Thank you very much.
I just want to say, “Go, Blue Jays, go!” It's going to help our economy.
Thank you, committee members. My name is Ernie Daniels. I have Steve Berna here with me. I'm the president and CEO and Steve is the COO. We're with the First Nations Finance Authority, also known as FNFA.
FNFA is a non-profit organization that operates under the authority of the First Nations Fiscal Management Act. It's an act that was legislated in 2006. It was created with all-party support at the time. Although established by statute, the FNFA is not a crown corporation. The FNFA is governed solely by the first nations communities that join as borrowing members, first nations bands and governments. The FNFA was a first nations-led idea. Our mandate is to work exclusively with first nations governments making available financing tools that other levels of government in Canada take for granted. Since 2012, our three publicly issued debentures raised $297 million in loans to our members, all supported by the first nations-owned revenue sources. Besides providing low-rate loans, we allow the communities to choose whichever repayment terms keep their budgets healthy.
As well, the FNFA model promotes capacity building whereby the internal governance capacity of each first nations member is enhanced to a municipal standard. The intent is to create an environment that manages sustainable growth and wealth management. Essentially, the FNFA functions like a provincial treasury department, but solely for first nations in a not-for-profit manner.
We are here today because the original projections estimated 100 first nations would join the act after 10 years. In only four years after our first loan was issued, we have reached 205 first nations that have joined the FMA, and that number is growing rapidly.
Fully one third of all of Canada's first nations across eight provinces and one territory have voluntarily requested to use our services. This success story brings with it some challenges. To operate like a provincial treasury department, FNFA must retain the confidence of the capital market investors who buy our debentures.
As such, all debt issuers need to manage an adequate capital-to-loan ratio. Our growth rate is straining this capital base. Canada originally provided $10 million in capital to the FNFA in 2012. This was based on projections that the FNFA would reach 100 members. This original membership target of 100 has long since been surpassed. FNFA's debentures are rated by two rating agencies, Moody's and Standard & Poor's. Both have commented that the exceptional growth of FNFA's membership has put a huge strain on the capital base to continue to meet FNFA members' projected future loan demands.
FNFA is requesting an additional amount for this capital base so that future loans can continue to meet the projected loan demand. This capital is not loaned out, nor is it touched by FNFA. Instead, it acts as a temporary secondary backstop in case a loan service payment by one of FNFA's members is late or insufficient in amount. This capital adequacy is a mandatory item to allow continued capital market access. To date, since our first loan issued in 2012, all FNFA members have paid their loans on time and in full. The capital base, however, is required because of the what-if scenarios since debentures are long term. FNFA debentures are usually 10 years in length.
Our membership is continuing to grow, and as it continues to grow, the FNFA's capital base must keep pace. Our 2015 budget submission requested that FNFA receive an additional $40 million. This amount was based upon our membership growth forecast and what other local government debenture issuers had in their capital bases.
In 2016, the federal government acknowledged our request and supported the work of the FNFA. Instead of an additional $40 million, budget 2016 invested a further $20 million of capital, raising the original $10 million to $30 million. Immediate tangible benefits resulted from this additional capital.
Not only were we able to improve our debentures and credit ratings, and diversify and expand our investment base from 13 to 22 large capital market investors, but the subsequent new FNFA loans were leveraged into 71 community houses. We remediated 30 houses to address mould issues; a new school was built; there were three green energy projects, with hydro, wind, and solar technology; infrastructure and administration buildings; economic ventures; and land purchases to expand reserves. We are now requesting a budget for 2017 of a remaining $20 million. If this request is approved it will enable the FNFA to continue providing increasing loans, all supported by first nations' own revenues, to grow their infrastructure basis and economy.
In conclusion, the FNFA fully supports the areas of focus that the standing committee identified for the pre-budget submission process and feel that our work directly aligns with those objectives, especially as they pertain to first nations communities. I would also like to reference and will make available to the clerk of the committee a July 19, 2016, special report by CIBC, “FNFA: Soaring on Sound Financial Principles”. This report provides an excellent in-depth review of the FNFA, the environment we operate in, and the accomplishments to date.
I want to thank you for the opportunity to appear today. I wish you well in your efforts to advise the minister on the scope and scale of budget 2017, and look forward to any questions you may have.
I just want to add that for every dollar that's spent on a reserve the economic impact is about six to 10 times for the rest of the economy.
Thank you.