Evidence of meeting #31 for Indigenous and Northern Affairs in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was indian.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Andrew Beynon  Acting Assistant Deputy Minister, Lands and Economic Development, Department of Indian Affairs and Northern Development
Brad Cline  Acting Director General, Aboriginal Entrepreneurship Branch, Department of Indian Affairs and Northern Development
Allan Clarke  Director General, Policy and Coordination Branch, Department of Indian Affairs and Northern Development

10:05 a.m.

Conservative

The Chair Conservative Blake Richards

A brief question.

10:05 a.m.

Conservative

Kyle Seeback Conservative Brampton West, ON

One of the things I know is that when I was in private practice as a lawyer, an issue for first nation businesses would be that a lot of businesses did not want to extend credit because there is no security or collateral and because enforcement is very difficult. Are there any options for letters of credit or things like that for first nations businesses to be able to try to get that kind of supplier credit that other businesses can get?

10:05 a.m.

Conservative

The Chair Conservative Blake Richards

Mr. Seeback's time has expired but I will allow you to answer. Just try to keep it fairly brief.

10:05 a.m.

Acting Assistant Deputy Minister, Lands and Economic Development, Department of Indian Affairs and Northern Development

Andrew Beynon

Do you want to answer?

10:05 a.m.

Acting Director General, Aboriginal Entrepreneurship Branch, Department of Indian Affairs and Northern Development

Brad Cline

With respect to the specific leasing and those types of guarantees, what we've done is have program interventions that actually help mitigate the risks so there's access to the equity, which triggers the debt finance. But it's not so much on just the pure legalities of it. It's more we're focusing on the access to the financial package to enable that business to actually, in turn, go to an aboriginal financial institution to get access to the debt financing. We try to put together whatever package we can so that the equity is there. Then it can trigger access to that debt financing. So we do have programs that we work with, again, with aboriginal financial institutions and the National Aboriginal Capital Corporation Association.

10:05 a.m.

Conservative

The Chair Conservative Blake Richards

Thank you. You did mention that you may want to provide a more precise answer to the one question. If you want to do that, you could certainly do that through the clerk or myself.

Next we have Ms. Bennett.

10:05 a.m.

Liberal

Carolyn Bennett Liberal St. Paul's, ON

I think I would like to take a slight different tack in that I would like know what you think the committee should do or where we should go in order to help in that you suffer under the Indian Act.

I think all of us have heard Robert Louie's stories of it taking 10 years to get a Royal Bank at Westbank. I guess I want to know if are we doing any better than that. But it seems, from the bands still under the Indian Act, like Osoyoos to Westbank, and land management to self-governing....

How would you organize that we do our work here? Should there be three different approaches, or is your assessment that it's just tough, period, in terms of access to capital? I wouldn't mind if you had any suggestions in terms of other government departments that might be helping, particularly around microfinancing on some of the other things that maybe we could help. I just would like you to help us in terms of designing our work.

10:10 a.m.

Allan Clarke Director General, Policy and Coordination Branch, Department of Indian Affairs and Northern Development

Perhaps I could start with the answer. Thanks for the question.

I think Andrew's comments in the presentation are clear around some of the key impediments. The Indian Act is the major impediment to business on reserve, unquestionably. I think that where we have been successful either by sectoral or self-government agreements is we have gotten people out of the Indian Act through things like self-government agreements themselves, or through things like the First Nations Fiscal Management Act or the First Nations Land Management Act. Basically, these are things that are allowing people to remove the constraints of the Indian Act from how they do business. All these things have shown a lot of success, and so I think increasing the use of those regimes as well as finding other alternatives to the Indian Act is a good thing.

There are also provisions within the Indian Act that are kind of paternalistic or anachronistic, like the treatment of Indian moneys. This is something that deserves some attention and needs to be examined in a more fulsome way. The National Aboriginal Economic Development Board provided some recommendations to the minister recently around the need to examine the provisions around Indian moneys.

We mentioned developmental lending and access to capital, and I think in terms of business development the network of AFIs has been very useful to building a class of entrepreneurs across Canada. In terms of the value for money, that regime works very well indeed. The other thing is, on a comment made around access to capital, it's not only access to capital, but rather the cost of capital as well.

Part of the challenge is around not having secure, let's say, ownership or tenure on reserve; for instance, you can't securitize it. Lending certainly happens on reserve, but a lot of the lending is secured only by people's income. So, you're paying more for the money than you would be if you were able to borrow or take out a mortgage against your house, which is kind of difficult. So, it's also the cost of capital, not just access to capital.

Another thing is infrastructure spending and how we support infrastructure on reserve, which is critical to economic development. The Senate committee is looking at this issue itself, so there might be some crosswalks to be made between what their deliberations are and your thinking around some of the issues around access to capital.

Financial management literacy is the other important element as well. We have something called the First Nations Financial Management Board in addition to some of the stuff that Brad spoke about. The Financial Management Board is working with communities across Canada to increase their capacity around financial management both with respect to their financial management processes and systems and with respect to their performance. That has been exceedingly successful, and it's also building on that success particularly. I noticed in your list of potential witnesses that you have representatives from the First Nations Fiscal Management Act regime, so the the First Nations Tax Commission, the First Nations Finance Authority, and the First Nations Financial Management Board. Those institutions all work together in a way that is extremely useful for first nations in terms of having first nations governments having access to capital in a way that would not have been possible without that regime.

I will close by saying that those are some of the key issues around access to capital.

10:10 a.m.

Liberal

Carolyn Bennett Liberal St. Paul's, ON

Is there any more advice on the study?

10:10 a.m.

Acting Director General, Aboriginal Entrepreneurship Branch, Department of Indian Affairs and Northern Development

Brad Cline

Thank you for that opportunity.

There are a number of other federal departments that do play a role in the microfinance or access to capital area. The regional development agencies work closely with a network of about 23 aboriginal community future development corporations. They're focused a lot on community development. The regional development agencies, such as Western Economic Diversification, ACOA, and FedNor, work very closely through the AFI network. That opens us up to speaking to people like the National Aboriginal Capital Corporation Association, which provides supports through our support to that national network. There are a lot of natural connections there that I think can be accessed through that.

There are other organizations—

10:15 a.m.

Liberal

Carolyn Bennett Liberal St. Paul's, ON

Should we call the ministers who are responsible for those regional development corporations?

10:15 a.m.

Acting Director General, Aboriginal Entrepreneurship Branch, Department of Indian Affairs and Northern Development

Brad Cline

I don't know.

10:15 a.m.

Liberal

Carolyn Bennett Liberal St. Paul's, ON

It would be a good idea, don't you think?

10:15 a.m.

Acting Director General, Aboriginal Entrepreneurship Branch, Department of Indian Affairs and Northern Development

Brad Cline

We do work very closely at the official level with these regional development agencies on technical program advisory committees and things of this nature, so we do share some financing with some of the aboriginal financial institutions. We have a delivery partnership, and then ACOA supports some of this.

If I may, there are other organizations we're working with right now that can give a very good portrait, such as the Canadian Council for Aboriginal Business. They did a portrait in 2011 based on the census information that Andrew cited, and we're doing another study with them based on the 2011 census.

There are a number of groups, and I do think there are some great successes and models around access to business opportunities in both the public and private sectors. Procurement is becoming a very important tool to actually build aboriginal capacity and competitiveness, and is a very good form of access to capital.

10:15 a.m.

Liberal

Carolyn Bennett Liberal St. Paul's, ON

Great.

10:15 a.m.

Conservative

The Chair Conservative Blake Richards

Thank you. Time has expired on that round.

Next we have Mr. Barlow.

10:15 a.m.

Conservative

John Barlow Conservative Macleod, AB

I am one of the newbies, so please bear with me if I'm asking some questions that have been asked in the past.

Mr. Beynon, I found it interesting that in your presentation you said some first nations are exercising the ability to collect property taxes and that there was $200 million in unused borrowing capacity.

Are these first nations collecting property taxes and putting the money aside as a fund to fund businesses, or are there some rules as to how they use that property tax, or how is it being used to help businesses?

10:15 a.m.

Director General, Policy and Coordination Branch, Department of Indian Affairs and Northern Development

Allan Clarke

It relates to the First Nations Fiscal Management Act regime. I mentioned the three institutions that support that regime.

Essentially what that regime does is it affirms jurisdiction for first nations around such matters as taxation and fiscal management and creates a vehicle akin to what exists in provincial jurisdictions so that communities can take advantage of pooled borrowing.

Essentially, all of these three institutions work together. The Tax Commission approves taxation laws; the Financial Management Board certifies the financial performance of communities, and the strength of these institutions and the support these institutions provide to communities maintains the integrity of the regime.

Based on revenue streams from both taxation and other sources of revenue, there are about $280 million in revenues that can be secured by the First Nations Finance Authority. They issued their first bond last June for about $89 million, which was historic. It was a very good rating—an A3 rating, as Andrew mentioned—at a rate of 3.7% or 3.8%, which is very competitive and much better than they would have had if they had gone to the market themselves.

10:15 a.m.

Acting Assistant Deputy Minister, Lands and Economic Development, Department of Indian Affairs and Northern Development

Andrew Beynon

Let me add as well that this is part of a progression, in the sense that taxation authority on reserve has existed for many years now. Then the First Nations Fiscal Management Act came into effect, which enhanced that authority, but not all of the taxing first nations have moved to participate in the pooled borrowing regime.

It's a growth line. As I was saying in the presentation, we've just gone through the inaugural, first time ever bond financing. What I think we are likely to see over time is more and more of the first nations who are raising dollars by taxes both achieving the capacity and having the desire to participate in the pooled borrowing regime, and so more bond financing is going to come over time.

10:15 a.m.

Conservative

John Barlow Conservative Macleod, AB

To build on that, what kind of potential do you see, short term and long term, with the bond program?

10:15 a.m.

Director General, Policy and Coordination Branch, Department of Indian Affairs and Northern Development

Allan Clarke

It's huge. Depending on how you count it, first nations are earning revenue through taxation and other sources of revenues. There are a bunch of different pieces that have to connect together here. But if you look at various sources of information, there is not quite $1 billion of revenue in the consolidated revenue fund that is basically first nations money sitting there waiting to be approved for use. That money can sit there in the Indian moneys account, or it can be used to borrow against. There are real revenue streams, about $250 million a year, in revenues coming into the CRF.

That's just one example. First nations are also earning their own money that doesn't come under the CRF. Counting only the 38 that have been approved as borrowing members of the Finance Authority, they could borrow on the strength of more than $200 million of revenue, which is significant. It's hundreds of millions of dollars.

10:20 a.m.

Conservative

John Barlow Conservative Macleod, AB

If there is some more time, I'll pass it on to Mr. Dreeshen to ask some questions as well.

10:20 a.m.

Conservative

The Chair Conservative Blake Richards

Mr. Dreeshen, you have just less than three minutes.

10:20 a.m.

Conservative

Earl Dreeshen Conservative Red Deer, AB

Thank you very much, Mr. Chair.

Thank you, gentlemen, for being here this morning.

I want to expand a little bit on the bonds to see where you see them going and whether there happen to be any limitations we should be aware of. That's the first part.

The second part, if we have enough time, is to look at some of the best practices. You described the issue in the oil sands region. Could we get a picture of what is holding one back rather than moving forward, so that we can wrap our heads around either the opportunities or the barriers that exist there?

10:20 a.m.

Acting Assistant Deputy Minister, Lands and Economic Development, Department of Indian Affairs and Northern Development

Andrew Beynon

I'll offer an initial answer and then ask my colleagues to join in as well.

For this committee, this is actually one of the areas for which there really should be some tremendous optimism. You have a growing reserve land base. You have greater closeness of first nations with neighbouring communities as they expand. You have more and more experience of many first nations with heavy-duty commercial activity. You have an increasing generation of tax revenues and this initial experience with bond financing.

I agree with my colleague, Allan. Over the next three to five years, this is going to grow quite significantly and that will have a multiplier effect of unlocking more and more opportunities.

What needs to happen in order to help that move along, I would suggest again moving away from the Indian Act restrictions, which I think we've talked about both on lands and moneys management. We need to build more capacity and stable capacity among first nation governments. We have programming where we try to do that. The more that they have the experience, and the direct capacity and knowledge of financial systems, the more effective they're going to be at unlocking these opportunities.

I would also offer for your consideration an interesting emerging area. We have done a fair amount of work in recent times on land use planning and associated economic development planning on reserve. Typical of what you see in other governments in Canada with commercial development, real estate development, environmental controls, infrastructure, including roads and so on, these are introduced, financed, and taxed all in accordance with well-developed plans. We've had some success with this on a pilot basis and we're looking to expand it.

I would also note for committee members, and be willing to provide a follow-up, that we had an interesting pilot project where we joined first nations and some of the neighbouring municipalities. They were willing to work together on land use planning. We had demand for at least 40 partnerships between first nations and neighbouring municipalities working with the Federation of Canadian Municipalities and the Council for the Advancement of Native Development Officers. We were only able to move ahead with six, but that was a good way to pilot. The interesting thing is that all six of the pilot participants have been a success. It's opening up new avenues and new opportunities.

While we're seeing these successes, the opportunity over time for first nations and neighbouring governments to work together to lift the financing and access to capital may be an emerging area as well.