information on federal incentives opportunities was obtained from Federal Department of Revenue Eligibility factors, likelihood of award, and benefit values were obtained through discussions and review with EY Subject Matter Experts for Work Opportunity Tax Credit (WOTC), New Market Tax Credit (NMTC), Federal R&D Tax Credit, and Federal Workforce assistance NMTC likelihood factor: eligible area per MSA determined with the mapping tool of the US Department of Treasury Community Development Financial Institutions Fund Information on state and local incentives opportunities are from State and Local Economic Development agencies, review of documentation of State s Department of Revenue and overview provided by EY s State Desk Network Information on state and local incentives opportunities from Provincial and Local Economic Development agencies, review of Provincial Departments of Revenue documentation and overview provided by EY s Canada National Incentives Leader. Combined rates for the Scientific Research and Experimental Development Tax Incentive Program (SR&ED) were obtained from the Invest in Canada agency For each industry, we consider an average location project in the given sector in terms of capital investment, job creation, R&D operating expenditures. Depending on the industry, the capital investment considered ranges from $4.8m to $34.1m, involving a job creation from 100 to 300 net new hires. For sectors 333, 334, 336, 339 and 541, an annual R&D spend ranging from $1.7m to $14m was considered, depending on the average research-intensity of the industry. The same project parameters are applied to estimate the incentives in each of the jurisdictions. The company investing is headquartered outside of North America and has no prior presence in Canada and the United States. It is considering several locations. The project is a greenfield investment, i.e. built from zero. It is not an expansion of a pre-existing facility. The analysis assumes a 2-year construction and fit-out period, with operations starting in year 3. Estimates Note Incentives calculated separately for each location, including locally applicable statutory and commonly awarded discretionary programs. Same eligible capital expenditure, and job creation applied for each sector. For discretionary programs, conservative high-level estimates (volume and duration) applied based on historical awards to projects with similar parameters Values of the overall estimated award per location (i.e. including federal, state and local component) were recalculated as net present values, using a 5% discount rate over a period of 30 years The incentives listed in this annex and applied to the cost benchmark are not an exhaustive list of statutory and discretionary programs available. Programs were only included if applicable for given industry and model project. Estimated value benefits are determined based on comparable projects. Page 65

66 Federal - U.S. and Canada Incentives overview Incentives State / Province Canada - Federal Industries Analyzed (NAICS) 333, 334, 336, 339, 541 Program name Category Type Description Scientific Research & Experimental Development US - Federal All Work Opportunity Tax Credit US - Federal All Federal Workforce Assistance US - Federal All New Market Tax Credit (NMTC) US - Federal 333, 334, 336, 339, 541 Research and Development Tax Credit Statutory Income Tax Credit Statutory Income Tax Credit Discretionary Cash Grant Discretionary Income Tax Credit Statutory Income Tax Credit The program is designed to encourage Canadian businesses across all sectors to conduct research and development, allowing a portion of eligible R&D expenditures to be offset against federal income tax. Some provinces also offer extension to the federal program, allowing to offset expenses against provincial income tax. Tax credit available to companies that hire and retain veterans, youth and other individuals from the target groups. Federal training dollars that are awarded to eligible State Workforce Agencies. The program provides a credit against federal income taxes to the investors that make qualified equity investments into the low-income community. Through a structured transaction, the company would receive a lowinterest loan to assist in funding their project that after 7 years has forgivable aspects to it and can potentially be forgiven. Tax credit available for eligible research and development activities under Internal Revenue Code section 41. Conditions / Parameters Business must undergo eligible R&D activities under Canadian law. Must meet target group criteria. Must be eligible State Workforce Agency. Must make qualified equity investments into the low-income community. Must meet 4 part test: 1. Permitted purpose; 2. Elimination of uncertainty; 3. Process of experimentation; and 4. Technological in nature. Applied benefit calculation Estimated credit percentage (federal and provincial component): Calgary, Edmonton: 23.5% Saskatoon: 23.5% Toronto: % Vancouver: 23.5% Estimated benefit based on comparable screened eligible employees. Estimated benefit based on comparable projects. Estimated benefit based on comparable projects. Application of the simplified formula (9.1% of current year R&D expenses over average expenses in prior 3 years multiplied by 50%), assuming that R&D spending is constant throughout the life-time of the project. # of years applied Annual Annual 1 year 7 years Annual Page 66

67 Calgary, Alberta Canada Incentives overview Incentives Jurisdiction Industries Analyzed (NAICS) Program name Category Type Description Conditions / Parameters Applied benefit calculation # of years applied Province All Canada Alberta Job Grant Statutory preapproval Cash Grant Employer-driven, costsharing program that helps employers invest in training for their current or future employees. No minimum contribution from employer required for residents of the province. 100% of training costs reimbursed when hiring and training Albertans. 2 years Province , 333, 334, 336, 339 Capital Investment Tax Credit Discretionary Income Tax Credit Non-refundable tax credit for manufacturing, processing and tourism infrastructure. Investment must be more than $1 million. 10% of a corporation's eligible capital expenditures, up to $5 million. 2 years. Carry forward: 10 years Page 67

68 Edmonton, Alberta Canada Incentives overview Incentives Jurisdiction Industries Analyzed (NAICS) Program name Category Type Description Conditions / Parameters Applied benefit calculation # of years applied Province , 493, , Canada Alberta Job Grant Statutory preapproval Cash Grant Employer-driven, cost-sharing No minimum contribution from program that helps employers invest employer required for residents of in training for their current or future the province. employees. 100% of training costs reimbursed when hiring and training Albertans. 2 years Province Capital Investment Tax Credit Discretionary Income Tax Non-refundable tax credit for credit manufacturing, processing and tourism infrastructure. Investment must be more than $1 million. 10% of a corporation's eligible capital expenditures, up to $5 million. 2 years. Carry forward: 10 years Page 68

69 Saskatoon, Saskatchewan Canada Incentives overview Incentives Jurisdiction Industries Analyzed (NAICS) Program name Category Type Description Conditions / Parameters Applied benefit calculation # of years applied State , 541 Saskatchewan Manufacturing and Processing Profits Tax Reduction State Manufacturing and Processing Investment Tax Credit State Manufacturing and Processing Exporter Tax Incentive Statutory Statutory Statutory Income Tax Credit Income Tax Credit Income Tax Credit State 541 Saskatchewan Statutory Preapproval Credit Income Tax Commercial Innovation Incentive Local , 541 Canada- Saskatchewan Job Grant Discretionary Cash Grant Tax credit on Canadian manufacturing and processing profits, as reported on the federal T2 CIT return. Saskatchewan-based firms with a high allocation of income to Saskatchewan will receive a larger tax reduction than firms with a low allocation of income. Annual business limit is $500,000. Refundable tax credit available to manufacturing Can be applied only on and processing corporations filing a T2 CIT return locally purchased with some allocation of taxable income to machinery, new or used. Saskatchewan designed to designed to Both sustaining capital encourage plant and equipment investment for and expansion capital M&P activities in Saskatchewan. investments qualify. Non-refundable tax credit to eligible businesses that expand the number of their M&P related fulltime employees above the number that was employed in Works similarly to a "Patent Box" program. Following certification, the company receives a tax rebate certificate, which it can then submit to the Ministry of Finance at any time within 10 consecutive years of CIT rebates. Project must pass SCII scientific eligibility test. Employer-driven, cost-sharing program that helps employers invest in training for their current or future employees. Min. 25% of revenues generated from outside of Saskatchewan. 2% income tax reduction on SA province manufacturing profit shares. 1 year 6% of purchase 2 years cost including SPST against the provincial CIT $3,000 / new full time employee Must have qualifying IP 6% of Province linked to the CIT commercialization of a new good, service or process in Saskatchewan Grant requires 1/3 of funding by employer. 2/3 of training costs 1 year 10 years 2 years Page 69

70 Toronto, Ontario Canada Incentives overview Incentives Jurisdiction Industries Analyzed (NAICS) Program name Category Type Description Conditions / Parameters Applied benefit calculation # of years applied Province , 333, 334, 336, 339, 493, Canada- Ontario Job Grant Statutory preapproval Cash Grant Employer-driven, cost-sharing program that helps employers invest in training for their current or future employees. No minimum contribution from 2/3 of training cost 2 years employer required for residents of the province. Max. contribution is up to $15,000 / employee. Province , 333, 334, 336, 339, 493, Wage Subsidy Statutory Cash Grant Wage subsidy for unemployed employees training. Employer must provide training for the recently-hired unemployed. 30% wage subsidy for eligible employees. 2 month training period Page 70

71 Vancouver, British Columbia Canada Incentives overview Incentives Jurisdiction Industries Analyzed (NAICS) Program name Category Type Description Conditions / Parameters Applied benefit calculation # of years applied Province 339 Machinery and equipment sales tax waiver and accelerated depreciation Statutory Province 493, Class 6 Statutory Business and other exemption Sales Tax Credit Tax Exemption Qualifying businesses do not need to pay the provincial sales tax on purchases of eligible machinery and equipment. Imports of advanced machinery and equipment are dutyfree and there are no tariffs on manufacturing inputs. Business and other exemption on assessed value of improvements. Must be involved in a qualifying manufacturing activity with a minimum of $30,000 in sales or manufacturing costs at a qualifying manufacturing site. Must be qualified business in Vancouver. Full sales tax exemption. 1 year Corporations can claim income tax depreciation of up to 50 % / year on certain manufacturing and processing equipment. Exemption on first $10,000 of assessed value of improvements. 30 years Province International Business Activity Statutory Preapproval Income Tax Credit Refund for provincial income tax paid on income earned on eligible international business activities. Corporations must register with Advantage BC and the BC Ministry of Finance. Income tax refund of the 30 years provincial portion on eligible international business activities. Province 339, 493, 541, Canada-B.C. Job Grant Statutory Pre- Approval Cash Grant Employer-driven, cost-sharing program that helps employers invest in training for their current or future employees by offsetting the costs. Employer contributes at least 1/3 to 2/3 of training cost 2 years the cost of training and must have a job for the participant at the end of training. Page 71

72 Albany, New York United States Incentives overview Incentives Jurisdiction Industries Analyzed (NAICS) Program name Category Type Description Conditions / Parameters Applied benefit calculation # of years applied State 333, 334, 336, 339, 541 Excelsior Jobs Program Tax Credit Discretionary Income Tax Credit Firms in select industries that create and maintain new jobs or make significant financial investment are eligible to apply for up to four tax credits. Refundable income tax credit. 6.85% of total 10 years compensation generated by all new payroll generated. State 333, 334, 336, 339, 541 Excelsior Investment Tax Credit 2% of qualified investments 10 years State 333, 334, 336, 339, 541 Excelsior Research and Development Tax Credit 50% of the Federal Research and Development credit up to 3% of research expenditures. 10 years Local 333, 334, 336, 339, 541 Payment in Lieu Discretionary Property of Taxes Tax Program (PILOT) Exemption Manufacturing, industrial, and not-forprofit companies may make a PILOT through agreements with Industrial Development Agencies and Economic Development Corporations. Non-Refundable income tax credit. Abatement usually over 10 years, with an annual abatement decreasing annually by 10%, (first year: 100%, min. 10%) 10 years Page 72

73 Chicago, Illinois United States Incentives overview Incentives Jurisdiction Industries Analyzed (NAICS) Program name Category Type Description Conditions / Parameters Applied benefit calculation # of years applied State , 333, Illinois Statutory Enterprise Zone Income Tax Credit Non-refundable tax credit may be available for qualified investment in property, including equipment, major computer installations, and buildings. Qualified investment must be made within the boundaries of an EZ. Nonqualifying property includes: land, inventories, small personal computers, trademarks, typewriters, and other small, non-depreciable, or intangible assets. 0.5% tax credit. 1 year; 5 year carry forward State , 333, Property Replacement Investment Credit Statutory Replacement Tax Credit Replacement tax credit for qualified property place in service for the tax year and additional credit if base employment increased over preceding year/. Illinois defines qualified property as Tax credit on 1% tangible, depreciable property with a qualified property depreciable life of 4 years or more that is placed in service in Illinois (assumption is that this is 75%). 2 years Local , 333 Tax Increment Financing ("TIF") Discretionary Financing The local government uses incremental property taxes associated with real property improvements to subsidize eligible costs. Funds may be used for costs associated with the development or redevelopment of property within the TIF. The project must be in an eligible Tax Increment District. 75% of real property taxes 10 years Page 73

74 Columbus, Ohio United States Incentives overview Incentives Jurisdiction Industries Analyzed (NAICS) Program name Category Type Description Conditions / Parameters Applied benefit calculation # of years applied State 333, 541, Ohio Job Creation Tax Credit State 333, 541 Jobs Ohio Economic Development Grant State Jobs Ohio Workforce Grant Discretionary Discretionary Discretionary State 333, 541 Research and Development Statutory Investment Tax Credit State 541 Research & Development Sales Tax Exemption Local 333 Jobs Growth Incentive Statutory Preapproval Discretionary Income A negotiated refundable tax credit Tax Credit based on a percentage of new qualified employee state payroll. Cash Grant Cash Grant Negotiated grant used to offset costs of fixed-assets and infrastructure investments. A negotiated training grant to eligible companies that create and/or retain jobs. Tax Credit Non-refundable tax credit for qualified research and development expenses. Sales Tax Sales tax exemption from state and Exemption county sales tax available for companies that purchase machinery and equipment used primarily for research and development. Cash Grant for eligible new employees for Grant up to a negotiated term for businesses locating or expanding outside of the Columbus Downtown area. Upon receiving a commitment from the Estimated benefit state, the company draws down the grant based on amount as eligible training costs are comparable incurred. projects. Company must receive a grant Estimated benefit commitment from the State and then draw based on down the grant amount as investments comparable are made. Creation of jobs within a projects. specified period of time required. Company must receive a grant 50% of eligible commitment from the State and then draw training costs down the grant amount as investments are made. Creation of jobs within a specified period of time required. Amount of the tax credit depends on the 7% of qualified R&D qualified research and development expenses expenses. Only for purchases of machinery and equipment used primarily for research and development. Applies to businesses relocating or expanding out of Columbus. Sales tax exemption on part of personal property. Estimated benefit based on comparable projects. 5-6 years (based on sector) 2 years 2 years 1 year. Carry forward: 7 years 2 years; Carry forward: 7 years 5 years Page 74

75 Grand Rapids, Michigan United States Incentives overview Incentives Jurisdiction Industries Analyzed (NAICS) Program name Category Type Description Conditions / Parameters Applied benefit calculation # of years applied Local , 333, 334, 336, 339 Local , 333, 334, 336, 339 State , 333, 334, 336, 339 State , 333, 334, 336, 339 Personal Property Tax Exemption (PA 328) Real and Personal Industrial Property Tax Abatement (PA 198) Michigan Business Development Program Michigan Skilled Trades Training Fund (STTF) Discretionary Discretionary Discretionary Personal Property Exemption provided in qualified local Tax Exemption governmental units for new personal property investment which covers a negotiated time period. Real and Property Property tax abatement for building of Tax Abatement new plants, expansion of existing plants, renovations of aging plants and/or the addition of new machinery and equipment. Grants, loans, and other forms of economic assistance Property must be commercial, new personal property that is not previously subject to property taxes in other jurisdiction in the state. Property must be new, industrial manufacturing real property. Applicable to qualified businesses that Create a minimum of 50 agree to make certain qualified Qualified New Jobs in a investments or create a certain competing, lower cost, out of number of qualified new jobs in state project location. Michigan. Discretionary Cash Grant Provides awards to companies to meet their talent challenges. Local MichiganWorks agencies are awarded STTF dollars and administer training consistent with approved applications. Payment amounts made according to a reimbursement schedule based on completed employment days by the participant. Estimated benefit 10 years based on comparable projects. Estimated benefit 10 years based on comparable projects. Estimated benefit 2 years based on comparable projects. Estimated benefit 2 years based on comparable projects. Page 75

76 Milwaukee, Wisconsin United States Incentives overview Incentives Jurisdiction Industries Analyzed (NAICS) Program name Category Type Description Conditions / Parameters Applied benefit calculation # of years applied State , 333 Manufacturing and Agriculture Credit Statutory Income tax credit Non-refundable income tax credit for businesses with income from eligible production activities in Wisconsin that reduces the corporate state income tax rate to 0.4%. Company must undergo eligible production activities under WI code. Reduces income tax from 7.5% to 0.4% Annual Local , 333 Tax Increment Financing Discretionary Property tax reduction Local jurisdictions may establish a tax increment financing district for significant capital investment and Funds may be used for costs associated with the development or 75% of real property taxes 10 years development. The funds are used for redevelopment of property infrastructure costs, consulting and legal fees. within the TIF. The project must be in an eligible Tax Increment District. State , 333 Business Development Tax Credit Program Discretionary Refundable tax credit Program supports job creation, capital investment, training and corporate headquarters location or retention by providing businesses with refundable tax credits. Benefit is the highest amount. Up to 10% of annual wages for employees earning more than $22,620 per year, up to 3% of personal property investment; and up to 5% of real property investment, and up to 50% of training costs. 5 years Page 76

77 Minneapolis, Minnesota United States Incentives overview Incentives Jurisdiction Industries Analyzed (NAICS) Program name Category Type Description Conditions / Parameters Applied benefit calculation # of years applied State 339 R&D Credit Statutory Income Tax Credit Credit for increasing research and development activities in Minnesota. Must be qualifying expenses. 10% of qualifying 30 years expenses up to $2M, and 2.5% for expenses greater State , 339 Job Creation Fund Discretionary Cash Grant Cash grant for creating jobs and starting or expanding a non-retail business. A business must sign a business Estimated benefit based subsidy agreement, agreeing to on comparable projects. invest at least $500,000 in CapEx within 1 year and hire at least 10 new employees within 2 years. 2 years Local , 339 Real Property Tax Abatement Discretionary Property Tax Abatement Tax abatement to help finance economically beneficial projects. At least 50% of the payroll of the operations must be for employees engaged in manufacturing or R&D. 50% abatement 10 years Local Value Added Grant Program Discretionary Cash Grant Grants for equipment purchases or physical improvements intended to support businesses that will start or expand livestock product processing businesses. Project must increase the use of Minnesota agricultural products to qualify. Estimated benefit based on comparable projects. 1 year Page 77

78 Salt Lake City, Utah United States Incentives overview Incentives Jurisdiction Industries Analyzed (NAICS) Program name Category Type Description Conditions / Parameters Applied benefit calculation # of years applied State State 334, 336, 339, 493, State 334, 336, 339, 493, State 334, 336, 339 Machinery and Equipment Exemption Custom Fit Training Economic Development Tax Increment Financing Credit 334, 336, 339 Tax Increment Financing Statutory Discretionary Discretionary Discretionary Sales Tax Exemption Manufacturers are exempt from paying sales tax on the purchase of new equipment and replacement manufacturing equipment. Cash Grant Grant for specialized training for companies. Administered through Utah College of Applied Technology Centers and State Colleges and Universities. Refundable Tax Credit The State may provide a refundable income tax to competitive projects that locate to Utah that create at least 50 new high-paying jobs and significant investments. Cash Grant Local governments may provide project funding through the incremental increase in property taxes associated with a new project. Companies must meet SIC code designations. (SIC ) Credit equals 6% of the 1 year purchase price of the machinery or equipment. Training may be conducted at Salt Subsidizes up to $250 / Lake Community College trainee for professional Campuses, Applied Technology training. Centers, or the business location. The credit requires a match from local governments, in the form of TIF funding or grant funds. The State asks that projects make a commitment to have significant purchases from Utah vendors and suppliers. Discretionary and based on the increment derived from the project. Project must be located in certain Economic Development or Community Development areas. 15% credit new state tax revenues over the life of the project. 50% of the total new property tax increment derived from the project. 2 years 5 years 20 years Page 78

79 Seattle, Washington United States Incentives overview Incentives Jurisdiction Industries Analyzed (NAICS) Program name Category Type Description Conditions / Parameters Applied benefit calculation # of years applied State 334, 336 S&U Tax Exemption on Manufacturing Equipment Statutory Sales Tax Exemption Exemption from state sales and use taxes on purchase of qualifying machinery and equipment. Machinery and equipment must be used directly for manufacturing, R&D, or testing. Exemption from the state sales and use tax (6.5%) on qualifying M&E. 1 year State 493 Remittance of state sales tax for warehouses, distribution centres, grain elevators, cold storage Statutory Sales Tax Exemption Refund of all or part of the state s portion of sales tax paid on qualifying construction and material racking/handling equipment. Construction of a 200,000 square foot warehouse or distribution centre or a grain elevator with a 1 million bushel capacity. Available to wholesalers who operate warehouses, grain elevators, and cold storage warehouses. A refund of all or part of 1 year the state s portion of sales tax (6.5%) paid on construction equipment. Page 79

80 Silicon Valley, California United States Incentives overview Incentives Jurisdiction Industries Analyzed (NAICS) Program name Category Type Description Conditions / Parameters Applied benefit calculation # of years applied State 334, 336, 541 Sales and Use Tax Exemption: Manufacturing and R&D Equipment Statutory State 334,336 California Alternative Energy and Advanced Transportation Financing Authority Sales & Use Tax Exclusion Program Statutory preapproval State 334, 336, 541 California Discretionary Competes Tax Credit Sales & Use Tax Exemption Sales Tax Exclusion Income Tax Credit Exemption is provided for manufacturing Applies to the first $200 million equipment or research and development equipment purchases each equipment purchases by companies calendar year. engaged in manufacturing or biotechnology research and development. Tax exemption offered to Advanced Manufacturers or for companies that design, manufacture, produce or assemble Advanced Transportation or Alternative Source products, components, or systems. New "high quality" job creation is critical. Application involves review by a state-appointed committee. Designed to attract and grow high paying Phased application process jobs in strategic industries. involves quantitative and qualitative review by a stateappointed committee. Exemption from stateportion of sales tax (4.19%); 20% personal property CapEx Sales Tax exclusion (up to 9.25%) on eligible purchases. Estimated benefit based on comparable projects. 1 year 1 year 5 years State 334, 336, 541 Employment Training Panel Discretionary Grant/ Reimbursem ent Reimbursement of training costs for each employee that participates in eligible training programs for a minimum of 40 hours and retained on a job for 90 days. Heavily discretionary program - new "high quality" job creation is critical and provides for stronger applications. Estimated benefit based on comparable projects. 2 years Page 80

81 Transportation Transportation wages Average trucking wages per worker Transportation Info United States Canada Source Estimate Industry Geography US Census County Business Patterns, Average employee earnings 2015 data (most recent available) Average annual wages of the transportation sector, USD All All StatCan MSA MSA Labour Force Survey (LFS), Employee earnings by type of work 2015 data (to match US); Custom data order Average annual wages of the transportation sector, CAD Trucking wages, USD Albany-Schenectady-Troy $50,857 Calgary $41,944 Chicago-Naperville-Elgin $52,410 Columbus $46,298 Edmonton $41,502 Grand Rapids $51,163 Milwaukee-Waukesha-West Allis Minneapolis-St Paul- Bloomington $49,908 $51,342 Salt Lake City $44,121 San Jose $59,787 Saskatoon $43,572 Seattle-Tacoma-Bellevue $49,318 Toronto $35,365 Vancouver $42,567 NAICS 484, Truck transportation NAICS 484, Truck transportation Notes Page 81

82 Transportation Population proximity Distance (miles) to capture 10 million population Transportation Info United States Canada Distance to capture 10 million population for Calgary Source Bureau of Economic Analysis Quantum Geographic Information System (QGIS) StatCan Quantum Geographic Information System (QGIS) N Canada Population (number of persons) Population (number of persons) Calgary Estimate Distance between population centres (in miles) Distance between population centres (in miles) USA Overall Overall Industry Centre city MSA MSA Radius to capture 10 million population Geography Metro area population density Page 82