Indigenous and Northern Affairs Committee on March 12th, 2015

[Harold Calla]

Thank you for the question.

I think it's also important to remember that these legislative changes do not change the optionality of this legislation. Nobody who is not part of this, or who doesn't want to be part of this, will be impacted. Only those who have already committed to the process and are engaged will be impacted.

As Manny has said, we've all been working with communities. In some cases, many of these have come from communities. I mean, this is 55 pages of legislation that we have developed that's never been developed anywhere in the world. We sat down and did the best we could; everyone did. It's only when you put it on the ground and start to run with it that you start to find where there needs to be some clarification. We all say the same words, but it means different things at times.

I have a lot of respect for the legal profession—even though I'm an accountant—and the fact is that we've now had a lot of lawyers look at this and say, “What does this mean?” When we tell them what it means, they say, “That's not how I read it.” A lot of clarifications are being brought to this to bring certainty to it all. We think it is appropriate that it be done before June so that we can move on in the next year, and in particular bring some clarity around these issues to the natural resource development opportunities that will exist in the next year, not just in terms of equity participation but in terms of implementation, needing access to capital to participate in the building of these projects if you have businesses that need.... We need these things today.

[Carolyn Bennett, Liberal, St. Paul's, ON]

Just to be clear, this came out of the statutory review in 2012.

[Harold Calla]

Yes.

[Carolyn Bennett, Liberal, St. Paul's, ON]

This all came out of what was done.

In terms of the issue around options to expand the leverageable revenues, there are many options, I think. Do you want to go into some of those things that you might like to see?

[Ernie Daniels]

One of the things I mentioned was the monetization of capital dollars. If $150 million, as an example, were monetized on an annual basis for 10 years, just over $1 billion could be leveraged at today's dollars. When you do the math, it's.... I don't know what the average cost of a house on a reserve is, or to build a reserve, but you could build a certain number of houses. Leveraging $1 billion per year, you get really close to the $10-billion deficit in housing. It's very close to that.

I think maybe even doing a pilot test or something along these lines, where we're able to monetize capital expenditures, would really benefit social housing.

[Carolyn Bennett, Liberal, St. Paul's, ON]

Does that include the transfer...if you knew there was a multi-year transfer, that was consistent for the next five years or ten years, that you could use that commitment from the federal government?

[Ernie Daniels]

Yes, we could.

The other suggestion—

[The Chair, Conservative, Blake Richards]

I would ask that you keep the response quite short, if you can. The time has expired.

[Ernie Daniels]

Yes.

The other one is the Indian moneys. There is lots of money sitting there that could be leveraged. There's about $250,000 annually that's generated. You can actually leverage it by 12 or 13 times.

[The Chair, Conservative, Blake Richards]

Thank you very much.

We have Mr. Barlow for the next seven minutes.

[John Barlow, Conservative, Macleod, AB]

I want to go back to these amendments a little bit. Being new on the committee, I'm not aware of what exactly they outline.

Mr. Jules, could you explain for me the amendments and how they will increase access to capital for first nations communities who are part of this program?

[C.T. (Manny) Jules]

Another example is fees and services. Right now we're excluded to, in the case of real property tax, just collecting tax. What we're also looking at is imposing fees and charges on provision of local services, including water, sewer and waste management, animal control, and recreational services. Even though that's a very small item, in a lot of communities that means a lot of revenue. Those kinds of things are important issues.

We now have, as a result of Rob's work, an ability to use the First Nations Gazette. We're moving away from paper notices, newspaper notices, and utilizing a very important tool that allows first nations, no matter where they are, to access laws as they develop. That's another small item, although its impact is very huge. It allows not only first nations to look at laws as they're being developed and passed, but it also allows ratepayers to look at it. It also allows investors to look at that as well. Those kinds of amendments have evolved as a result of our direct working relationship with first nations that have been involved in establishing the jurisdiction over taxation and all the myriad issues that they face under that regime. Then when you compound it with what's happening in the management board as well as FNFA, all of these work in concert to ensure that investor confidence is built in what we're doing.

[John Barlow, Conservative, Macleod, AB]

Thank you. It sounds like the amendments aren't significant changes but they will have a profound impact on how the process works, if we can get them.

[C.T. (Manny) Jules]

Absolutely.

[John Barlow, Conservative, Macleod, AB]

Mr. Calla, I really like the comment that you made that this is an economic solution and not a societal problem. I think that's a great way to brand this and what we're trying to do here.

You mentioned that your goal is to have all first nations communities be a partner in these programs. I think Mr. Daniels touched on that a little bit, but I wanted to get your response as well. If we have one in four who is involved, what's holding back those other three, and is there something we can do as part of the study to address that?

[Harold Calla]

What we've seen since 2005 is that many communities that did not see economic opportunity, could not see how they could benefit from this legislation, are now being confronted with economic development opportunities, particularly in the north, as a result of all of the major initiatives that are under way in this country. Anything that we can do that can bring economic development opportunity and first nations participation in that economic opportunity is something that needs to be pursued, because all of a sudden they see the need for access to capital. They see the need to be accountable and transparent to respond to their membership to become business partners.

They have to move out of the dependency base. They have to evolve into being able to function in a modern-day economy. It's the financial literacy that comes with that, the planning that Ernie talks about, the need to develop capital plans or treasury function. We have to evolve from a dependency based, “I'm going to fill out my form and send it in and get a contribution agreement from the Department of Indian Affairs” to “I'm going to have a full-blown capital plan and a business plan that's no different from what you do as a federal government, just smaller.”

[John Barlow, Conservative, Macleod, AB]

Mr. Daniels, you were mentioning that the letter outlining how much they can borrow is an important piece of this program. I don't know if you touched on it, but can you explain to me how those limits are set and the process that goes into that, please?

[Ernie Daniels]

We worked in concert with the banking syndicate and the investment community to develop different leverage factors for each type of eligible revenue stream that's allowed under the regulation. We assess a first nation. We review their financial statements, look at the eligible revenue streams, and then apply the factor over what term they want. That determines how much they borrow.

The other part of it is that what we incorporate in there is that we won't lend more than 75% of that capacity. because we never want to put a first nation in the position where they're going to over-borrow. That coverage ratio is for each revenue stream, depending on the risk level.

[John Barlow, Conservative, Macleod, AB]

What do they need to have in terms of collateral as part of that process?

[Ernie Daniels]

There is no collateral. We secure ties to revenue stream.

[John Barlow, Conservative, Macleod, AB]

It's just to revenue stream.

[Ernie Daniels]

We don't do risk lending.

[The Chair, Conservative, Blake Richards]

Thank you, Mr. Barlow.

We have one more round each for the opposition and the government, and then we will probably move to our committee business.

Mr. Genest-Jourdain, the floor is yours.

[Jonathan Genest-Jourdain, NDP, Manicouagan, QC]

Good morning, gentlemen.

Mr. Calla, in your presentation, you talked about the social impact of natural resource development. That opens up the door to questions.

The documents supporting your presentation indicate that natural resource development plays a role in community development and economic development.

Mr. Calla, although there have been agreements and partnerships related to the media coverage of First Nations, how do you explain that the breakdown of the social fabric is all too often associated with natural resource development? Ultimately, that is being done at the expense of the Aboriginal communities that are close to natural resource development sites.

[Harold Calla]

Thank you for that question. It is very timely. We are now in a position where there is going to be a lot of potential wealth transfer. It is my view that we don't invest early in capacity and community development. Arriving at the door with a bunch of money in the absence of that has created the problem. That means, how do you manage wealth?

We are pretty good at managing poverty; we have a lot of experience at that, but we have not had the opportunity to manage wealth. It's because we don't have the technical experience and capacities; we don't have the planning experience and capacities, and too often we are not engaged in the economy.

If having money presented to you were a solution, we wouldn't be in the circumstances that we're in, in my view. People need to work. They need to be engaged, to have an interest, a personal interest in what goes on, and to be able to achieve a personal benefit. We have to invest in the development of the capacity in that community. In my view, many of our impact benefit agreements are not put in place to deal with community development. They are put in place to achieve the objective of getting the project moving at any cost.

What we are starting to see evolving in the resource industry is a recognition and a need for them to invest as well as everyone else in that community development. The best long-term solution for the private sector is to see that happen. As these projects are being considered, we have to invest in them, not at the time of signing, but we have to start today.