When I was 7 years old, I remember my father coming home to our 900 square foot house in St. Albert and telling my mother that he was leaving his incredibly secure job as the CFO of a company called Numac Oil & Gas and he wanted to start a real estate company. My mom cried.
We packed up all three kids and moved to the big smoke, a place called Edmonton where, in 1977, we began one of the biggest economic and real estate booms in Canadian history. Everything was grand. And my father, the accountant, took a risk that many never dreamed of, and many never thought an accountant should ever take.
But this was, and is, Alberta. And it didn’t matter if you were an accountant, a doctor, a lawyer or a school teacher, you had entrepreneurial DNA in your blood and it ran deep.
Tough Times – Early ‘80s
Five years later – 1981, as the NEP took form and interest rates rocketed to 16% on GoC bonds and >20% on real estate mortgages … I remember being in the back seat of our Ford LTD station wagon driving down River Valley Road, lying across the bench, no seat belts, pretending to be asleep.
I remember the conversation between my mother and my father. My father said, “We’re in for some tough times, and frankly I don’t know how tough they are going to get. We have to get rid of all expenses that aren’t absolutely necessary. We simply can’t afford them.”
My mom, again in tears asked, “Can we buy the kids some new clothes for school?” and the answer was simple, “Bunny, we simply can’t afford it.”
Man, I was so scared. I just pretended to be asleep.
Tougher Times – Early ‘90s
We made it through the early ‘80s and things got good again. So good, in fact, I spent the next four years in the back of a brand new used 1982 Chevrolet Monte Carlo where I was just tall enough to peek out of that small rectangular window they had in the back as we drove endlessly around Alberta looking at developments and looking for new properties. I travelled with a hard hat because occasionally we would stop at a construction site and check in on the progress being made. It was boom time and I was anxious to get in the real estate business.
In the early 90’s I was 21 years old, and Princeton was building a new office tower downtown in downtown Calgary. Rents were reaching $46/sqft and rising and everyone one was living high on the hog. You could do no wrong, and the future of Alberta was fantastic.
Then, over the next 18 months as we were approaching completion, I watched leasing rates drop from $46/sqft to $30/sqft, then to $18/sqft. At that point, the joint venture partner declared bankruptcy, and rents plummeted to zero, and I watched my father give away office space in order to simply cover operating costs.
I stood there, hard hat in hand, really starting to understand the power of leverage and the cyclical nature of a commodity-based province … and what happens when those two realities collide.
I came out of university in the early 90’s and Edmonton was not the place to be. Don Getty had just failed to win his seat, Jan Reimer was Mayor, business was at a standstill and there were no jobs. Most of my friends were moving to Vancouver or Toronto … the Province was running a $3 billion deficit and was $20 billion in debt, and the Spirit of Edmonton was at an all-time low.
Ralph Klein came into power in 1992 and made the hard choices that people living beyond their means have to eventually make, and set out to slay the deficit and debt at all costs. We’ve benefited from those tough decisions, they made Albertans who we are today, although we are still catching up on the infrastructure deficit that was created as we cut too far.
Economic Development Edmonton was established in 1993 under the leadership of Rick Lalacheur, bringing together four organizations – the Shaw Conference Centre, Edmonton Tourism, the Edmonton Research Park and Economic Development – into one organization thinking that synergies were available if they were all under one management structure.
Raising the Morale of Edmontonians
Bill Smith became Mayor in 1995 and really focused on raising the morale of Edmontonians. “This is the best City in the best Province in the best Country” was his mantra, and he was the cheerleader we needed at the time.
Cal Nichols & Company saved the Oilers, the internet was just becoming mainstream when our organization came out with Vision 7/25 which was a stated desire that 7% of our GDP would come from knowledge-based industries by the year 2025. A bold vision for diversification … and we are well on our way.
Jim Edwards took over EDE through the boom and the bust of the internet, and then Allan Scott, one of my true mentors, started a number of great initiatives <LIST> that couldn’t have been done without the support of Mayor Stephen Mandel. History shows that when the head of EEDC and the Mayor are in synch, great things can happen. And when they are disconnected, the city perishes.
Boom Time Again
Ed Stelmach came in 2006 along with my predecessor, Ron Gilbertson in 2007, and if you recall, we were in boom time again. Low unemployment, huge inflow of migration, record GDP growth, record labour shortages, and record oil prices. The economy was so hot in fact that we made the conscious decision to get out of the traditional economic development business and focus our attention on labour attraction.
But then our over-leveraged, high commodity-priced world collapsed. Bear Sterns went under in March 2008, Lehman Brothers followed in September, and literally over a weekend, the entire global economy came to a halt. Credit markets evaporated, ships were stranded in the Atlantic, financial institutions were declared bankrupt and global trade came to a standstill. Everybody froze.
Over the past five years as the world was in disarray, searching for stability and security, we’ve learned something about ourselves. We learned that when the price of oil went from $140 down to $40 in six months, we still had net positive migration, net positive employment gains, a downturn that was much milder than other jurisdictions and a rebound that has us leading not only the country, but just about all regional economies in the western world. We learned that our economy is more diversified than once believed, our standard of living is more resilient than others, and our quality of life is more attractive than we give ourselves credit for.
Asleep in the Backseat No More
Of course, Premier Stelmach resigned on January 26th 2011 and Alison Redford became our premier in October 2011 with a new vision for a more progressive, compassionate Alberta that will now be challenged because we have new, long-term risks to our balance sheet.
And when you map that history against the price of oil, you can see that our political leaders and our economic development leaders all managed through booms and busts, and the self-esteem of Edmontonians has been equally as volatile.
As we look forward over my term in the next 5-10 years, and potentially with a new Mayor, what we know to be true is that we are extremely well positioned versus just about every other jurisdiction in the world, but we are entering a low-growth world where the word “competition’ will forever be redefined.
Our self-esteem issues must be conquered, and we can no longer be asleep in the backseat anymore.
Whether it be RBC, TD or CIBC or the City’s Economist, all are expecting Alberta and Saskatchewan to outperform the rest of Canada, and for Edmonton to be an ECONOMIC AND ENTREPRENEURIAL POWERHOUSE and one of the top two or three municipal markets in North America terms of growth? A high-growth jurisdiction in a low-growth world they say.
And what is driving that growth?
- Massive Commodity Demand
- Democratic Government
- Stability of Government Regulations
- Property Rights System
- Judicial Independence
- Ability to Repatriate Capital
- Soundness of Banking System
- Provincial/Local Credit Rating
- Openness of Culture
- $56 Billion in GDP
- GDP Growth Rate of 3.5% ~$50,000 GDP per Capita
- Unemployment <4.3%
- No Sales Tax
- Lowest Overall Tax
- Population +22,000/Year
- Labour Shortage of 114,00
- Cap Ex of $220B + $330B
- Critical Mass in Services
If you had a shopping list as to the things you were looking for in order to move to a location or invest in a location, it would probably look like this.
At EEDC, our principal objective is for Edmonton and the Capital Region to outperform every regional jurisdiction in North America – consistently – over the next 20 years … whether the price of oil is $140 or $40 … and that last phrase is critically important as we anticipate continued volatility over the next 10 years.
And we measure “outperform” by GDP/Capita and Standard of Living.
And what an opportunity we have while the world is going through tough times, challenged by sovereign debt and political divisiveness.
Where I come from … when the going gets tough, the tough acquire market share.
Lessons from the Past
Just after I took this role, on September 13th, we lost possibly the greatest Albertan of all time. When I heard of his passing, I was wounded … yet, in a strange way, inspired. I thought back to the two lessons this man taught me – the first was the importance of remembering every single person`s name. And the second was that Alberta needs a Master Plan.
When I was running Doug Horner`s leadership campaign, I met with Peter and Jeanie was there too. He leaned in and said, “Young Mr. Ferguson, the United States had a Master Plan, where (1) they built up their military such that their Navy could control the flow of goods in the Pacific and Atlantic; then (2) they used fiscal policy to provide debt capital to foreign countries; to (3) have access to air rights anywhere in the world; to (4) protect the interests of American companies. Alberta has a Master Plan too, and with the US now stumbling financially, we cannot take our eye off the ball.”
- We need to create a policy environment that spawns entrepreneurs and the entrepreneurial spirit, such that people can take responsibility for themselves and their families. Entrepreneurism creates a culture of self-reliance, such that people are less dependent on government.
- When people are self-reliant, we can maintain a small, smart, stable government with a predictable business and investment environment.
- With a small, smart, stable government, we can ensure our tax environment is always kept below that of the United States and the rest of Canada. As other governments continue to borrow, interest rates will increase as will eventually taxes. At that stage we have the opportunity to differentiate.
- That’s when we need to raise our game and compete and offer workers, investors, entrepreneurs, families and researchers a lower tax environment at a time when the world needs our resources.
- Long term, sustainable competitive advantage = Alberta, and Edmonton, will be a beacon towards which all people who crave opportunity will come.
Dark Clouds Looming
Now, as the head of the local economic development authority, I traditionally would stop there and present a series of graphs that look extremely rosy, and I certainly could do that. But what I think is more valuable is to provide some insights into some of the dark clouds looming that have the potential of throwing some of the forecasts we’re all hearing into question.
From my perspective there are dark clouds looming in six categories:
Globally: We have negative growth in Europe, US recovery that will continue to stagnate, growth in China maturing to customary levels, and global growth occurring in places where we are not connected. We need to get better connected to high growth regions of the world.
Nationally: We have an escalating loonie that was once our competitive advantage, the rise of social agendas that cost vast amounts of money, provincial debts reaching their tipping points, resulting in an east-west envy that will jade our national public policy environment in favour of central Canada. We need to shift our language, and be less about the bravado of Alberta and more about our contribution to Canada.
Provincially: We have an escalating cost structure that is unsustainable. And we have a revenue model that provides no certainty. Get caught offside multiple years in a row, as we have today, and multiple deficits turn into debt, which will lead to increased interest rates that eventually need to be offset by higher taxes. And we need to start talking about what the Premier isn’t talking about, and that is a stable revenue framework for the province.
Industry-level: We have much more supply that expected coming onto the market, and we have oil-intensity demand forecasts falling as developing nations start to become more efficient. We continue to be a land- locked province with fixed pipeline capacity, higher labour costs, all of which leads to increased uncertainty and a deceleration of capital expenditures.
Firm-Level: Companies are lined up to come here and compete for the small share of global growth that is available. And they are hungry – much hungrier than the typical Alberta company that works hard enough from Monday-Thursday so that Friday they can go to the cottage. Our aging owners are more risk-adverse and are not investing in research, innovation, machinery and equipment that will keep them highly productive in an increasingly competitive world. We need to create an environment where every business is a growth business again and we eradicate this disease called complacency.
Personal-Level: We have an aging workforce as well as an increasingly immigrant and aboriginal workforce, and in between we have a workforce with an entitlement culture and massive personal debt loads that sing “what have you done for me lately” as opposed to the competition who is saying, “I want this job because I need to feed my family” all in an environment where the growth rates of wages and salaries are beginning to decline.
These are very real challenges, and we cannot afford to be complacent, and certainly we can no longer be asleep in the back seat.
At EEDC we understand these realities facing our economy – the opportunities and the threats – and there is significant work to be done. Our Board and our Shareholder have made it extremely clear that they want us to:
- Get back in the Economic Development business where “business/industry” is our customer;
- Become the change we want to see in the marketplace – competitive vs. complacent;
- Fundamentally change the value to deliver to the market;
- Bring clarity and confidence in our structure;
- Redefine our relationships with our Stakeholders (EIA, Northlands, Chamber, etc.) and strengthen the entire economic development system.
How are we responding at EEDC? We have seven (7) priority industries in our economic development group that will be aligned to our provincial counterparts. Our teams will be engaged with business leaders to understand both the challenges and opportunities associated with growth and profitability. Within each industry sector we will establish priorities – short, medium and long-term – that we want to accomplish together.
We anticipate that priorities will fall into five (5) categories:
- Business, Investment and People Attraction and Retention
- Opportunities for Market Expansion
- Productivity, Innovation & Entrepreneurship (Risk-taking)
- Economics and Analytics
- Policy Development & Market Positioning
And every year our success will be measured by the level of industry engagement and satisfaction, as well as the implementation of priorities where industry is leading and funding the implementation – the litmus test for relevance.
The outcomes we want to achieve are very straightforward:
- Accelerated inflow of new business, investment and people to Edmonton;
- Confident, authentic image/brand, well-marketed in targeted jurisdictions;
- Competitive business environment that facilitates entrepreneurism, innovation and business expansion;
- Resilient and diversified industry growth and employment opportunities; and
- Informed, engaged, networked business and stakeholder community
That’s the expectation of us, and that’s our promise to you. And we will never fail because we didn’t try hard enough, and we will never fail because we’ve become unfocused. That’s our intention and we want it to have impact.
That’s also the Spirit of Edmonton … and it is something that unites us. Whether you’re in the private sector or the public sector, whether you’re 25 years old or 65 years old, and whether it’s +30 degrees above or -40 degrees below, we all came here in search of an opportunity to grow … and every Edmontonian chooses to stay here … because we are building something here … whatever your [IT] is … your career, your business, your family, your skills, your life … your opportunity … we need to issue an invitation to the world and say, “Come build [IT] here.”
Brad Ferguson, President & CEO
Edmonton Economic Development