The Role of Urban Communities in Sustaining Saskatchewan’s Growth by Economic Development Regina Inc.

The Role of Urban Communities in Sustaining Saskatchewanâ&#x20AC;&#x2122;s Growth

The Institute of Certified Management Consultants of Saskatchewan In Partnership with Johnson-Shoyama Graduate School of Public Policy & Praxis Analytics Inc.

Acknowledgements The Institute of Certified Management Consultants of Saskatchewan and the Canadian Association of Management Consultants would like to acknowledge the contributions of the following organizations and consulting firms who greatly assisted in the undertaking of this study: Communities of Tomorrow Legacy Grant CMC Canada Partnership Fund Institute of Certified Management Consultants of Saskatchewan Regina Regional Opportunities Commission Saskatoon Regional Economic Development Authority b-creative group Conroy Ross Partners Deloitte Mandate Consulting Ltd. McNair Business Development Inc. Paradigm Consulting Group Inc. Perspect Management Consulting Praxis Analytics Inc. Johnson-Shoyama Graduate School of Public Policy

Table of Contents Executive Summary I Introduction:

4 10

A. Purpose of the Study B. Participants and Contributors

II Background:

A. The Institute of Certified Management Consultants of Saskatchewan's Interest in this Topic B. Sustaining Growth as the Goal C. The Challenges Ahead in Sustaining Saskatchewan’s Growth D. The Interdependent Role of Urban Centres and Rural Areas in Saskatchewan’s Growth

III Study Findings:

A. A Significant Shift in Citizens' Positive Attitudes Toward Growth B. Factors Contributing to the Shift in Citizens' Attitudes C. Commodity Exports Are Driving Saskatchewan's Rapid Growth D. The Impact of Growth is Noted Mostly in Cities E. International Immigration is a Primary Driver of Population Growth F. Most of the Employment Growth is in the Cities G. Growth Brings New Opportunities and Challenges H. Unique Role and Growth Challenges Facing Urban Centres

IV. Conclusions: Imperatives for Sustaining Saskatchewan’s Growth

A. The Importance of Growing Saskatchewan’s Urban Centres B. Addressing the Challenges of Saskatchewan’s Growth

V. Next Steps: A process for Sustaining Growth

A. Communicating the Challenges and Opportunities 3

B. Mobilizing Leaders and Communities C. Creating a Sense of Urgency

Appendix A: Methodology

Executive Summary Saskatchewan has changed in many notable ways over the past decade. One of the most striking changes has been the turn toward a stronger, more upbeat attitude among Saskatchewan residents about the current and future well-being of their province and the prospects for their own personal situations. As part of this study, nearly 900 Saskatchewan residents were asked in 2013 to answer the following question: Thinking about the next four years, how do you expect Saskatchewan’s economy will perform? Do you think it will . . . perform worse than today, about the same as today, or better than today?

The responses to this question showed that 84.5 per cent of respondents believe that Saskatchewan’s economy will perform about the same or even better than today. 51.4 per cent think Saskatchewan's economy will continue over the next four years to remain as strong as it is today. A third of respondents (33.1 per cent) said they expect Saskatchewan’s economy to perform even better than it has over the past four years. The same question asked of Saskatchewan residents in 2004 produced different results. In 2004, people thought they would personally do better than the province as a whole, expecting the provincial economy to underperform going forward. In 2004, people viewed their personal situations running ahead of the province as a whole. In 2013, respondents rated the prospects for the province-wide economy more highly than for their own personal situations. Saskatchewan has had one of the highest annual economic growth rates in Canada for the past five or more years. This higher than usual sustained rate of economic growth has lasted for a longer time than previous periods, and the impacts have been larger in terms of the provincial economy and population growth. Despite previous decades of out-migration and a history of difficult economic conditions, the vast majority of Saskatchewan people now perceive Saskatchewan’s rapid growth as the new normal. Saskatchewan is less than a decade into the second-greatest growth period in its history, surpassed in population growth terms only by the first settlement period at the turn of the last century when the province added roughly 27,000 new residents annually for nearly three decades. As of the end of 2013, Saskatchewan was a province of over 1.1 million people, over a 100,000 increase in population in just seven years, most of which is now driven by the arrival of new Canadians, much as was the case when Saskatchewan was first settled by the waves of homesteaders from Europe. Population growth has always been seen as a measure, perhaps even the measure, of how well Saskatchewan is doing as a province. Saskatchewan has experienced four major periods of 4

population growth throughout its history, with the most recent period being the second greatest. Saskatchewan has added about 20,000 people per year over the past half decade. Saskatchewan people have often debated whether population growth is a consequence of the ideology of the governing party of the day. If perception is reality, this is somewhat true. Saskatchewan residents who support the Saskatchewan Party are somewhat more inclined than supporters of other political parties to believe that Saskatchewan is doing better today than four years ago. However, supporters of all other political parties, including the NDP, Liberal and Green parties in Saskatchewan, agree that Saskatchewan's economy will continue doing at least as well over the next four years as it has over the past four. The optimism is widespread regardless of political affiliation. While the Saskatchewan Party government undoubtedly deserves credit for doing many of the right things to help sustain both Saskatchewan’s economic success and the positive attitudes of its residents, data analyzed for this study suggests that Saskatchewan's population and economic growth is tied much more directly to the strength of its resource-based economy, and in particular the ebbs and flows of global commodity prices. Saskatchewan's population began to grow slightly again after 2001, about the time the current global commodity supercycle1 began. In particular, Saskatchewan's more recent strong population growth has tended to parallel rising prices and export volumes of potash and oil, which now are two of Saskatchewan's largest economic growth engines. Saskatchewan’s population also grew through part of the last global commodity supercycle (that began in the early '70s and ended in the late '90s period), although much less rapidly than it has this time. Saskatchewan’s continued dependency on the state of global commodity demand begs the question as to how long the current commodity cycle will last and therefore continue to support Saskatchewan’s growth. Moreover, what should Saskatchewan businesses, governments and workers do to ensure Saskatchewan continues to have strong growth after the current commodity cycle ends? The Institute of Certified Management Consultants of Saskatchewan (ICMCS) undertook this study to examine these very questions. The Certified Management Consultant (CMC) designation is the world's premier management consulting certification and is recognized in over 50 countries around the world. Many individual CMC consultants and member firms of ICMCS volunteered their professional time to carry out the work to complete this study. ICMCS contributed funds directly to cover the costs of this study, as did the Canadian Association of Management Consultants. ICMCS also received a legacy grant from Communities of Tomorrow2 to help fund this research. This project was undertaken in 1

The commodity supercycle is an economic theory based on the work of twentieth-century economists who studied the result of demographic shifts in populations. These shifts resulted in specific effects regarding the demand for basic commodities.

Communities of Tomorrow was a Saskatchewan economic development agency sponsored by three levels of government and private industry, and was instrumental in building a municipal innovation network helping to create a number of strategic partnerships that brought innovative solutions to municipalities across the province of Saskatchewan. Communities of Tomorrow, wound down in June 2013, established a legacy fund to support economic development projects.

partnership with Praxis Analytics Inc. (Praxis), one of Saskatchewan's leading public opinion research firms, as well as the Johnson-Shoyama Graduate School of Public Policy. Praxis received support from the Saskatchewan Chamber of Commerce in undertaking a provincewide survey of public attitudes toward growth in Saskatchewan. CMC consultants conducted a series of in-depth, in-person interviews with approximately 30 key business leaders in Saskatchewan in order to gain their insights on how to sustain Saskatchewan’s current high growth levels. The business leaders selected for these interviews were nominated by the economic development agencies of Saskatoon and Regina. CMC firms also provided project management services in support of the study. Our examination of the dynamics of Saskatchewan’s recent growth concludes that it is indeed largely driven by a unique partnership between rural and urban Saskatchewan. The key economic growth drivers have been natural resource production and exports, along with vastly increased levels of construction and investment activity associated with expansion of production of these natural resources. Rural areas produce the commodities that Saskatchewan exports but most of the supporting workforce and services are located in Saskatchewan’s urban centres. Over the most recent economic boom period, Saskatchewan’s eight largest cities have captured the majority of impacts from Saskatchewan's economic growth. From 2006 to 2011, the gross domestic product (GDP) in Saskatchewan's eight largest centres increased by $14.2 billion CDN, measured in nominal dollars at basic prices. Two-thirds (66 per cent) of Saskatchewan economic growth between 2006 and 2011 is accounted for by four sectors:  The resource (mining, oil/gas) sector with an average annual increase of 13 per cent from 2006 to 2011 that is equivalent to $3.5 billion;  The finance, insurance and real estate group (including the imputed value of owneroccupied homes) with an average annual increase of 9 per cent;  The public sector including non-profits with an average annual increase of 7 per cent; and  Construction, with an average annual increase of 16 per cent which added $1.6 billion to urban GDP over the five-year period 2006 to 2011. Saskatoon and Regina now account for 43 per cent of Saskatchewan's economic output, roughly the same amount as for all of rural and small urban Saskatchewan combined. The remaining 13 per cent is generated by the cities of Yorkton, Swift Current, Prince Albert, Moose Jaw, Estevan, and North Battleford3. As Saskatchewan's economy continues to expand, cities will be responsible for an increasing share of the provincial economy and play a vital role in hosting the firms and institutions that will drive increased value-added development from Saskatchewan’s rich array of commodities. Saskatchewan urban centres will also be the primary magnets for immigration, now the key source of population growth. 3

Note: The eight centres were selected for the quantitative Johnson-Shoyama review if they had a population of more than 10,000 in their metropolitan areas and therefore enjoy an enhanced level of statistical reporting from Statistics Canada. (Weyburn will fit into this category in the next census.) Lloydminster was not included as most of the population are Alberta residents.

Sustaining Saskatchewan's growth over the long term will require that Saskatchewan's urban centres play an increasingly greater role. Cities are the main sources of global economic growth and productivity4. Canada is already 80 per cent urban. Saskatchewan, while not a particularly urban province by Canadian standards, has 60 per cent of residents residing in the eight largest cities in the province. Sixty-one per cent of Saskatchewan jobs are in these eight largest Saskatchewan cities and population growth rates are highest in these urban areas and nearby communities. Regina and Saskatoon are the primary destinations of new residents from outside of Canada and are now Saskatchewan's largest source of population growth. Saskatchewan is the only Canadian province, however, other than those in Atlantic Canada, without a city of 500,000 people or greater. This report outlines why Saskatchewan needs larger urban centres for continued sustained provincial growth and also shows the importance of regional partnerships in creating strategic plans to support continued growth. Saskatchewan's cities have an important role to play in developing Saskatchewan's postcommodity economy. In order to increase its economic output, Saskatchewan needs to add more value to its natural resources rather than just produce greater quantities of such resources in unprocessed form. This added value will take place largely in the cities. This is an age-old challenge for Saskatchewan but has become increasingly important and necessary to build a post-commodity economy, one that can continue to grow at recently higher historical rates and will depend less on the fortunes of global commodity prices in the future. Such strategies require Saskatchewan to have larger, more developed, more attractive urban areas, both for workers and investment. These larger urban centres are needed to attract the business investment, the professional firms and the skills needed for value-added processing and innovation. Technology is in many ways at the centre of the need for larger cities in Saskatchewan. Technological changes for value-added production processes have favoured concentrated production. This type of production occurs predominantly in urban centres where there is a cluster of skilled firms and workers. By comparison, the technologies associated with primary production (which in Saskatchewan is concentrated in rural areas) are typically highly capital intensive, requiring very little labour 5. Employment growth in Saskatchewan therefore depends on increasing value-added production, much of which will still be closely associated with our natural resource base but where the processing plants, laboratories and more highly skilled workers are located in urban areas. Furthermore, business functions beyond the manufacturing and processing phase of producing goods (transportation and distribution, legal, finance, consulting, marketing and other business services) are primarily found in urban centres where there is a sizable skilled labour pool, major transportation hubs such as airports, and input goods and services that are 4

McKinsey Global Institute. McKinsey Cities Special Initiative, How to Make a City Great, 2013 Olfert, M. Rose, Murray Jelinski, Dimitrios Zikos, John Campbell. 2011. "Human Capital Drift up the Urban Hierarchy: An Example from Western Canada." The Annals of Regional Science First published online May 25, 2011. DOI: 10.1007/s00168-011-0448-2 5

readily available. These are almost exclusively found in urban centres. The net effect of these requirements is that production, in larger cities in particular, is often more efficient, innovative and more competitive than it would be if undertaken in smaller cities or rural towns. Saskatchewan businesses need to be globally competitive in markets and this requires that these businesses adopt the most efficient and productive technologies available. As these technologies and processes (as well as supporting business services) are found largely in cities, Saskatchewan's larger cities will play a vital role in sustaining and increasing the growth of the region served by the city as well as the province overall. Cities are also centres of consumption and labour supply, offering amenities and access to a full range of personal and professional services and cultural and sporting events and activities. Access to such services is playing an increasingly important role in individual and household choices of where to live. This is why many people find larger cities more appealing places to live when making such choices. As we found through the interviews with Saskatchewan business leaders, access to these amenities is critical in attracting and retaining highly skilled labour professionals and their families to a community. To be competitive in drawing such skilled resources to a community, business leaders have indicated that a community must have the desired quality of life characteristics, in addition to a range of employment options for (usually) both spouses. Saskatchewan has a plan for growth as set out by the Government of Saskatchewan's document Vision 2020 and Beyond6 in which it advocates a Saskatchewan population target of 1.2 million people by 2020 with a labour force increase of 60,000 workers. To accomplish this, Vision 2020 and Beyond advocates actions in areas such as:  Increased investments in growth enabling infrastructure;  Developing a more skilled workforce;  Enacting measures to increase the competitiveness of Saskatchewan’s economy;  Increased trade, investment and exports through international engagement;  Advancing Saskatchewan’s natural resource strengths through innovation, to build a Saskatchewan post-commodity-centric economy; and  Maintaining sound fiscal policies of balanced budgets, lower debt and smaller, effective government. Part of Saskatchewan's growth strategy recognizes the need to build a post-commodity-centric economy. In December 2013, the global consultancy McKinsey and Company released a research paper entitled Reverse the curse,7 which was a strategy for commodity-centric economies to capture increased value and benefit from their natural wealth. The actions prescribed by McKinsey in this report closely parallel the strategies contained in Saskatchewan's growth plan. This should give Saskatchewan residents additional assurance that Saskatchewan is on the right track. ICMCS believes, however, that Saskatchewan’s Vision 2020 and Beyond needs further enhancement with a view to creating a more deliberate focus 6 7

Government of Saskatchewan, The Saskatchewan Plan for Growth, Vision 2020 and Beyond, www.gov.sk.ca McKinsey Global Institute, Reverse the curse, December 2013

on the role of urban centres in driving Saskatchewan’s continued growth -- particularly in terms of the role to be played by urban centres in creating Saskatchewan’s post-commodity economy. Such a focus is foundational to creating a sustainable and growing higher-valueadded economy where technology, manufacturing, processing and business services make a larger and larger contribution to provincial GDP. Our view is that the task of creating a greater role for cities needs to start with the communities themselves. It must begin with a leader’s or community’s vision about what the community can and/or should become. Doing so will involve assembling a group of talented and dedicated people from the community who can support a community’s leadership by implementing actions that move the community closer to the vision. Often such actions will create both opposition and controversy. This will require strong leadership and a supporting team, coming from both the city administration and the wider community. This group must be resilient to the inevitable opposition and controversy that change brings while maintaining the ability to stay dedicated to the mission of making the vision a reality. These change leaders may need to incorporate the best ideas from opponents if such ideas can help move the community forward in a way consistent with the end goal or vision. Above all, the implementation team must be accountable for what is agreed upon and commit to action and delivery. Achieving a vision often involves substantial change. CMC consultants are change agents and many of them are experts in change management. They can help communities with all of the above key steps, including the processes to craft a vision, develop action plans, assemble high performance teams and identify strategies for early success. CMC change agents can also assist in building a wider consensus of support across the community. The key to building a wide consensus in a community is the engagement process itself, and many CMC consultants have significant expertise in this area. In the end, the work primarily involves creating a vision, developing a plan to achieve the vision, building public support for the plan through wide engagement in the community and implementing the plan efficiently and effectively within a strong framework of accountability. The first phase of this project was to identify and report on qualitative and quantitative analysis, using census information and surveys and interviews to build a summary report on growth in the province. As part of the second and final phase of this project, ICMCS will develop a framework for communities to use in moving through this process. As multiple communities engage in this process, the common needs of cities will become evident and this can create a powerful and effective dialogue with senior governments to set the agenda for what is needed to have cities play an even stronger role in sustaining Saskatchewan’s economic growth. Saskatchewan today has a unique opportunity to continue the growth it has experienced in recent years. Although Saskatchewan’s rapid growth has been very strongly influenced by the global commodity supercycle, the challenge is now to move beyond a sole reliance on commodities to create an economy that will still do well as the commodity supercycle diminishes. Unfortunately, there is no way to accurately predict how long the current 9

commodity supercycle will last or how long it will continue to buoy Saskatchewan’s economic growth. The current commodity cycle could last a further 20 years but we know from past experience that the commodity cycle benefits Saskatchewan for only a portion of the time it runs in global markets. The length and strength of the current commodity cycle depends to a large extent on global economic growth patterns. If global growth remains strong, especially in emerging markets, the commodity cycle is likely to continue to benefit Saskatchewan for some time yet. However, if the economies of emerging markets slow, as they have been starting to do recently, this will shorten the period of time that Saskatchewan can continue to prosper on commodity prices and trade alone. It is important therefore, in our view, for Saskatchewan leaders to adopt a sense of urgency to get on with the task of building a vision of more vibrant, more competitive and more appealing cities. The sooner Saskatchewan’s largest cities get on with the task at hand, the less likely it will be that Saskatchewan will suffer the side effects of a downturn in global demand for commodities when it inevitably comes. Moreover, the more quickly Saskatchewan cities can address their post-commodity-economy future, the less likely other commodity producing countries, or even regions of Canada, will seize our opportunities. While the role of the cities is increasingly more critical to all of Saskatchewan’s growth, the importance of rural Saskatchewan cannot be overstated. The attitude of competitiveness in the past has always been such that, as adversaries, one wins (urban or rural) and one loses (urban or rural). This is no longer the case. We see that public attitudes have dramatically changed and it is time for leadership to embrace a vision of partnership in development, not only for Saskatchewan as “The Community” but also to understand how regions (including urban and rural areas) can work side by side to build upon each other’s strengths and to focus on long-term, sustainable growth that will benefit all citizens.

I Introduction A. Purpose of the Study The Institute of Certified Management Consultants of Saskatchewan undertook this study to examine the dynamics of Saskatchewan's recent rapid economic growth. Saskatchewan began to grow modestly in 2001 but the period of most rapid economic growth began in 2006. Saskatchewan has experienced several periods of growth in the past. However, aside from the settlement period from 1905 to 1929, the most rapid and expansive growth has been in the recent period from 2006 to 2013. Saskatchewan has changed in many notable ways over the past decade. As this study found, these changes go well beyond a growing population. One of most evident and outstanding changes has been the shift in attitudes of Saskatchewan residents. Residents of the province today have a much more positive outlook on the province's future than in previous years. This is a significant reversal from earlier periods in the provinceâ&#x20AC;&#x2122;s history. Other observable differences are the rising value of residential, commercial and agricultural property, the reduced dependency on government transfers for incomes, rising household incomes generally, higher employment levels as well as greater employment opportunities, rising levels of international immigration, and rapidly growing investments both in business enterprises and public infrastructure. In seeking to more precisely understand the dynamics of Saskatchewan's recent growth, our aim is to determine what its residents, workers, public institutions and businesses must do to keep Saskatchewan's economy growing well into the future.

B. Participants and Contributors Many individual Saskatchewan CMC consultants and ICMCS member firms contributed professional time to carry out the work involved in completing this study, both to conduct the research and to report its findings. The Institute of Certified Management Consultants of Saskatchewan (ICMCS) and the Canadian Association of Management Consultants both contributed funds directly to cover the costs of this study. ICMCS was pleased to secure a legacy grant from Communities of Tomorrow to help fund the research. This project was also undertaken in partnership with Praxis, one of Saskatchewan's leading public opinion research firms, as well as the Johnson-Shoyama Graduate School of Public Policy (Johnson-Shoyama). Johnson-Shoyama prepared a very comprehensive statistical profile of Saskatchewan's growth characteristics based on available secondary sources. Praxis, with the support of the Saskatchewan Chamber of Commerce, undertook a province-wide survey of public attitudes toward growth in Saskatchewan. This primary research work involved conducting nearly 900 telephone and email interviews via a Praxis online panel. Finally, a series of in-depth, inperson interviews was completed with approximately 30 key business leaders in Saskatchewan. The business leaders selected for interviews were nominated by the economic development agencies of Saskatoon and Regina. These interviews were conducted by CMC professionals from a number of Saskatchewan-based firms. CMC firms also provided project management services in support of the study. 11

Finally, both the Regina Regional Opportunities Commission and the Saskatoon Regional Economic Development Authority were significant in-kind contributors to the project, providing both guidance and leadership, contributing ideas and discussion to the key questions that were addressed through the study effort. This overview report has been developed by an editorial committee of Frank Hart, FCMC, Doug McNair, CMC and Lorne Boyle, CMC. It is based on information and analysis from the various works commissioned under this study and through a literature review of the papers noted. Two other detailed publications are also available: ď&#x201A;ˇ ď&#x201A;ˇ

The State of Cities Report; Johnson-Shoyama Graduate School of Public Policy, and Perceptions of Economic Standing, Business & Growth; Praxis Analytics Inc.

Copies of this report as well as The State of Cities Report and the Perceptions of Economic Standing, Business and Growth study as well as associated presentations on the findings of these studies are available through contacting CMC Saskatchewan and can be downloaded from any of the following websites. Reports - CMC Saskatchewan Economic Review, Final Report - The State of Cities - Perceptions of Economic Standing, Business and Growth Presentations - CMC Presentation PowerPoint: to various Saskatchewan Chambers of Commerce, mayors and councils, economic development forums CMC Saskatchewan www.cmc-canada.ca/provincial_institutes.cfm?Portal_ID=7 CMC Canada, National Headquarters www.cmc-canada.ca Johnson-Shoyama Graduate School of Public Policy www.schoolofpublicpolicy.sk.ca Praxis Analytics Ltd. www.praxis-analytics.ca

II Background A. The Institute of Certified Management Consultants of Saskatchewan’s Interest in this Topic The Certified Management Consultant (CMC) designation is the world's premier management consulting certification and is recognized in over 50 countries around the world. Many CMCs also hold other professional designations such as Chartered Professional Accountant, Institute of Corporate Directors, Certified Management Accountant, Professional Engineer, Project Management Professional, Certified Human Resource Professional, Consulting Agrologist, and a variety of other professional designations. While many CMCs carry individual professional specializations such as those noted above, individuals earning the CMC designation must prove to be experienced and qualified management generalists in order to receive and maintain the CMC professional designation. Many of Saskatchewan’s major management consulting firms are CMC member firms and are staffed with CMC professionals. CMC professionals are often engaged by organizations which need to respond to unique opportunities and challenges or must deal with issues that are keeping them from realizing their full potential. CMCs are often engaged where the task falls outside a client's capacities and/or skills. As noted earlier, Saskatchewan Management Consultants, through ICMCS, became interested in undertaking this project to bring greater clarity to the factors driving Saskatchewan's recent and rapid economic growth. The ultimate objective was to develop a point of view on how to sustain the recent high levels of economic growth in Saskatchewan. Much of the inspiration for this work came from similar work undertaken for many years by the Saskatchewan Institute of Chartered Accountants through their publication, Saskatchewan Check-Up, published annually from 2002 to 2008. Similar to the Saskatchewan Check-Up program, this study examines Saskatchewan’s recent past economic performance and attempts to offer prescriptive public policy suggestions to maintain or improve the performance of Saskatchewan’s economy. CMC firms have a unique interest in the topics covered by this study. Many CMC consultants and firms have noted that their consulting assignments in Saskatchewan increasingly involve working with local organizations that are trying to address growthrelated challenges – challenges that are relatively new for many Saskatchewan organizations. The magnitude of these growth-related challenges is often new for management in Saskatchewan because the current level and nature of growth is unprecedented in the recent past for many organizations in the province. CMC consultants are often change agents and Saskatchewan is coping with change, most of it positive. Recent and rapid growth of the province has already brought about new public attitudes. ICMCS holds the view that Saskatchewan must work to sustain these pro-growth attitudes in order for growth in the province to continue. In addition, unless key policy enablers are implemented to embrace growth, future opportunities will be lost. For these

reasons, ICMCS considered it important to reflect on these questions and explore how to maintain the positive momentum Saskatchewan has experienced in recent years.

B. Sustaining Growth as the Goal ICMCS takes the view that growth is good and that it is critically important that the right public policies, programs and initiatives are put in place to sustain growth. Sustaining Saskatchewan's growth is a mission set out by the Government of Saskatchewan in its plan for growth, Vision 2020 and Beyond. This growth plan advocates a Saskatchewan population target of 1.2 million people by 2020 and a labour force increase of 60,000 workers. To accomplish this, Vision 2020 and Beyond advocates actions in areas such as:      

Increased investments in growth-enabling infrastructure; Developing a more skilled workforce; Enacting measures to increase the competitiveness of Saskatchewan’s economy; Increased trade, investment and exports through international engagement; Advancing Saskatchewan’s natural resource strengths through innovation, to build a Saskatchewan post-commodity-centric economy; and Maintaining sound fiscal policies of balanced budgets, lower debt and smaller, effective government.

Population growth has always been seen as a measure of how well Saskatchewan is doing as a province. Saskatchewan has experienced four major periods of population growth throughout its history. The first was during the settlement period from 1901 to 1931 when people came to Saskatchewan in large numbers, primarily from Europe, to farm. During this settlement period, Saskatchewan's population grew by 30 per cent per year on average. With the exception of the settlement period, the most rapid growth experienced in Saskatchewan's history was from 2006 to 2013 (see Figure 1).

During the settlement period of 1901 to 1931, Saskatchewan added an average of 27,000 residents per year for three decades. Since 2006 when Saskatchewan's population began to increase steadily and rapidly once again, Saskatchewan has been adding an average of approximately 20,000 new residents per year. Saskatchewan people have often debated whether there is a direct link between the ideology of the governing party of the day and the rise and fall of the province's economic performance. If perception is reality, there appears to be some credence to this view. Figure 2, drawing on data from

the public opinion portion of this study, shows that supporters of the Saskatchewan Party (currently the governing party) are somewhat more inclined than supporters of other political parties to believe that Saskatchewan is doing better today than four years ago. However, even supporters of all other political parties in Saskatchewan appear to agree that Saskatchewan's 15

economy is doing at least as well as it was four years ago and that this will continue for the next four years. While certain investment and other major decisions by residents and businesses may indeed be influenced by perceptions of the ideology of the governing political party of the day, other data seems to strongly suggest that Saskatchewan's population and economic growth is mostly tied directly to the strength of its resource-based economy, and in particular the ebbs and flows of global commodity demand and prices. Figure 3 shows this pattern of alignment between commodity price growth and population for Saskatchewan's most recent growth period. Saskatchewan's population began to grow slightly again after 2001, about the time the current global commodity supercycle began. In particular, Saskatchewan's more recent strong population growth has tended to parallel rising prices of potash and oil, now two of Saskatchewan's most important economic growth engines. Prices of oil and potash have been on an upward trend since about 2006, as has Saskatchewan's population. Rising global economic growth, increasing global population and the increasing wealth in emerging market countries is now driving increased global demand for energy and food and, in turn, commodities such as those produced in Saskatchewan. This is at the heart of the current commodity supercycle. Figure 3: Saskatchewan Population Changes Relative to Commodity Cycles

______ __________________________________________________ Source: McKinsey Global Institute and Institute of Certified Management Consultants of Saskatchewan, 2013

C. The Challenges Ahead in Sustaining Saskatchewanâ&#x20AC;&#x2122;s Growth 16

The set of global circumstances now fuelling Saskatchewanâ&#x20AC;&#x2122;s recent rapid growth have not always been prevalent. Notwithstanding the many and periodically volatile movements in the prices of energy, minerals and food-related commodities during the past century, the global prices of commodities were no higher in real terms at the end of the 20th century than they were at the beginning. According to the McKinsey Global Institute's Commodity Index, commodity prices remained relatively flat during the last century even though the demand for various commodities increased between 600 and 2,000 per cent in response to a quadrupling of the worldâ&#x20AC;&#x2122;s population and a 20-fold increase in global economic output over the last century. McKinsey found in its recent commodity market resource study8 that technological innovation and the discovery of new, low-cost sources of commodity supply mitigated what would otherwise have been strong price increases relative to growing global demand. In addition, governments, particularly those in developing countries, have had a propensity to influence their domestic markets for various commodities by subsidizing production or consumption. Actions such as energy price subsidies to consumers and/or industry, production curtailment, under- or un-priced water, the tendency to refrain from enacting mitigation requirements to address environmental degradation from commodity production, and a host of other public policies have in the past distorted the natural supply and demand dynamics of commodities and therefore pricing. Today and going forward, all such public policy measures are becoming increasingly less viable in a global economy where capital and public values concerning the environment now flow so easily across international boundaries. So what are the prospects for continued high commodity prices? How much longer can Saskatchewan rely on higher commodity prices to fuel the recent high levels of economic growth? ICMCS believes that answers to these questions are vital not only in understanding Saskatchewanâ&#x20AC;&#x2122;s likely future economic growth patterns but also in knowing how to maximize our opportunities and mitigate risks of future slow economic growth. One perspective that advocates a positive outlook for continued robust commodity pricing is found in the argument being made that the resource landscape has been transformed fundamentally since about 2000. This point of view rests on data showing that average minerals prices have roughly doubled and energy prices have tripled (Figure 3, shown on the previous page) since the beginning of the current commodity supercycle. Such price increases have led to a strong increase in the production of energy and minerals, two of Saskatchewan's primary wealth generating sectors. Despite recent price declines (in late 2013) for some commodities such as oil, potash and uranium, commodity prices still remain, on average, relatively close to their peak prices before the 2008/09 financial crisis and are still well above the pricing levels of 2000 when the current commodity price supercycle began. If this view of continued higher commodity prices over the longer term turns out to be the case, it will be continued good news for Saskatchewan. It would mean that the prospect of commodity windfalls will continue for some time yet and Saskatchewan would continue to benefit economically from higher commodity prices. Although nothing in the world of commodity markets is guaranteed, a number of fundamental forces suggest that such a 8

McKinsey Global Institute, Resource Revolution: Tracking Global Commodity Markets, September 2013.

scenario is possible, giving Saskatchewan the benefit of higher commodity prices for some time yet to come, perhaps for another 15 or so years up to 2030. According to the McKinsey Global Institute, about $17 trillion US of new investment is required in commodity industries over the next 15 years (in areas like oil, gas and minerals, in particular) in order to meet expected strong demand from rapidly growing emerging market economies. This $17 trillion of new investment is needed not only to meet higher demand from an expected global population increase of two billion more people over the next 25 or so years but also to replace existing depleting sources of supply. Further evidence of such a scenario is supported by various United Nations studies. In terms of food production and demand for example (another major commodity and value-added industry in Saskatchewan) the United Nations Food and Agriculture Organization (UNFAO) estimates that food demand could rise by 35 per cent by 2030 and further by 70 per cent by 2050. This rising demand for food is projected to come from countries such as China, India, various Asian countries, and countries in Africa. Such strong demand will be driven by both rising populations and increasing calorie consumption as levels of affluence increase. However, the problem of meeting this increased demand is exacerbated by the fact that, according to the UNFAO, 25 per cent of the world’s potential agricultural land is “highly degraded,” making it unsuitable for agriculture. China, for example, as one of the high demand generators for increased food, is experiencing significant loss of agricultural land due to industrial pollution. The UNFAO estimates that farm output must increase by 70 per cent accommodate the world's population in 2050. Such demand would generate a requirement for another billion tonnes of grain foods and 200 million tonnes of livestock meat. Historically, about 90 cents of every dollar invested in resource extraction and commodity production finds its destination in middle to higher per capita income countries such as Norway, Canada, Australia, Brazil, Chile, South Africa, Malaysia, Saudi Arabia and the United Arab Emirates. Saskatchewan is one region that benefits from this pattern of investment. Of the $17 trillion of increased investments McKinsey says will be required, much of this will still go to these wealthier countries unless less developed countries such as Colombia, Kazakhstan, Indonesia, Azerbaijan, Zambia, Mongolia and a host of others can improve and stabilize to make themselves more attractive investment destinations for commodity producing companies. To do so, they need at a minimum to achieve major improvements in institutional governance and management of resource policies, reduce their political risk as investment destinations and improve their infrastructure to serve the resource industries. Within this context, Saskatchewan’s continued relative attractiveness as a destination for such investments in oil, minerals and food production is somewhat dependent on both the degree to which Saskatchewan does the right things to sustain its investment attractiveness but also whether these various emerging economies become more competitive over the next 15 years. While there are factors affecting continued rising global commodity demand that are positive for Saskatchewan’s continued growth, there is also the threat of increased competition from new lower cost countries.

In order to remain competitive as a destination for investment and production by resource industries, and thereby keep commodity driven economies like Saskatchewan’s growing in the face of global competition, the McKinsey study advises that public policies are required that will:  Maintain and continuously improve the institutions that govern the resource sector;  Invest in and build the public infrastructure required by these investors;  Ensure that fiscal policies, royalty regimes and the business environment remain competitive;  Enhance the development of local content to support the competitiveness and productivity of these industries;  Ensure that the financial resources currently coming as a temporary windfalls are spent and invested wisely; and  Transform resource wealth into broader economic development to provide greater economic stability as commodity prices and supplies decline. These policy priorities advocated by McKinsey closely match those set out in the Government of Saskatchewan’s growth plan, Vision 2020 and Beyond. The fact that there is generally such alignment between Saskatchewan’s growth strategy and the policies advocated by McKinsey provide an endorsement from a globally recognized and respected strategy consulting firm that Saskatchewan’s growth plan is fundamentally on the right track. In general, Canada does well as a global supplier of commodities and in sustaining its competitiveness as an attractive destination for investments by global commodity producers. McKinsey’s assessment of leading commodity producing countries undertaken as part of its global research for its study, Reverse the curse, ranked Canada number one in terms of building infrastructure, having the right fiscal policy and regulatory environment and encouraging and fostering local content development. Canada ranked second in the world in institutional governance of natural resources.

However, Canada ranked fifth after Norway, Qatar, Australia, and Iceland in terms of economic development from natural resources (Figure 4). If this is true of Canada, it may well be true of Saskatchewan and if so, Saskatchewan must find ways to extract more value from its commodity sectors and move toward a post-commodity or value-added economy. 19

Figure 4: Ranking of Best Countries Across Six Areas of the Resources Value Chain

Source: McKinsey Global Institute, Reverse the curse, 2013

D. The Interdependent Role of Urban Centres and Rural Areas in Saskatchewan’s Growth Aside from the need for a more concerted effort to extract greater value from Saskatchewan’s natural resources, ICMCS views Saskatchewan’s public policy framework with regard to sustaining growth as being fundamentally sound. The task of extracting more value from Saskatchewan’s natural resource wealth will depend on understanding and embracing the rural/urban dynamic of Saskatchewan’s resource-based growth. In particular, there is a need to focus more on the increasingly important role that urban centres can play in creating a more diversified resource-driven economy, one that is less vulnerable to resource price volatility and extracts more gain through higher-value-added activity, albeit still tied to the resource industry. In our view, this approach will be critical in achieving the right outcomes of one of the six key growth activities of Vision 2020 and Beyond that seeks to “Advance Saskatchewan’s natural resource strengths, particularly through innovation, to build the next post commodity-centric economy." A strong role for Saskatchewan urban centres is also vitally important to addressing McKinsey's sixth prescription for sustaining growth of resource/commodity economies by "transforming resource wealth into broader economic development to provide greater economic stability as commodity prices and supplies decline."

Rural areas in Saskatchewan produce most of the products for export, and most of the value of this output is still predominantly earned from commodities exported in the form of unprocessed material. Adding more value can be achieved by way of:   

Greater processing of commodities where possible; Creating innovative products and services that enhance resource industry productivity; and Development of the local supply chain to service and support the commodity industry.

The above are all areas of significant opportunity available to Saskatchewan as it seeks to build a post-commodity economy. This study found that urban centres play a vital effort in this regard. Most of the effects of growth in terms of population increases, new housing investment, business formation and new infrastructure requirements are occurring in every one of Saskatchewan’s eight largest urban centres and most strongly in Regina and Saskatoon. Understanding the important interdependency between rural and urban Saskatchewan in terms of sustaining the province’s growth is vital to the mission of continued strong longer term economic growth in Saskatchewan. Increased urbanization of Saskatchewan will continue to be an outcome of Saskatchewan’s future growth and increased urbanization will help to sustain growth. ICMCS believes, based on the findings of this study, greater urbanization needs to be both encouraged and supported as part of Saskatchewan’s longer term growth strategy, primarily as part of efforts to support more value-added production from Saskatchewan’s key commodity industries. Indeed, the indepth interviews we conducted with business leaders in Saskatchewan repeatedly spoke of the need to enhance the size and appeal of Saskatchewan’s urban centres as a vital strategy to ensure current growth levels continue. ICMCS commissioned the Johnson-Shoyama Graduate School of Public Policy to conduct research on the role of cities in sustaining and driving regional growth. Johnson-Shoyama was specifically asked to assess the urban contribution to the dynamic of regional growth in general and that of Saskatchewan in particular. The Johnson-Shoyama study revealed that most people still think of Saskatchewan as a rural province both in terms of its economy and its people. Not surprisingly, this is a direct reflection of Saskatchewan’s agricultural history as well as the strong growth in natural resource industries that started in the 1970s and has been the key driver of Saskatchewan’s recent high levels of economic growth. The more predominant rural nature of Saskatchewan is also still evident in its population geography, even when compared with our neighbours immediately to the east, with Winnipeg as a single large centre of population, and to the west, with two very large cities in Edmonton and Calgary. Aside from the Atlantic provinces, Saskatchewan is the only province in Canada without a city of at least 500,000 in population. While Saskatchewan still has a strong and vibrant rural-based resource economy, the JohnsonShoyama study concludes that the provincial economy and its residents are becoming more urban. Nevertheless, Saskatchewan’s cities remain small relative to major centres in most 21

other parts of Canada (and especially relative to the major centres directly to the east and the west). While the proportion of the provincial population that is urban is also smaller than in Canada as a whole, there is evidence that Saskatchewan’s cities are growing in importance. As we will show, they are the centres attracting population growth. As they continue to grow, they will further develop their roles as engines of growth, somewhat independent of the commodity industries that support provincial economic growth. While Saskatchewan's largest cities contain 52 per cent of the provincial population, they contribute 56 per cent of provincial GDP. Population growth has become a significant public measure of the success and veracity of growth strategies. Patterns of population growth in Saskatchewan, as is the case for Canada and most countries globally, are strongly influenced by the dynamics of larger urban areas. Larger urban areas are vital to attracting economic activity and population. The JohnsonShoyama research found that equally, rural areas for the most part, with the exception of those in close proximity to urban centres as part of the daily commuting shed, are typically either in decline or remaining stagnant in terms of population and investment. Provincial economies depend on their urban centres, especially the larger ones, for their growth and viability. The imperative of both recognizing and encouraging this inevitable economic and population shift toward urban areas seems even more important in Saskatchewan’s case. Historically, urban centres emerged to serve the resource-based rural economy. The urban centres depended on the rural economy for their origins and early development. It can well be argued that in Saskatchewan’s case, without the resources of the rural and remote areas, Saskatchewan’s cities and towns would never have emerged at all. As the Johnson-Shoyama study concludes, however: For most cities and especially “large” cities or metropolitan areas, this direction of causation has long since reversed. In the entire Northern Plains region, from the Canadian prairies to west Texas, vast areas have seen persistent net out migration for decades, with the exception of those areas that contain cities of more than 500,000.9

Cities have now become regional and national engines of growth as economic activity has concentrated in urban areas, while populations and businesses in rural areas depend on urban centres for higher order public and private goods and services, and for employment. Urban areas serve as the markets for raw materials extracted from rural and remote areas at least in terms of distribution points and most often for processing and manufacturing. Recognition of this fundamental shift is critical to achieving sustained growth in Saskatchewan. It is with regard to this last point that ICMCS believes subsequent versions of Saskatchewan’s Vision 2020 and Beyond will need to have a more deliberate focus on the role of urban centres in driving Saskatchewan’s continued growth -- particularly in terms of their role in creating the post-commodity economy of Saskatchewan. This focus is foundational to creating a 9

Johnson-Shoyama Graduate School of Public Policy. The State of Saskatchewan Cities, Page 10, 2013

sustainable and growing higher-value-added economy where technology, manufacturing, processing and business services make a larger and larger contribution to provincial GDP. Cities have become important engines of growth for their region or province as discussed more fully in The State of Saskatchewan Cities, chapter four. The factors contributed by cities to an economic region’s growth stem from a combination of the business requirements of firms and the quality of life considerations of the skilled, largely mobile labour force (and population in general), including decisions made by immigration candidates. Technology innovation and adoption favours concentrated production which is effectively undertaken in cities. Sustained business competitiveness relies on this concentrated production and therefore on larger cities. Technologies associated with primary production, concentrated in rural areas on the other hand, are now very capital intensive, as a result requiring much less labour. Saskatchewan’s success as a world leader in agriculture is because of the province’s agriculture industry's innovation and application of productivity-improving technologies. This in turn has driven ever-increasing farm size and farm family dependence on off-farm employment for their income (about 80 per cent)10,11 as well as the resulting shifts in population from rural areas to cities in Saskatchewan. The business or production management and supply side of the resource industries has also favoured cities. Beyond the primary production phases, activities such as supply chain, processing, distribution and broader manufacturing occur primarily in urban centres where there is a sizable skilled labour pool, where there are major transportation hubs (airports) and where input goods and services are readily available. The net effect of these requirements is that value-added production and processing in cities and in larger cities is more efficient and more competitive than it would be in smaller cities or rural towns. In markets that are increasingly globally competitive, the low cost producer will survive while others may not. Finally, the quality of life characteristics of urban centres is critical to sustaining population and economic growth. Increasingly individual and household choices about where to live are based on access to the full range of personal and professional services. To attract and retain skilled labour and professionals in a community, a community must offer the desired quality of life characteristics, in addition to a range of employment options increasingly for both spouses12,13. If the desired amenities and services are not immediately available they need to be accessible within a reasonable commute.14

Stabler, J.C. and M. R. Olfert. 2002. "Saskatchewan’s Communities in the 21st Century": From Places to Regions. Regina, SK: Canadian Plains Research Centre, University of Regina. 11 Partridge, Mark D. and M. Rose Olfert. 2011. "The Winner’s Choice: Sustainable Economic Strategies for Successful 21st Century Regions." Applied Economic Perspectives and Policy 33(2): 143-178. 12 Florida, Richard. 2002. The Rise of the Creative Class: And How It’s Transforming Work, Leisure, Community and Everyday Life. New York: Basic. 13 Partridge, Mark D., Dan S. Rickman, Kamar Ali, and M. Rose Olfert. 2008. "Employment Growth in the American Urban Hierarchy: Long Live Distance." Berkeley Electronic Journal of Macroeconomics—Contributions. 8 (1). 14 Renkow, Mitch, and Dale Hoover. 2000. "Commuting, Migration, and Rural-Urban Population Dynamics." Journal of Regional Science 40(2): 261–87.

Rural and urban businesses require high-level services in order for them to be competitive. Attracting the professionals to deliver the needed services requires access to an urban centre that can also provide a full range of cultural and recreational amenities and professional services of the highest order10. In the absence of such amenities, professionals and skilled labour will leave to go elsewhere or decide not to come to Saskatchewan in the first place. The labour market is increasingly global, particularly for these qualified workers. As the JohnsonShoyama study noted: In Saskatchewanâ&#x20AC;&#x2122;s bid to remain competitive as a place to live and to do business, its urban centres and especially its metropolitan areas are of vital importance. They must provide the kind of setting and provide the level of services that make them globally competitive if they and the province are to achieve sustained growth and development.15

Johnson-Shoyama Graduate School of Public Policy, The State of Saskatchewan Cities, page 13

III Study Findings There has undoubtedly been a positive shift in Saskatchewan’s fortunes over the past seven years. This section of the report discusses the key elements and impacts of these shifts with a view to identifying what more can be done to ensure Saskatchewan continues to experience the benefits of its new-found economic success. Public attitudes about Saskatchewan’s future are now strongly positive given that incomes are rising, population is growing, and business investment as well as employment is rising substantially. Saskatchewan cities are experiencing significant growth as a consequence of province-wide growth and are in many ways also experiencing the greatest impacts in terms of the need for infrastructure investment and housing demands. This study found that rural and smaller urban communities are generally also growing, more in terms of rising personal incomes than in increased employment. Saskatchewan's recent and rapid growth is creating new challenges both at the provincial level and in urban areas. Nevertheless, the current economic state is still very good news relative to Saskatchewan's historical situation. There are many new opportunities being created by Saskatchewan’s growth and now is the time to seize them.

A. A Significant Shift in Citizens' Attitudes Toward Growth One of the most striking findings from this study has been the turn toward a stronger, more upbeat attitude among Saskatchewan residents about the current and future well-being of their province and their own personal situations. In this report, we reveal only a portion of the opinion research completed by Praxis on Saskatchewan citizen attitudes toward growth. Readers seeking greater insight on the shifts of Saskatchewan’s attitudes are encouraged to review the entire survey findings completed by Praxis as part of this report's broader release in Perceptions of Economic Standing, Business & Growth. The Praxis attitude research suggests that Saskatchewan is experiencing a return of the core values that pioneers brought with them during the first major settlement or homestead period that founded Saskatchewan in the first place. Saskatchewan attitudes and values in the 1901 to 1931 period were built around concepts such as:  Communities building together – Communities came together to build the infrastructure of the day from barns to local schools to hospitals, local community halls, local telephone systems, roads, and other elements of the community more broadly.  Saskatchewan: A land of opportunity – The breadbasket of the world, a place where immigrants were welcomed, where people came to build wealth and a better life. But the Great Depression had a significant psychological impact that turned those positive values significantly away from a land of opportunity mindset and more toward:  An aversion to taking risk;  A culture where success was envied and not applauded; 25

  

A focus on redistribution of wealth versus wealth creation; An expectation and overdependence on government to do things for people; and A sense that there was always greater opportunity elsewhere.

The Depression-related attitudes of "scarcity" contributed to a long period of underinvestment and out-migration where the population remained flat and even declined from time to time. Today the opinion survey results gathered by Praxis show a resurgence of positive attitudes about the future. The older notion of community building together is now expressed as regional inter-dependency where it’s about the wider community or the region, and not just found solely in the identity of the town or city itself. This is largely a function of the commuting patterns followed by Saskatchewan people in terms of where they live versus where they work and a prevailing attitude of “what is good for you is good for me.” Saskatchewan is once again seen by its citizens and businesses, as well as those from afar, as a place to invest. Today political and business leaders talk about the world wanting what Saskatchewan has to offer. Saskatchewan’s exports are now dominated by energy and mining products, uranium and potash and with world-leading agriculture and food exports. Because Saskatchewan’s trade has grown so rapidly, its citizens now have an even greater appreciation of how much the province depends on global trade for its prosperity. Saskatchewan is increasingly more outward looking and less inward looking. It is becoming a province with greater self-confidence, for good reason! Throughout Canada, Saskatchewan is now viewed as a have province. This new Saskatchewan attitude can be illustrated in a few of the responses to questions posed in the Praxis survey. To illustrate, respondents were asked to respond to the following question: Thinking about the next four years, how do you expect Saskatchewan’s economy will perform? Do you think it will . . . perform worse than today, about the same as today, or better than today?

Respondents were asked to answer this question using a five-point scale where responses of 1 or 2 are negative, a response of 3 is neutral, and responses of 4 or 5 are positive. The results for the survey response to this question are given in Figure 5 below and show that 84.5 per cent of respondents believe that the Saskatchewan economy will perform about the same (51.4 per cent) as it is today or even better (33.1per cent).

While Saskatchewan has posted a record-setting economic performance over the last several years versus historically long periods of underperformance, a large majority of Saskatchewan citizens today believe the provincial economy will continue to do at least as well as it has in the past four years or even better. A strong majority of Saskatchewanâ&#x20AC;&#x2122;s citizens clearly feel good times will remain in Saskatchewan for the foreseeable future. A measure of how much Saskatchewan attitudes have changed can be found by comparing the responses to an identical question asked of Saskatchewan residents in 2004. The 2004 versus 2013 responses show markedly different ratings. In 2004, residents were asked how they expected to do personally four years out as compared to how the province would do four years out. In 2004, people thought they would do better than the province as a whole, expecting the provincial economy to underperform going forward, but they themselves expected to continue to do as well as they had in the past. The same question asked in 2013 shows the province/personal outlooks reversed from the 2004 results. Respondents in 2004 viewed their personal situations running ahead of the province as a whole, while in 2013, respondents rated the prospects for the province-wide economy more highly than their own situations (Figure 6).

When asked how growth is affecting them personally on a scale of 1 to 5, again with 1 being very negative and 5 being very positive, with a score of 3 or higher, most residents indicate that growth is affecting them neutral to slightly positive with slight differences by region and by occupation. Residents of farms and acreages, for example (rating 3.65), as well as most small towns and small cities (rating 3.44), tend to be more positive. Regina and Saskatoon residents gave a slightly lower rating of about 3.37 and 3.31 respectively, while Moose Jaw residents are mostly neutral to negative in terms of their assessment of growth impacts on them personally (rating 2.70). (Figure 7 on the following page). When asked if they personally are on the right track to earn enough in the next four years to have the quality of life they want, the majority feel they are on track, as shown in Figure 7 for various demographic breakouts of the data:

Figure 7: Perceptions of How Growth Has Affected Citizens, Regionally and by Occupation

Source: Praxis Analytics, Household Survey: Perceptions of Economic Standing, Business, and Growth, 2013

Region  Those in Prince Albert (81.3 per cent), in central Saskatchewan (79.4 per cent) and in the Southwest (78.2 per cent) are most likely to say they are on track. Those in Moose Jaw (35.7 per cent) are least likely on track to earn enough in the next four years to have the quality of life they want. Those in Regina (68.5 per cent) are more likely than those in Saskatoon (63.3 per cent) to say they are on track. Age  The percentage saying they are on track decreases as age increases, from 77.2 per cent among those 18-34 to 65.0 per cent among those age 65+. Residence Location  Those on a farm or acreage (77.1 per cent), those in small towns (73.1 per cent) and those in small cities (75.0 per cent) are more likely to say they are on track than those in large cities (65.3 per cent).

Income Level  The percentage saying they are on track increases as income level increases, from 56.4 per cent among those with income under $40,000 to 86.2 per cent among those with income over $120,000.  Education Level  University graduates (75.4 per cent) are more likely to say they are on track than those with technical, trade or some university (71.5 per cent) and those with up to grade 12 (61.5 per cent). Overall, Saskatchewan residents are positive about their province's future and for the most part positive about their personal future. Forty-one per cent (41.3 per cent) anticipate improvement in their personal situation over the next four years, versus only 12 per cent who anticipate decline.  Respondents in Prince Albert are most likely to be optimistic, with 58.1 per cent expecting improvement. The region with the highest number anticipating decline is Moose Jaw, at 32.1 per cent.  Optimism falls with age, from 63.3 per cent among those under 34 to 14.3 per cent among those 65+. Recent newcomers are markedly more optimistic, with 60.9 per cent of those here five years or fewer expecting further improvement, compared to 39.9 per cent of those residents here more than five years. Results are summarized in Figure 8 below which shows, for those who have reported a change in their personal situation over the past four years, how they expect their personal situation to unfold relative to their perceptions of how the provincial economy will perform over the next four years. Figure 8: How Saskatchewan Citizens Expect Their Personal Situation Will Change

Performance rating avg 1-5 Past 4 yr. Change Forward 4 yr. Expectation

Economic Outlook Summary Provincial Economy Personal Situation 3.77 3.40 Worse Same Better Worse Same Better 14.6% 28.9% 56.5% 28.1%* 13.2%* 58.7%* 15.5% 51.4% 33.1% 12.0% 46.6% 41.3%

*These percentages are among the 57.5 per cent reporting a change in situation over the last four years. Source: Praxis Analytics, Household Survey: Perceptions of Economic Standing, Business, and Growth, 2013

Among those who have reported a change in their situation over the past four years, 85 per cent of people think the provincial economy is as good or better today compared to four years ago and that this will continue over the next four years. In terms of their personal situation, 72 per cent think they are the same or better off than they were four years ago while 88 per cent expect to be doing as well or better over the next four years. 30

B. Factors Contributing to the Shift in Citizens' Positive Attitudes The change of attitude in Saskatchewan is largely a result of the recent sustained economic growth which, as noted earlier, started about 2006. Saskatchewan and Alberta have led Canada’s economic growth since 2009 (Figure 9).

In Saskatchewan’s case, the key economic drivers have been natural resource production and export and construction activity associated with historically high levels of capital investment. Saskatchewan’s eight largest cities captured much of this growth in recent years. From 2006 to 2011, the GDP in the eight large centres increased by $14.2 billion, measured in nominal dollars at basic prices. Figure 10 on the next page shows that there were large percentage increases in some smaller sectors (e.g. agriculture, business services, and utilities) but 66 per cent of the growth was accounted for by four sectors:  the resource (mining, oil/gas) sector with an average annual increase of 13 per cent from 2006 to 2011 that is equivalent to $3.5 billion;  the finance, insurance and real estate group (including the imputed value of owneroccupied homes) with an average annual increase of 9 per cent;  the public sector, including non-profits, with an average annual increase of 7per cent; and  Construction, with an average annual increase of 16 per cent which added $1.6 billion to urban GDP over the five years.

All 14 industry groups showed growth from 2006 to 2011 but the highest growth rates were among the larger industry groups.

Although Saskatchewan's employment and population growth rate has not been quite as high as Alberta's since 2007, Saskatchewan's relative change in GDP in percentage terms has been comparatively higher than Albertaâ&#x20AC;&#x2122;s. This is a significant finding and a signal of a key indicator of what Saskatchewan must improve in order to sustain its current growth levels, namely to increase value-added production, technologies and innovation to enhance productivity and increased levels of business services and supply chain development in support of primary exports. Alberta has made more progress than Saskatchewan overall in these areas. Another reason for the big shift in attitudes is that incomes have grown all across Saskatchewan. Figure 11 shows average household income in 2000 (in blue) and in 2010 (in yellow).

(CMA=Census Metropolitan Area, CA=Census Area)

Incomes have grown most rapidly in Estevan, Regina and Saskatoon but all communities have seen significant growth in household incomes. Household incomes in rural and small urban centres have also grown over the past decade. Employment growth has undoubtedly been another factor contributing to increased optimism. Employment growth has been strong in Regina and Saskatoon with both cities outpacing Calgary's employment growth rate between 2006 and 2011 as shown in Figure 12.

It wasnâ&#x20AC;&#x2122;t too many years ago that this would have never been thought possible. Employment growth in Saskatoon and Regina has been among the strongest in Canada over the past five years. Saskatoon and Reginaâ&#x20AC;&#x2122;s share of income from employment is rising compared to other western Canadian cities. This means a greater proportion of income in Saskatchewan's two 34

largest cities is coming from employment and not from government transfers. The emphasis is on wealth creation and not distribution.

C. Commodity Exports Are Driving Saskatchewan's Rapid Growth Commodity exports are at the heart of the recent strong growth in Saskatchewan's GDP, household incomes, employment and population. As noted in chapter II, the global commodity supercycle (which began in 2000 and is still ongoing) is generating increased demand for commodities for which Saskatchewan is a key source of world supply, particularly potash but also uranium and, on a North American basis, oil and gas as well. This strong global commodity demand is driving investment growth in commodity production in Saskatchewan which in turn is driving growth of investment, jobs and income and ultimately contributing to Saskatchewan's growing population. As a result of this strong global demand for commodities, the effective work of the Saskatchewan Trade and Export Partnership (a public-private partnership for government and Saskatchewan exporters) and solid work by Saskatchewan exporters in general, Saskatchewan became Canadaâ&#x20AC;&#x2122;s fourth largest exporter when it surpassed British Columbia in 2012. As Figure 13 on the next page shows, Saskatchewan grew its exports over two and a half times between 2003 and 2012. Albertaâ&#x20AC;&#x2122;s export growth by comparison was the second fastest in Canada but substantially behind Saskatchewanâ&#x20AC;&#x2122;s in terms of the rate of export growth over this period. Figure 14 shows that Saskatchewan's goods exports predominantly consist of agriculture, food, energy, minerals and related manufactured products.

D. The Impact of Growth is Noted Mostly in Cities There have been four global commodity supercycles over the past 115 years. Saskatchewan as well as other major commodity driven economies are currently benefiting from the latest global cycle. The last commodity supercycle continued for 28 years. It began in 1971 and 35

ended in 1999. Historically, such cycles have typically lasted between 10 and 30 years. The early 1970s marked the beginning of the third (last) cycle, which peaked around the early 1970s, turned downward during the mid-1970s and ended in the late 1990s. As was the case in the last such cycle, Saskatchewan's population growth has once again somewhat followed this same commodity cycle pattern, as is shown in Figure 15. Figure 15: Saskatchewan Population Growth Relative to Global Commodity Supercycles

Source: United Nations Economic and Social Affairs and Institute of Certified Management Consultants of Saskatchewan, 2013

The growth-related impacts in Saskatchewan caused by the global commodity cycle are different for various parts of the province. For rural and northern Saskatchewan – particularly those areas close to the resources – incomes have risen, existing businesses have expanded dramatically and new businesses have opened. The current cycle has supported business expansions in many smaller urban Saskatchewan communities as hospitality and food service establishments have grown to serve the oil, gas and mining industries. Between 2008 and 2012, rural and small urban communities had the fastest growth rate of new businesses in Saskatchewan at 2.9 per cent per year versus a 2.2 per cent for Regina and Saskatoon. However, most of these new firms in rural and small urban Saskatchewan generate a relatively small number of employees per establishment. Even with this growth in new business start-ups and expansions, employment levels overall have continued to decline in rural and small urban Saskatchewan albeit at a much slower rate than during periods prior to 2006. On the other hand, employment levels rose significantly in the eight largest urban centres during the same period (2008 - 2012). While Saskatchewan’s population is growing, population growth is not being evenly distributed across the province. Population growth is strongest and almost exclusively found in or close to Saskatchewan's eight largest urban centres. Sixty per cent of Saskatchewan residents now live in cities, versus 56 per cent in 1996. Within 10 years, if population trends continue, 62 per cent of Saskatchewan residents will likely live in the province’s eight largest cities. Regina and Saskatoon are en-route to becoming cities of around 300,000 or more within a decade. The trading and commuting shed around Saskatoon is already almost this large. The dynamic and impact of the growth of Saskatchewan’s two largest urban centres on nearby communities is illustrated in Figure 16. 36

Cities or communities closer to Saskatoon and Regina are growing more rapidly as compared to similar sized communities that are not part of either the Regina or Saskatoon commuting shed. As Figure 16 shows, between 2006 and 2011 those communities close to Regina and Saskatoon grew much faster than similar sized communities not located near a large urban centre. Figure 16 compares the growth of selected cities including those close to either Regina or Saskatoon

such as White City, Warman and Martensville to those further away, including Moosomin and Meadow Lake. These latter two communities grew but comparatively slower than Warman, Martensville and White City because they lacked the proximity of being close to a major urban centre such as Regina or Saskatoon. The effects of this urbanization on the provincial population growth dynamics overall is shown in Figure 17.

While Saskatchewan’s eight largest cities represent only 60 per cent of the provincial population, they are attracting nearly 80 per cent of Saskatchewan’s population growth. Conversely, rural and small urban Saskatchewan, with 40 per cent of the population today, is attracting only 20 per cent of the population growth; hence the long-term population shift towards Saskatchewan’s eight largest urban centres and nearby communities. A key finding of this study is that growth of Saskatchewan’s population is highly dependent on the province’s urban centres — in particular Regina and Saskatoon, and on communities within their surrounding immediate trading areas. Cities and their appeal are playing a critical role in growing the provincial population overall. Regina and Saskatoon play a most critical role, attracting many of the highly skilled workers that Saskatchewan requires to sustain a growing economy as well as attracting new residents to the province and growing the provincial population overall.

E. International Immigration is a Primary Driver of Population Growth One of the main reasons Saskatchewan’s two largest cities and their nearby communities are contributing so strongly to Saskatchewan’s population growth is the role that international immigration is now playing in Saskatchewan’s rising population. International immigrants are now adding 1 per cent population growth to Saskatchewan annually and 2 per cent to Regina and Saskatoon, shown in Figure 18 on the next page. International immigrants are twice as likely to locate in Regina and Saskatoon as they are to locate elsewhere in the province.

F. Most of the Employment Growth is in the Cities A further factor driving urbanization, illustrated in Figure 19, is that the vast majority of employment growth is occurring in the eight major urban centres in Saskatchewan. Rural and small urban centres on the other hand have experienced declining employment between 2006 and 2011.

Saskatchewanâ&#x20AC;&#x2122;s employment growth has largely been in the eight cities because service industries and value-added manufacturing and processing tend to locate in urban centres. Value-added production is more efficient in cities because of better access to: ď&#x201A;ˇ Pools of skilled labour, ď&#x201A;ˇ Transportation services and logistics, 39

 Inputs and business services. Large cities also attract service industries, which are more employment intensive than goodsproducing industries. Cities also have an advantage in attracting labour because they offer more of the amenities required to attract highly qualified professionals, essential for business services and competitiveness. These amenities include:  Cultural, entertainment and recreational amenities  Good employment options for both spouses  Post-secondary education  Access to medical specialists  Air travel services. Rural areas, on the other hand, produce the vast majority of commodity products for export, most of which are still predominantly in raw material or pure commodity form. Only the agriculture and forestry industries have significantly more employment in rural and smaller urban areas than in the eight major cities in Saskatchewan. All other industries tend to locate more predominantly in one of Saskatchewan's eight largest urban centres. Even in the case of mining, oil and gas, which are still rural dominated employers, rural and small urban centres have only slightly higher employment levels than the eight largest cities in Saskatchewan. BHP Billiton, for example, has at least as many if not more employees located in downtown Saskatoon than they do at or near their mine site at Jansen. For all other industries, the eight cities are the preferred location choice for workers and employers unless it is necessary to have workers stationed near the oil field or mine. Saskatchewan's eight largest cities are capturing the greatest share of employment growth because it is the type of employment found in the cities (such as service industries) that is growing (Figure 20),

while the type of employment found in the rural and small urban areas (primary goods or commodity production) is either flat or declining (Figure 21).

With the dynamics and implications of growth being different for urban Saskatchewan versus rural and small urban, it is clear that sustaining strong provincial growth still depends on the interdependency of this rural-urban partnership where the rural and small urban areas produce the goods for export while the service industries (and their employees) that support these exporting industries reside for the most part in the eight largest urban centres in Saskatchewan.

G. Growth Brings New Opportunities and Challenges As noted in chapter III, CMC consultants interviewed approximately 30 business leaders to gain their perspectives on the opportunities and challenges for Saskatchewan to sustain its recent patterns of economic growth. These interviews were conducted in person and by telephone, and involved an in-depth dialogue about Saskatchewan's growth and how it was impacting their businesses. CMC consultants also sought the business leadersâ&#x20AC;&#x2122; perspective on the role of urban centres in sustaining Saskatchewan's growth. As might be expected, all business leaders interviewed were pleased with Saskatchewan's economic situation but were also candid about the challenges and opportunities facing the province in sustaining the recent high levels of economic growth. The business leaders were asked to identify what, in their opinion, were the top three to five opportunities Saskatchewan must seize over the next five years in order to sustain its current high level of economic growth. Almost all business leaders interviewed observed in one way or another that Saskatchewan is rich in commodities but processes relatively little of the commodities that the province produces. Business leaders see the need to add value to these resources through further processing or by manufacturing products used by these industries. They see such actions as critical to diversifying Saskatchewan's economy.

The opportunities seen by business leaders are summarized in Figure 22.

Several business leaders advocated following the lead Alberta has demonstrated in this regard. Failure to do so at this time in Saskatchewan's history is seen by many of these business leaders as a lost opportunity. Increase of agri-business value-added processing was most often singled out as one of the most significant opportunities, largely because of its fit within the regional urban centres across Saskatchewan. Innovation and technology applied to Saskatchewan's resource industries to enhance productivity was also seen as an important opportunity for capturing additional value. Sustaining international immigration was frequently mentioned as important, particularly to address sustained population growth as well as to meet the labour supply challenges of a growing economy. Ensuring the required infrastructure was also mentioned frequently, not only in the sense that it is in need of improvement, but because there is now interest and opportunity to attract private capital to increase the investment in Saskatchewan's infrastructure given the growing demand. Finally, ensuring the abilities of our institutions to keep up with the changes required due to this heightened level of economic activity was of importance to the leaders of the business community. In terms of challenges, those most often mentioned relate to the basic inputs needed by businesses to sustain growth, including infrastructure such as transportation systems, the supply of skilled workers and professionals, and sufficient affordable housing for a growing population and workforce. The rising cost of doing business was also often mentioned as an increasing challenge, especially for those businesses that were facing price compression in their products but rising labour and other costs due to operating in a hot economy. Business leaders often noted the challenges of attracting skilled professionals due to the relatively smaller size of Saskatchewan's urban centres. Increased Aboriginal participation in Saskatchewan's economy is uniquely seen as both an opportunity and a challenge. It is seen as a challenge from the perspective that higher education and skill levels from all segments of Saskatchewanâ&#x20AC;&#x2122;s population are required to access and fill new jobs. Figure 23 illustrates the challenges most mentioned.

It is believed, however, that the current strong economic growth also provides an opportunity to increase the supply of skilled local workers and entrepreneurs through training programs.

H. Unique Role and Growth Challenges Facing Urban Centres Business leaders were further asked to comment on any unique roles played by Saskatchewan's two largest cities, Regina and Saskatoon. Regina and Saskatoon are commonly seen as providing unique contributions relative to other regional centres although some leaders disagreed. One business leader commented, for example, that Regina and Saskatoon do not have any more significant impact than the other regional centres on provincial growth, excluding some of the large infrastructure investments under way in Regina and Saskatoon. This business leader noted that there is plenty of development under way province-wide, and further that Saskatchewan's economic growth is rooted in commodities and commodities aren't produced in the cities. While elements of this point of view are undoubtedly true, this perspective was in the minority among the business leaders interviewed for this study. Almost all business leaders interviewed see Regina and Saskatoon as centres making a unique contribution to Saskatchewan's growth. Most also advocate that they need to become even larger cities with expanded amenities to help drive Saskatchewan's growth over the longer term.

Saskatchewan's eight largest urban centres already account for the majority of Saskatchewan's GDP as shown in Figure 24. The GDP share contribution of urban centres is expected to increase over

time as urbanization continues. Saskatchewan's provincial GDP in 2011 was $71 billion and 56 per cent of this was generated in Saskatchewan's eight largest urban areas, with 43 per cent of provincial GDP generated by the cities of Regina and Saskatoon alone. The GDP per capita in the eight cities was $73,000 compared with $64,000 in rural and smaller urban centres 16. The city of Estevan has a particularly high contribution to the provincial GDP. In 2011, GDP per capita was $186,000 in Estevan compared with less than $100,000 in the other seven cities. GDP per capita was estimated at $76,000 in Saskatoon and $69,000 in Regina. Business leaders interviewed for this study see Regina and Saskatoon as the central hubs for key services, noting for example that Saskatoon is regarded as an important mining centre in Canada and that university graduates and university programs, law and engineering firms and various others with higher incomes and with an interest in the mining industry are now drawn to Saskatoon. Similarly, Regina was noted by some leaders as becoming a strategic transportation and logistics centre with the development of the Global Transportation Hub. Regina and Saskatoon are also the province's dominant retail centres. Other advantages cited for these cities by business leaders included the following comments: ď&#x201A;ˇ ď&#x201A;ˇ ď&#x201A;ˇ 16

Investment opportunities are strongest in these cities. Regina and Saskatoon are a main source of talent for industries and are centres where talent is developed (i.e. universities and SIAST). Housing choices are best in these cities.

Johnson-Shoyama Graduate School of Public Policy, The State of Saskatchewan Cities, page 107

ď&#x201A;ˇ ď&#x201A;ˇ ď&#x201A;ˇ

New Canadians are more attracted to live in these two cities. Therefore these cities play a key role in increasing Saskatchewan's population. They are the only cities capable of attracting any number of regional headquarters from elsewhere in the country such as BHP Billiton establishment in Saskatoon and Halliburton's recent decision to move its headquarters to Regina. They are the main centres for medical, legal, accounting and management consulting and other highly skilled professionals.

One of the most predominant roles seen as important roles for Saskatoon and Regina in supporting Saskatchewan's long-term economic growth is that of centres for entertainment, culture and education. As one leader noted: It's the amenities available in the two largest cities that is the key difference. These don't exist to the same extent in regional centres. Most people now demand what Regina and Saskatoon have to offer (at a minimum). The amenities of these cities make it easier to attract people, such as what a new football stadium in Regina will provide or concerts already provide in Saskatoon. Only these cities have capacity capable of attracting larger industry players due to market scale.

As noted in chapter II, economies of scale are only possible in larger cities. Large cities (500,000 and up) become engines of growth in their own right. Scale is important. One leader noted, "We have moved up the ladder from a tertiary to a secondary centre in the country." Another leader commented that it was unfortunate Saskatchewan's two largest cities were not combined into one as this greater density would increase the ability and likelihood of attracting companies and investment. In response to the question about the role of Saskatchewan's two largest cities, one leader commented as shown in the quote that follows Figure 25. This point of view was reflected in various ways but the role of larger cities and their impact on enhancing culture, entertainment and education were strongly highlighted by various business leaders as shown in Figure 25.

YES they make unique contributions and in fact they are unique in themselves. As they are not or never will likely be extremely large cities we can [still] leverage this fact when attracting people. If we properly execute their growth we can make them very desirable cities in the future - example cities that have succeeded in this space include Portland, Oregon. This requires strategic investments in health care, sporting and cultural venues, universities. It does not feel like we have comprehensive plans in this regard - very organic decisions are being made that could hamper things. Our cities must provide the "lifestyle" elements - social/sporting/arts/culture - these areas of our infrastructure that need significant investment. (Saskatchewan business leader)

At the same time, Saskatchewan's urban centres face unique challenges in terms of increasing their role to help sustain Saskatchewan's economic growth. As noted at the outset of this chapter, the impact of growth on the province as a whole is rated positively by residents in general. With an average rating of 3.78, (where 1 = very negative and 5 = very positive) the rating for growthâ&#x20AC;&#x2122;s impact on the province is considerably higher than the rating for its personal impact (3.42). Almost two-thirds of those surveyed had no residual concerns about growthâ&#x20AC;&#x2122;s impact on the province. However, among the 36.5 per cent who register a residual concern, infrastructure and traffic were found to be the leading concerns, cited by 26.3 per cent. Given the growth in population in both Regina and Saskatoon, these issues are most expensive to resolve in Saskatchewan's two largest cities.

IV. Conclusions: Imperatives for Sustaining Saskatchewan’s Growth A. The Importance of Growing Saskatchewan’s Urban Centres Half of the world’s population lives in cities. By 2030, 60 per cent of the world’s population (5 billion people) will be urban dwellers, most of them living in cities much larger than those in Saskatchewan, both today and in the future. Cities are the main sources of global economic growth and productivity (McKinsey Global Institute, Cities Special Initiative). Canada is already 80 per cent urban. As noted in this report, Saskatchewan (not a particularly urban province by Canadian standards), has 60 per cent of residents residing in the eight largest cities in the province and is en route to having 62 per cent of its residents living in these eight cities within 10 years. As shown in Figure 26, 61 per cent of Saskatchewan residents already work in these eight largest Saskatchewan urban census areas (CAs) and census metropolitan areas (CMAs), and population growth rates are much higher in these urban areas and nearby communities than elsewhere in the province. Saskatchewan and Canada, Population RuralUrban and Urban, Figure 26: Population Growthby Rates versus2011 Rural Areas Canada and Saskatchewan Canada CAs

2011 Population

% of Total

2006 to 2011 Increase

33,476,688

100.0%

5.4%

4,311,524

12.9%

4.2%

CMAs

23,123,441

69.1%

7.4%

Urban CAs + CMAs

27,434,965

82.0%

6.9%

Rural

6,041,723

18.0%

1.7%

Saskatchewan

1,033,381

100.0%

6.7%

CAs

157,822

15.3%

5.8%

CMAs

471,156

45.6%

9.8%

Urban CAs + CMAs

628,978

60.9%

8.8%

Rural

404,403

39.1%

3.7%

Source: Statistics Canada. 2011 Census. Note that CA/CMA boundaries change over time. That is, as surrounding rural areas become more intensively attached to urban centres, that is when 50% of their labour force commutes to the city, they are added to the CA or CMA. So these data reflect slight changes in the boundaries of Estevan and North Battleford between 2006 and 2011. These changes make the sizes of these CAs larger than they otherwise would be, and produce slightly higher growth rates.

Source: Johnson-Shoyama Graduate School of Public Policy, The State of Saskatchewan Cities, 2013

The

Johnson-Shoyama research report commissioned as part of this study identified the reasons why cities have become growth engines, whether measured by increases in population, employment or business establishments. The reasons are the combination of the roles and advantages cities offer in serving the business requirements of firms and the quality of life considerations of the labour force (and population in general). Technological changes for value-added production processes have favoured concentrated production. This type of production is generally only possible in cities. By comparison, the technologies associated with primary production (which in Saskatchewan is concentrated in rural areas) are typically 49

more and more highly capital intensive, requiring very little labour17. Furthermore, business functions beyond the manufacturing and processing phase of producing goods (i.e. transportation and distribution, legal, finance, marketing and other business service functions) are primarily found in centres where there is a sizable skilled labour pool, where there are major transportation hubs (airports) and where input goods and services are readily available. These are typically found only in urban areas. The net effect of these requirements is that production, in larger cities in particular, is often more efficient and more competitive than it would be if undertaken in smaller cities or rural towns. Businesses need to be globally competitive in markets and this requires that businesses adopt the most efficient and productive technologies. As these technologies and processes (as well as supporting business services) are largely found in cities, cities therefore play a vital role in sustaining and increasing the growth of a region. Cities are also centres of consumption and labour supply, offering amenities and access to the full range of personal and professional services. Access to such services is playing an increasingly important role in individual and household choices of where to live. This is why many people find larger cities more appealing places to live when making such choices. As noted in the findings of the interviews with business leaders, access to these amenities is critical in attracting and retaining highly skilled labour and professionals to a community. To be competitive in drawing such resources to a community, business leaders have indicated that a community must have the desired quality of life characteristics, in addition to a range of employment options for (usually) both spouses18,19. Experts from Johnson-Shoyama noted in their work as part of this study, that: To attract the professionals to deliver the needed services requires access to an urban centre that can provide the full range of cultural and recreational amenities and professional services of the highest order. In the absence of an acceptable place to live, professionals and skilled labour will go elsewhere, as the labour market is increasingly global. In Saskatchewan’s bid to remain competitive as a place to live and to do business, its urban centres and especially its metropolitan areas are of vital importance. They must provide the kind of setting and provide the level of services that make them globally competitive if they and the province are to achieve sustained growth and development.20

B. Addressing the Challenges of Saskatchewan’s Cities

Partridge, Mark D. and M. Rose Olfert. 2011. "The Winner’s Choice: Sustainable Economic Strategies for Successful 21st Century Regions." Applied Economic Perspectives and Policy 33(2): 143-178. 18 Florida, Richard. 2002. The Rise of the Creative Class: And How It’s Transforming Work, Leisure, Community and Everyday Life. New York: Basic. 19 Partridge, Mark D., Dan S. Rickman, Kamar Ali, and M. Rose Olfert. 2008. "Employment Growth in the American Urban Hierarchy: Long Live Distance." Berkeley Electronic Journal of Macroeconomics—Contributions. 8 (1). 20 Johnson-Shoyama Graduate School of Public Policy. The State of Saskatchewan Cities, 2013

Because we conclude from this research that there is undoubtedly an important role for Saskatchewan cities in sustaining and continuing to drive Saskatchewan’s economic growth, we feel it is important to consider and address the growth-related challenges facing Saskatchewan’s cities. A majority of Saskatchewan residents now live in cities. This trend will continue as Saskatchewan’s economic development continues, so the nature and quality of urban development in Saskatchewan is highly important to a great many of its current and future residents. Creating and sustaining economically competitive cities that offer a high quality of life is an even greater challenge for city governments these days. City leaders must address the double challenge of replacing aging infrastructure while building the new infrastructure required to keep up with Saskatchewan’s recent strong levels of economic growth, growth that is impacting cities greatly in Saskatchewan given that most of the effects of this growth in terms of increased population are being felt by Saskatchewan’s cities. Over recent years, cities have been attempting to cope with these higher demands while at the same time strongly resisting tax increases given that property taxes are one of the least equitable ways to raise revenues to fund the increased demand for growth-related infrastructure and services. Not surprisingly, as a result, the Federation of Canadian Municipalities is lobbying senior governments for increased funding to cope with these challenges. While rethinking the funding levels and models for local governments is an important and serious issue that must be addressed, much of the solution to address the challenges of growing Saskatchewan’s cities must be found within the cities themselves. The most important thing for Saskatchewan’s cities is that they first define for themselves how to increase their competitiveness and therefore how they can contribute to the continued growth of Saskatchewan. They must also self-define what measures of improvement and performance are right for them. Generally cities that have been successful in these efforts have focused on three key areas as follows:   

The strength of the local economy; The quality of life and social conditions; The sustainability and appeal of their urban environment.

Most city performance measures, whether the Mercer Quality of Living Index or the McKinsey Global Institute’s Urban Performance Index, rely on these general measures to rank and assess performance. McKinsey advocates a framework such as that shown in Figure 27 below. This framework was developed based on interviews with 30 mayors and city leaders and 80 case studies of city development on four continents. Figure 27: McKinsey Consulting Framework for Strategies to Make Great Cities

Source: McKinsey Global Institute. McKinsey Cities Special Initiative, How to Make a City Great, 2013

More specifically the framework advocates the following actions. Adopting a Strategic Approach - Involves a rigorous approach to determining the city’s best growth prospects and is based on a candid assessment of a city’s competitive advantages and the types of industries and companies that can power a city’s growth. Cities must then determine the best way to support the growth of these industries and companies by taking a client service approach to supporting these growth opportunities. Planning for Growth and Change - There are numerous examples of cities that have grown without a plan. Such growth often leads to chaotic development patterns that ultimately impede further growth. Taking a regional approach is also important to achieving smart growth, one which fosters regional co-operation rather than competition. In this context, the regional growth summits organized by cities and surrounding municipalities in and around Saskatoon and Regina in late 2012 are examples of best practice. Integrating Environmental Thinking into Planning for Growth  Cities are major sources of pollution in terms of greenhouse gas emissions, landfills and other areas due to the density of economic activity. Lack of regard for this could hinder economic growth over the long term. Consequently, the cost of environmental degradation and mitigation should be incorporated into the planning process. Opportunities for All  Plans to sustain and enhance economic growth and quality of urban life must go beyond just providing opportunities and creating a favourable environment for attracting and supporting growing businesses in a city. It should also provide a wide range of opportunities for all city residents regardless of their wealth. The absence of focus in this area can lead to high crime rates, insufficient supplies of skilled, educated workers and a deterioration of the competitiveness of the city overall and its appeal to the wider citizen population. Affordable housing is a real example of the challenges affecting Saskatchewan cities as a result of Saskatchewan’s recent high levels of economic growth. Rigorously Managing Costs  Very few Canadian cities, if any, have access to all of the resources required to address the growing challenges of meeting an increasing demand for infrastructure and services. As found in the research conducted by Johnson-Shoyama as part 52

of this CMC project, cities in Saskatchewan generally seem to be on a strong fiscal footing. They have witnessed strong growth in their assessment base over the past number of years and have a much lower dependency on the property tax as a source of revenue than might be widely believed to be the case. The growth in the property tax base and cities' increased use of other revenue sources leaves them with substantial fiscal capacity to plan for future needs. Nevertheless, all Saskatchewan cities find it significantly challenging to amass the resources required to meet the demand for services and infrastructure, both to replace aging infrastructure as well as build the new infrastructure required to support growth. Beyond rigorously managing expenses, the increased use of technology as well as public-private partnerships can be beneficial to meeting the need for efficient use of resources. A high-cost city is not a competitive city. Explore Partnerships  Saskatchewan is beginning to look seriously at public-private partnerships (PPPs) as one way to address the infrastructure deficit facing a growing province. The publication InfraAmericas21 recently published an article noting that Saskatchewan is about to become a pre-eminent destination for PPP investment with a pipeline of infrastructure projects under review to be built as PPPs valued at over $2 billion, spanning the communities of Regina, Saskatoon, Swift Current and North Battleford. Regina’s recent waste water referendum, while controversial, was an important public debate. Other PPP projects that are proceeding, such as the new football stadium in Regina or Saskatoon’s new Operations Centre, are further examples of Saskatchewan cities looking to new and innovative approaches to support the development of growth-related infrastructure. PPPs are not a solution for every aspect of what has traditionally been exclusively the domain of government-funded infrastructure. Civic leaders and citizens in general are often quite reluctant to yield control to the private sector for areas traditionally seen as core functions of government. Fears of job losses and lower quality of service are often at the root of such reluctance and it is therefore important for cities to approach the potential PPP solution both cautiously and thoughtfully. However, cities that have successfully applied this model have saved local taxpayers money through the use of PPPs and have delivered additional services as a result of PPPs. A key element of success is transparency around the cost-benefit analysis of delivering such infrastructure and related services via a PPP or traditional procurement approach. The private sector can often bring innovative ideas and solutions that benefit the community overall. Investment Accountability  Governments of all levels find capital spending and asset management one of the most challenging areas of their business. Traditional procurement systems can sometimes result in capital expenditures exceeding what is required or reasonable, particularly if specifications end up creating projects with higher capital and operating costs. Similarly, when budgets are tight, capital spending is often deferred as political leaders are reluctant to ask taxpayers to pay higher taxes, or alternatively to cut employment levels to save money. Deferred capital spending can result in higher operating costs and therefore 21

Launched in 2002, InfraNews is the leading provider real-time intelligence for the European and Global infrastructure communities. It focuses on deal-led, principal investing in the development of new infrastructure assets and the acquisition of operational assets & companies. http://www.infra-news.com/public/

become self-defeating in the effort to save money. One of the reasons that PPPs can be effective is that ongoing operating costs are usually "baked into" the concession and tied to required public service levels. While this may appear to cost more, it is usually designed for maximum efficiency over the long term. A McKinsey study undertaken for work around the Cities Special Initiative Project found that capital investment decision making for better financial outcomes could be achieved in various ways including: 



Extending the life of existing infrastructure in some instances for 3 per cent of the cost of building new. (Interestingly, some of the work conducted by Communities of Tomorrow found similar opportunities where Saskatchewan cities were already undertaking such an approach); Streamlining the delivery of major capital projects through faster approval processes, improved project planning and design, improved contract performance terms and other areas; Improved governance of major projects, including enhanced asset management systems and capital prioritization processes.

Embracing Technology  City governments around the world are embracing new technology to reduce cost and enhance performance. Technologies are being used to better manage traffic flows and reduce congestion, reduce energy consumption, reduce crime, improve asset management and infrastructure replacement, improve landfill operations and so forth. The above framework for making a city great and the explanations of key elements of the process provide only a rough guide for cities wanting to address their growth challenges. Clearly the role of cities is important to sustaining Saskatchewan’s recent high levels of economic growth. Cities fortunately have many of the resources needed to move forward, particularly if they do so in collaboration with nearby communities and local governments within their commuting shed. However, they do not have all of the resources necessary and must also rely on senior governments as much as they do on local businesses and their citizens in general to drive forward the required changes.

V. Next Steps: A Process for Sustaining Growth This last chapter attempts to address more specifically how communities should begin to think about tackling the issues defined in this paper in terms of their own community development efforts.

A. Communicating the Challenges and Opportunities CMC consultants realize, perhaps more than others, that a study of this nature is only useful if it involves the implementation of ideas into action. Sponsors of and contributors to this study plan to communicate the information and study findings to various communities across Saskatchewan with the objective of helping cities rise to the challenge of mounting initiatives to help sustain Saskatchewan’s recent strong economic growth well into the future. Beyond the public release of the study findings, much of the follow-on work involves undertaking dialogue, debate and discussion about what every community can do in shaping a role to help sustain Saskatchewan’s growing prosperity. While there is much the provincial government will be required to do in the future to support the growth of cities, we believe that much of the direction can be set by cities and regions themselves, working together across Saskatchewan to develop their individual plans for growth and collaborate with the provincial government as a group. Partnerships within and between regions will be critical. Key topics for discussion will include:  Increasing value-added production from commodities in their community based on the inherent strengths of the community;  Attracting key business services to support development of more robust local supply chains for key industries as well as strong offerings of other business services;  Developing highly skilled local workforce and application of technologies to support increased productivity of key industries;  Improving infrastructure, access to affordable housing and quality of life amenities, including efforts to enhance the cultural and recreational appeal of their communities;  Providing greater opportunities to increase the participation of First Nations into the local economy; and  Addressing the rising cost of doing business in their communities.

B. Mobilizing Leaders and Communities The effort needs to start with leaders in communities. It must begin with the leaders’ vision about what the community can and/or should become. It also involves assembling a group of talented and dedicated high performers who can support the leadership in implementing actions that move the community closer to the vision. Often such actions create both opposition and controversy. This requires strong leadership and a supporting team, coming from both the city administration and the wider community. This group must be resilient to the inevitable opposition and controversy and have the ability to stay dedicated to the mission 55

of making the vision a reality, incorporating the best ideas from opponents if they help move the community forward in a way consistent with the end goal. Above all, the implementation team must be accountable for what they have agreed to do. Early wins that demonstrate success are often important to build momentum and to increase public support for the vision. Achieving a vision often involves substantial change. CMC consultants are change agents and many of them are experts in change management. They can help with all of the key steps from processes to craft a vision, develop an action plan, assemble high performance teams and identify strategies for early success. Another role CMC change agents can assist with is in building a wider consensus of support across the community. The key to building a wide consensus in communities is the engagement process itself, and many CMC consultants have significant expertise in this area. In the end, the work primarily involves creating a vision, developing a plan to achieve the vision, building public support for the plan through wide engagement in the community and implementing the plan efficiently and effectively within a strong framework of accountability. As part of phase II of this project, ICMCS will develop a framework for communities to use in moving through this process. As multiple communities engage in this process, the common needs of cities will emerge and this can create a powerful opportunity for dialogue with senior governments to set the agenda for what is needed to have cities play a strong role in sustaining Saskatchewanâ&#x20AC;&#x2122;s economic growth.

C. Creating a Sense of Urgency Saskatchewan has a unique opportunity to continue to grow. Although Saskatchewanâ&#x20AC;&#x2122;s recent levels of rapid growth have been very strongly influenced by the global commodity supercycle, the challenge is to create an economy that will still do well as the commodity supercycle wanes. Unfortunately, there is no way to accurately predict how long the current commodity supercycle will last. It could last a further 20 years, but historically we know it benefits Saskatchewan for only a portion of the time it runs. The extent of the length of the cycle depends to a large extent on global economic growth patterns. If global growth remains strong, especially in emerging markets, the commodity cycle is likely to continue to benefit Saskatchewan for some time yet. However, if the economies of emerging markets slow as they have been starting to do recently, this will shorten the period of time that Saskatchewan can continue to prosper on commodity prices and trade alone. As a result it is important for Saskatchewan cities to get on with the task of building a vision of better, more competitive and more appealing communities sooner rather than later. The sooner Saskatchewanâ&#x20AC;&#x2122;s largest communities get on with the task at hand, the less Saskatchewan will suffer from a sustained downturn in global demand for commodities. Moreover, the more quickly Saskatchewan communities can address their post-commodity-economy future, the less likely other communities in other commodity producing countries will overtake the opportunities that lie ahead for Saskatchewan.

Appendix A: Methodology The study methodology in general is captured graphically in Figure A1 below. The entire set of reports compiled to form the foundation of this study is based on three individual and complementary areas of research. The first of these, completed by the Johnson-Shoyama Graduate School of Public Policy, included a thorough statistical analysis of Saskatchewanâ&#x20AC;&#x2122;s growth patterns isolating factors and trends in areas such as demographic shifts, housing, education and labour market, personal income, state of city finances as well as broader economic measures including GDP contributions of regions within Saskatchewan and business formation patterns. The cities included for in-depth analysis were chosen on the basis of size rather than legal status with the largest eight urban centres in the province selected as the focus for the analysis. Each centre has a population in excess of 10,000. Part of the reason for this choice was that data published by Statistics Canada are more comprehensive for these larger cities than for smaller ones. Lloydminster was excluded as a potential candidate even though it has a population in excess of 10,000 because the majority of the population lives on the Alberta side of the border. For comparison purposes, the three largest Prairie cities â&#x20AC;&#x201C; Winnipeg, Calgary, and Edmonton â&#x20AC;&#x201C; were chosen for reference and comparative purposes. Figure A1: Overview of Study Methodology

Source: Institute of Certified Management Consultants of Saskatchewan, 2013

The second element was conducted by Praxis Analytics Inc. with sponsorship from the Saskatchewan Chamber of Commerce. This portion of the study involved completing 892 interviews with a sample of Saskatchewan residents contacted either by telephone using 57

randomly selected numbers, or by email through Praxis Analytics online panel. The data set was adjusted by weighting to parallel census demographics for geographic location, age and gender. The focus of this portion of the study was to determine the attitudes in general of Saskatchewan residents toward growth. The third element of the study involved in-person interviews with approximately 30 business leaders involved in a wide cross-section of industries from resource extraction to real estate investment and development, technology companies, transportation and logistics, infrastructure service providers and so forth. The candidate interviewee names were provided by the economic development agencies in Regina and Saskatoon. Interviewees were asked to comment on topics including:  Top of mind opportunities for sustaining Saskatchewan’s growth at a high level;  The challenges facing Saskatchewan over the next five years to sustaining growth;  How these challenges are impacting the interviewee's business;  The role of cities in supporting sustained economic growth in Saskatchewan;  The infrastructure needs of cities to help sustain provincial growth;  Actions needed by the three levels of government to support growth (municipal, provincial, federal);  Their views on the need for regional co-operation to support growth; and  The outlook for Saskatchewan over the next five years. These interviews were conducted by CMC professionals from a wide number of firms noted in the acknowledgements section of this report. The study team was organized into a steering committee that met frequently through the fall and early winter of 2013 to review and compare the findings of the three areas of independent research. A subcommittee was established to prepare, summarize and report on the findings and prepare this report which contains descriptions of:    

The dynamics of Saskatchewan’s growth; The challenges facing the province as a result of rapid growth; The unique growth challenges facing urban centres; and The new opportunities arising from rapid growth.