8 posts categorized "Transportation"

More evidence that businesses expect to grow, increase hiring

Signs are upbeat that the Ninth District economy will continue to grow, according to a recent poll of more than 300 business contacts from across the district (see methodology below).

For starters, 40 percent plan to increase employment at their firms, and nearly three-quarters of these firms cited expected high sales growth as the most important factor. Only 7 percent plan to decrease employment. In the same survey a year ago, 38 percent planned to increase employment and 10 percent planned to cut jobs.

Other important factors cited for new hiring were overworked staff, improved financial condition of firms and the need for additional skills. The majority of respondents plan to use word of mouth and advertising to get new employees. Twenty-eight percent plan to use a recruiting firm, and surprisingly few (9 percent) plan to raise starting pay.

For those respondents not planning to hire additional people this year, most expected low growth sales and a desire to keep operating costs low. Many reported difficulty finding skilled candidates. Though fiscal policy developments were not a factor for most respondents, 35 percent said they had a detrimental effect on hiring and 4 percent said they would increase hiring plans.

The survey also asked about wages and benefits; 36 percent expected wage growth of 2.5 percent or more, and a similar amount expected positive wage growth of less than 2.5 percent (see Chart 1). Respondents generally believed benefit increases would be larger than those for wages (see Chart 2).

  Ad hoc survey Ch 1-2 -- 2-5-13

Methodology: On Jan. 15, the Minneapolis Fed invited, via email, about 1,000 Beige Book contacts from across the Ninth District to answer the special question in a web-based survey. By Jan. 31, 303 contacts had filled out the survey. The respondents come from a variety of industries (see table below).

Ad hoc survey METHOD TABLE -- 2-5-13

A rough road for townships

When springtime comes around this year, the harsh winter effects on roads will become obvious. So too will the effects of lagging state aid for roads to local governments.

The matter is particularly problematic for township governments. Roads make up the single largest expenditure for most of the thousands of township governments that provide public service to the rural expanses spanning the Ninth District. So when budgets get tight, rural roads are heavily affected.

In November, the fedgazette surveyed township officials on the subject of tight budgets and their consequences for public services (see January fedgazette). Among almost 150 respondents (about 85 percent from Minnesota, and the remainder from the Upper Peninsula of Michigan), more than two-thirds identified roads and transportation as the service most affected by tight local budgets (see chart).

MN & UP roads survey -- 1-22-13

Below are comments that respondents gave the fedgazette permission to share with readers.

“Road work suffers the most, dirt roads don’t get as much attention as they should. … (Residents) are not happy; they want the roads smooth but don’t realize the money isn’t there.” Cheryl Lincoln, clerk, Richardson Township, Minn.

“We blade the roads less often and also remove snow less often. We also cannot afford to apply as much gravel to our roads.” Jo Ann Kolbaske, clerk, Bismarck Township, Minn.

“With the retirement of a full-time employee, the position was eliminated in our road department. Our former four-person department continues with three people to operate and maintain 63 miles of roads in addition to 90,000 linear feet of sanitary sewer line.” Rhonda Peleski, clerk/treasurer, Thomson Township, Minn.

“Our largest expense is roads. There have been no improvements or upgrades. (We’re) trying to hang on to the status quo. The public would like to see road upgrades and improvements, such as paved roads, improve drainage issues and dust control. The number one issue would be more gravel for roads. We also have one bridge in jeopardy, (but) no money for repair.” Dave Tangen, clerk, Hawley Township, Minn.

“Gravel used for our township roads is becoming scarce, (and) the price per cubic yard is rising dramatically. The price for chloride that we use for dust control is going out of sight.” Daniel New, supervisor, Hudson Township, Minn.

“There is not enough money to keep up our roads and bridges the way we need to. There are no pluses when you have to cut services in the townships. Road ditches will fill up with brush and less money for rock on the roads. Soon it will need to be addressed, but what can we do? Still no money. … (T)he budget has to increase to keep up with some of the services, but we can’t keep up with them all.” Dave Tart, supervisor, Forestville Township, Minn.

“We do not blade our roads as often and only spot-gravel our roads. Snow plowing is important in our township. … The roads have more washboards and are slippery when it rains. If we get a lot of snow, that could be an issue to get the snow plowed off.” Lori Handyside, clerk, Clover Township, Minn.

“The cost of road maintenance is always on the rise. Our roads are being hammered by ever increasing size of farm machinery. They were not built to withstand the weights being put on them now.” Dale Kulberg, supervisor/chairman, Brookfield Township, Minn.

Tax me for this, but not for that

Local governments have been facing tough budgets since the recession, or even longer in states like Minnesota and Wisconsin, where state budget deficits have been semiregular occurrences since the 2001 recession. One of the difficulties posed by tight budgets is deciding what services residents value most and which ones they’d prefer to scale back rather than see taxes go up.

The Michigan Public Policy Survey provides one perspective on that dilemma. A biannual (spring, fall) survey started a few years ago at the University of Michigan, it polls each of Michigan’s 1,856 units of general purpose local government, including several hundred in the Upper Peninsula (the only part of Michigan in the Ninth District, and the focus of this post).

Last year’s survey showed that 35 percent of U.P. respondents (who are local government officials) said their community was less able to meet its financial needs this year compared with last year. Almost 30 percent said there had been a decrease in federal aid (compared with just 7 percent that saw an increase), and more than half had their state aid cut (12 percent saw an increase). At the same time, almost half of U.P. respondents said infrastructure needs have increased, and 31 percent said similar for human services; virtually no local officials reported decreases in these public services.

So what to cut? Not fire services. Almost 60 percent of local U.P. officials believed residents would prefer higher taxes, while just 11 percent believed residents preferred a service cut over tax increases (see chart; the gap in responses for individual categories—why responses don’t add up to 100 percent—represents both “don’t know” and “doesn’t apply” answers). No other service had close to the same support. General government operations, economic development and public transit, as well as parks, recreation and libraries were conspicuous in the lack of support for higher taxes to avoid cutbacks for these services.

For more discussion on tight local government budgets, see the January issue of the fedgazette.

UP govt. taxes vs service cuts -- 1-21-13

The biggest trophy: Out-of-state hunters and anglers

A new U.S. Fish and Wildlife survey shows that district states have a unique profile when it comes to wildlife recreation, particularly when it comes to economic activity resulting from the great outdoors.

The survey, conducted every five years, measures participation in and expenditures for hunting, fishing and wildlife watching (observing, photographing and feeding wildlife; includes those who do it from home or nearby). Almost across the board, Ninth District states have higher than average rates than the nation as a whole—maybe not surprising given the natural assets and wide-open spaces in each state (see Chart 1).

Those activities bring with them considerable revenue, and the more who come for the outdoors, the higher the returns. Spending per participant in most district states is very consistent with the national average of about $1,500. But South Dakota and (especially) Montana are exceptions, seeing significantly higher spending by participants (see Chart 2, right bars). With high participation and high average spending by those participants, those states see almost quadruple the in-state spending on a per capita basis (see Chart 2, left bars).

  Hunting Ch1-2 -- 9-19-12

The large majority of those revenues are generated by hunters and anglers, despite the fact that there are considerably more wildlife watchers in most states (Minnesota and South Dakota are exceptions). Across district states, the average hunter/angler spends two to five times more than the average wildlife watcher (see Chart 3, at bottom).

But more fundamentally, high participation rates and expenditures are driven by nonresidents, who tend to spend more money than residents on travel, accommodations, food, equipment and other needs. For example, Montana has high rates of nonresident hunters (31 percent) and anglers (30 percent) who come to find big game and to fish world-famous trout streams in the Rocky Mountains. Montana also sees much higher spending from nature watchers—double the average of most other district states—again, often attracted from other states to the natural splendor of the Rockies.

South Dakota has exceptionally high rates of nonresident hunters (53 percent) and anglers (42 percent) as well, many of whom come to hunt pheasants throughout the state and to fish walleyes and other species in the cavernous Missouri River reservoir system, among the largest freshwater bodies in the world. Though the state has the highest rates of nonresident participation in the district, the relative accessibility of good hunting and fishing spots in South Dakota likely helps keep a lid on nonresident spending, at least compared with a trip to Montana’s Rockies.

The survey is done to benefit natural resource and conservation agencies, academic researchers and wildlife related recreation industries, which use the information to estimate demand and identify recreation trends. The methodology used for this survey changed from previous versions, according to the agency, making current results incomparable with previous surveys.

Hunting Ch3 -- 9-19-12

Frac sand mining spurs rural rail

On average, railroads are four times more fuel efficient than trucks. In west-central Wisconsin, which is in the midst of a frac sand boom, that fact has increased business for railroads and spurred reinvestment in long-disused rural lines.

The region is a rich source of fine quartz sand, a vital ingredient in the hydraulic fracturing process that has opened up fresh reserves of shale oil and natural gas in North Dakota, eastern Montana, Texas and other parts of the country. Over the past five years, more than 40 frac sand mines have either opened or expanded their operations in west-central Wisconsin and in neighboring southeastern Minnesota.

In Wisconsin, many sand mining companies have built facilities adjacent to rail lines—a cost-effective way to ship raw or processed sand, often in “unit trains” of over 100 cars. In response to increased demand, railroads have ramped up their operations and rehabilitated little-used or dormant lines, at a cost of roughly $1 million to $2 million per mile.

Lakeville, Minn.-based Progressive Rail operates a 62-mile line running north from Chippewa Falls to Rice Lake and Almena, in Barron County (see accompanying map). Freight volume has increased fivefold to about 1,800 cars a month since EOG Resources completed a new sand processing plant in Chippewa Falls last December, said company President Dave Fellon. Over 90 percent of that volume consists of frac sand from the EOG plant and other mining facilities along the route.

Rising revenue has allowed Progressive to invest in human capital (payroll has increased from 65 to 100 workers over the past year) and critical line improvements. Fellon said the firm will spend $30 million to $50 million over the next five years on new railroad ties, bridges, loading facilities and other infrastructure.

Canadian National and Union Pacific have also refurbished long-neglected rail lines linking Wisconsin frac sand operations to distant markets. This summer, CN began clearing brush and laying new ties on a 45-mile section of rail between Cameron and Ladysmith to connect existing and proposed sand mines with a main CN line running north into Canada and south to Texas. The railroad backed out of a pending sale to the state that would have let Progressive operate the line, opting to retain ownership of a potentially profitable sand route.

Colorrail-final500

For more on the economic impact of frac sand mining in the district, see the recent article in the July fedgazette.

Minnesota job vacancies: Good news, with caveats

Job vacancies in Minnesota climbed 48 percent in the fourth quarter of 2011 compared with the same period a year earlier, according to a semi-annual survey recently released by the Minnesota Department of Employment and Economic Development (DEED).

That pencils out to almost 50,000 job openings last quarter—back to fourth quarter levels last seen in 2007, though short of the 65,000 vacancies in 2006. The survey also found that vacancies increased across a wide range of industry sectors (see Chart 1). In all, there were 3.2 unemployed people for each vacancy, compared with 5.8 a year earlier.

While certainly moving in the right direction, job vacancies still have some way to go before spurring the type of employment market many hope for. For example, DEED said 42 percent of the job vacancies were for part-time employment and another 13 percent were for temporary or seasonal work. The median wage offer for all job vacancies was $10.89 an hour—slightly lower than median wages seen in the same quarter of 2007 and 2008.

A breakdown of vacancies also shows that industry sectors with the greatest percentage of growth and the largest number of job vacancies generally offer lower wages (see Charts 1 and 2). This isn’t necessarily a surprise, or even a change. A look back at vacancies in the fourth quarter of 2006 shows a similar relationship regarding industry sector vacancies and median wages (see Chart 2).

Industry sectors like retail and accommodation employ many workers, are generally low-paying and typically see high turnover, which means they are perpetually looking for workers. In fact, health care traditionally has the most vacancies, reflecting the fact that it is a large and still-growing industry despite a sluggish economic recovery. Even though there are many high-paying jobs in the field, median wages for vacant jobs are just $11, a shade higher than the median wage for all vacancies. The biggest difference in job vacancy distribution among industry sectors is in transportation and warehousing, where vacancies remain considerably below 2006 levels (see Chart 2).

MN job vacancies -- Chart 1&2 -- 3-2-12


 

A deer stuck in your headlights

It’s that time of year again when attention for a significant portion of the population turns to whitetail deer. Most often it’s toward hunting season and dreams of hat racks. But a not-so-small number get an unfortunately close encounter with deer this time of year—with their vehicle.

With high deer populations and significant rural roadway—both a factor in collisions—every Ninth District state ranks in the top 10 in likelihood of hitting a deer over the course of a year, according to estimates from State Farm Mutual Insurance. South Dakota ranks highest in the district at number three (see table below).

Deer crashes -- Table 1 - 11-14-11

Few states closely track the number of vehicle-deer collisions. Wisconsin appears to keep better records than most. The good news is that deer collisions, at least in that state, are trending lower over the past decade in absolute numbers (see Chart 1), and the rate of collisions per vehicle mile has fallen considerably, from about 50 per 100 million miles in 1994 to fewer than 30 in 2010, according to a study by the state’s Department of Transportation. The number of persons killed or injured has also been cut in half, to about 400, over the past decade.

Still, the costs of deer collisions are considerable. In Wisconsin, collisions cost a total of almost $27 million in 2008, according to the Deer-Vehicle Crash Information Clearinghouse at the University of Minnesota. These figures are likely conservative, because the DVCIC included only investigated crashes involving at least $1,000 in property damage (about 15,000 in 2008 for Wisconsin), which are considerably below estimates in that state of both the number of deer killed by vehicles (the blunt force of which is likely to cause considerable damage to a vehicle) as well as insurance estimates of annual deer crashes.

And while you’re out driving, it might pay to know that the majority of deer-vehicle collisions occur during the months of October and November (see Chart 2) when deer are most active during the breeding phase, according to the Wisconsin DOT.

Deer -- chart 1&2 11-14-11

District air service: Flyin’ high and dry

In mid-July, travelers in small cities across the district got the unfortunate news that they would be losing air service when Delta Air Lines announced it was dropping service to 24 small regional airports nationwide, 14 of which are in the district, and several others immediately nearby (see map, at end).

Delta cited a few reasons for the cutbacks, the primary one being low usage rates during a period of higher fuel costs. Average occupancy rates on regularly scheduled flights along most of the cut routes range from 60 percent to as low as 12 percent for Thief River Falls, Minn.

But there is another culprit—the uncertain future of the federal Essential Air Service program. Readers of the fedgazette might be familiar with EAS, which subsidizes airlines on flights between (often very) small isolated markets and major hubs. The program is still in effect but expires in 2013, and its renewal in the current atmosphere of budget tightening seems unlikely.

Delta is subsidized for operations in nine of the 14 district airports it is leaving. Those routes were formerly served by Northwest Airlines before its merger with Delta and date back to the era prior to airline deregulation in 1978. But in recent years, flights to and from subsidized locations were operated by subcontractor Mesaba.

Passengers who have already booked flights in and out of those cities don’t need to worry just yet. The EAS program requires Delta to continue operations for at least 90 days, or until another carrier jumps in to take advantage of the subsidy.

 Delta air service cuts -- 8-3-11

 

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