TAMRMS#: B06
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Edmonton Global - Investment Plan Proposal
Presented by: Sean McRitchie, Director, Economic Development
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RECOMMENDED MOTIONS
recommendation
1. That Council direct Edmonton Global Shareholder representatives from the City of St. Albert to commit to support Option C of the proposed Investment Plan Proposal and associated Top Up Cost Allocations for a one (1) year period, at the October 22nd, 2020 Edmonton Global Extraordinary Shareholder meeting.
2. That Council direct Administration to bring back a report by Q3 2021 on the effectiveness of the one (1) year investment.
3. That $65,061.33 be allocated from the Stabilization reserve for the 2020 fiscal year.
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PURPOSE OF REPORT
The purpose of this report is to inform Council of a request from Edmonton Global to consider an “Investment Plan Proposal”. The “Investment Plan Proposal” and initial recommended resolution were presented to the Shareholder group on August 20, 2020, with the initial resolution as follows:
“That the Edmonton Metropolitan Region Economic Development Company Shareholders approve a budget top up of up to $xxxxxxx for the 2020 fiscal year from those within the Shareholder group willing and able to provide additional contributions.”
The resolution and Investment Plan were discussed amongst Shareholders and the subsequent resolution was put forward:
“That the proposal be referred back to flesh out a two year ramp up to Option A, B, and C with:
a) clearer metrics and outcomes;
b) the objective of maximizing leverage of government grants in 2021,
c) securing a provincial match subject to this member top up;
d) to provide time for members to work the escalation into their budgets over two years; and,
e) that the revised proposal come back to a special general meeting in October.
f) work with EDO network to refine and prioritize marketing deliverables.”
Edmonton Global has called an Extraordinary Shareholder Meeting on October 22nd, 2020 to discuss the Investment Proposal Plan against the above resolution with a planned November 19th meeting if necessary.
ALIGNMENT TO PRIORITIES IN COUNCIL’S STRATEGIC PLAN
Strategic Priority #2: Economic Development: Enhance business/commercial growth.
ALIGNMENT TO LEVELS OF SERVICE DELIVERY
N/A
ALIGNMENT TO COUNCIL DIRECTION OR MANDATORY STATUTORY PROVISION
N/A
BACKGROUND AND DISCUSSION
In December of 2019, Edmonton City Council passed a motion to narrow the focus and mandate of the Edmonton Economic Development Corporation (EEDC) to tourism and convention centre management. As a result of the changes to EEDC’s mandate, the various functions once covered by EEDC were split into various groups. On May 11th, 2020, Edmonton repurposed $5 Million Dollars from EEDC into a new innovation entity called Edmonton Innovates, which replaces Innovate Edmonton, a division of EEDC which also partnered with Startup Edmonton, TEC Edmonton, etc. In addition to the innovation portfolio, the City of Edmonton has brought the Business Retention & Expansion portfolio in house.
As a result of this change in governance and funding, specific resources previously dedicated to FDI & Trade have been held until a determination regarding resourcing for investment attraction has been finalized. On December 9th, 2019, Ernst & Young presented a report entitled “Response to the City of Edmonton Council motions regarding Edmonton Global, the Edmonton Economic Development Corporation and Tech Innovation”, in the report the following consideration was suggested:
“That Edmonton Global should be responsible for FDI and Trade activities across all industries and sectors with support from City Administration. Support from the City Administration could include the identification of potential opportunities / companies for FDI and Trade, and support to the business on the value proposition or business case for expansion and /or investment. All other activities would remain with Global.”
As a result of the recommendations in Ernst & Young's report, as well as funding availability from the change in EEDC’s mandate, City of Edmonton put forward a motion “That the shareholders direct Edmonton Global Board and Management to prepare an investment case with options to increase shareholder contribution along with any identified leverage opportunities for accessing funding from Provincial or Federal programs, and bring this back to a special shareholder meeting, timing to be determined.”
On August 20, 2020, Edmonton Global’s Board Chair presented the investment case entitled “Investment Plan Proposal” (attached) for the Shareholder group's consideration, with an expectation that a decision would be made by Shareholders regarding level of support by October, 22nd 2020.
Edmonton Global is still in early stages of establishing a meaningful and sustainable process for lead generation with respect to investment attraction. The areas highlighted below are part of Edmonton Global’s suggested growth strategy to develop a pipeline of opportunities that are aligned with the strategic sectors that have been identified as being priorities for the Edmonton Metro region based on an analysis of the region’s capabilities and competitive advantages, the Investment Plan will focus on 4 Key Outcomes:
1. Product Development
Building the necessary business cases and other elements that showcase the regional value proposition that can be proactively marketed globally to attract investment and promote businesses.
2. Marketing
Significantly enhance capacity to activate engagement in the promotional requirements to market the region and its value proposition across focus sectors. This includes ensuring the region is highly visible and have professionally produced products. This story is not just for the global market but for the local, provincial and national ones too which the region continues to be not at the forefront of policymakers, investors and business leaders outside of the region. The region needs to transition to a significantly more aggressive, proactive and digitally enhanced position in marketing regional assets and the value proposition. Research from WAVTEQ on marketing by EDOs shows a 4:1 return on investment.
3. Regional Database
The Regional database is currently Version 1. Connectedness with Shareholders and partners, as well as aligning efforts provincially (Invest AB) and Federally (Invest In Canada), will significantly enhance both quality of information available and the client centric service provided to companies interested in investing in the region or exporting to other jurisdictions.
4. Investor Journey
Enhancing the clients’ experience through their journey to a final investment decision and investor aftercare. This would include facilitating regional work, regional level services provided, learning from each process, creating greater value add to the entire journey, and enhancing Regional Investment Readiness. This item includes enhancement of the CRM to allow for enhanced tracking of investors, automation, and segmentation of nurturing campaigns to enhance and accelerate deal flow.
Edmonton Global has provided a draft Investment Plan Proposal with corresponding 2020 Budget Options and anticipated outcomes for the aforementioned 4 scenarios (A,B,C,D) for Shareholder consideration. (Attached Pg. 14 of Shareholder August 2020 Document)
Current Annual Financial Contribution - $97,353.85
Option A- Optimal (Top Up Cost Allocation for St. Albert - $239,917.05)
Current $97,353.85 + Top Up Option A $239,917.05 = Total Contribution $337,270.90
Option B- Enhanced (Top Up Cost Allocation for St. Albert - $145,400.45)
Current $97,353.85 + Top Up Option B $145,400.45 = Total Contribution $242,754.30
Option C - Budget 2020 (Top Up Cost Allocation for St. Albert - $65,061.33***)
Current $97,353.85 + Top Up Option C $65,061.33 = Total Contribution $162,415.18
Option D - Status Quo (Top Up Cost Allocation for St. Albert - $0)
Current $97,353.85 + Top Up Option C $0 = Total Contribution $97,353.85
***Allows Edmonton Global to fully leverage Federal matching funds - $727,000.00
The intended outcome of Edmonton Global’s proposal is to increase Shareholder funding in a sustained manner to activate Edmonton Global’s mandate more fully and to enable access to matching funding from other levels of government.
Administration is recommending that St. Albert support Option C - on a one-time basis. This one-time budget top up will allow Edmonton Global to maximize grant dollars and leverage funding sources from both Federal and Provincial governments while maintaining the funding of operational expenses. Most grant dollars are limited by strict criteria on how funds can be utilized, often excluding operational expenses. Additionally, most public funding is awarded based on matching contributions and approved project expenditures can only be claimed for payment once the organization has proved, by way of reporting, that funds have been expended. This creates a cash flow challenge to Edmonton Global since the resources allocated to the organization from the shareholders are being used primarily to fund operational expenses, and this limits the ability to leverage additional funds through matching “project based” expenses.
While Administration feels there is merit in the proposal from Edmonton Global, given economic uncertainty and financial constraints at this time Administration is not able to recommend Option A or B. Option C -one time, presents Edmonton Global and the City of St. Albert the opportunity to leverage existing shareholder contributions towards the development of strategic business cases while continuing to fund business operations.
Additionally, due to the nature of the “one time” budget top up vs. ongoing support or “ramp up”, it is very likely Edmonton Global will look to engage shareholders in advance of the 2022 budget cycle to discuss additional ongoing funding. This “one time” approach allows the City of St. Albert the opportunity to reflect on the value derived from allocating additional resources to further inform future budgetary decisions as it relates to Edmonton Global.
STAKEHOLDER COMMUNICATIONS OR ENGAGEMENT
N/A
IMPLICATIONS OF RECOMMENDATION(S)
Should Council decide to move forward with one of the proposed Funding Top Up Options, it will directly impact Edmonton Global’s funding for the foreseeable future, as well as impact their ability to fully deliver on their mandate. Attached is the “Investment Plan Proposal” which clearly identifies the investment options, payment schedule, metrics, and Key Performance Indicators of all associated top up options inclusive of deliverables and implications for aforementioned options.
Financial:
Edmonton Global is asking Shareholders to consider 3 potential options to change the funding model (Options A,B,& C) which have differing financial impacts as outlined in above report. (Option D represents no change to the status quo.) These top ups are intended to allow Edmonton Global to fulfill their mandate more fully, which is to promote the Edmonton Region as an investment destination on the global stage. All marketing efforts for promoting the City of St. Albert as an investment location specifically fall within the mandate of the City’s own Economic Development department.
The current uncommitted balance in the Stabilization fund as of September 30, 2020 is $1,269,721.
Legal / Risk:
Edmonton Global’s Articles of Incorporation mandate simple majority rules, so if the majority chooses to move forward in a direction not consistent with St. Albert's support for Option C on a one-time basis, then St. Albert would be bound by the will and the direction of the majority. However, it is Administration's understanding that in the event of only a bare majority of support for one of the options in the Investment Plan Proposal (for example, a 7-6 vote) then a further conversation among Shareholder communities would be held to determine a path forward.
To change the Articles of Incorporation for Edmonton Global a super majority of shareholders would be required, while unanimity would be needed to change the Memorandum of Association.
Program or Service:
None at this time.
Organizational:
Dependent on the Option considerations by Council, additional Economic Development staff time would likely need to be spend coordinating activities and business cases with Edmonton Global staff.
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Council has the authority to choose Options A, B, C, or D.
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Report Date: October 19, 2020
Author: Sean McRitchie
Department: Economic Development
Deputy Chief Administrative Officer: Kerry Hilts
Chief Administrative Officer: Kevin Scoble