Indigenous and Northern Affairs Committee on May 26th, 2015

[Mark Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

That would be great.

Mr. Davis, you said that governments and financial institutions, etc., should try to act in innovative ways to address barriers to access to capital. We've heard from different groups, even aboriginal groups, some of whom want to pursue more private property ownership and others who say that that, in and of itself, would be unacceptable under treaty.

So there's obviously a wide variety of views on the topic, even in the aboriginal community. Is there a working group or anything like that where all of these aboriginal communities, aboriginal governments, the Government of Canada, and financial institutions come together and work together on these things? Or are they all coming at it from their own perspective and talking past one another, perhaps?

[Clint Davis]

It's probably the latter. It usually bubbles up whenever there's a timely issue, that we come together. You may be aware that the Public Policy Forum pulled together a variety of different stakeholders to talk about access to capital and infrastructure financing in October this past year. Unfortunately, I didn't participate, but I did read the report. I'm not sure if the Canadian Bankers Association does anything around this either.

There seems to be, from my observation, a lot of activity, a variety of different institutions that have been created and different legislation that has been passed. The FNLMA is a perfect example of where there could be value in setting up some sort of working group to talk about how it's going, if there is anything else we can do, and about the evolution of how a bank assesses and values a variety of different assets by first nations.

So, sir, I think it's probably a pretty decent recommendation to think about some sort of working group to talk about this. Potentially maybe the National Aboriginal Economic Development Board would look at it as well. I'm just not certain; I'm not actively involved in something.

Thank you.

[Mark Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

Okay, thank you.

[The Chair, Conservative, Blake Richards]

Next we have Ms. Bennett for seven minutes.

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

Thank you very much.

You're a great panel to have with all your different perspectives.

I have questions on two things. One is that we've heard about how much of an impediment the slow additions to reserve, or ATR, decisions are to being able to get on and do things. I guess I want to know how that affects the access to capital if people have no certainty as to when this will actually take place.

Second, having visited certain communities, I know that when they were in third-party management it was like a chapter in their life when everything stopped. They say, “But of course that's when we were in third-party management and nothing happened”. I think the parliamentary secretary's father promised to overhaul the third-party management approach, and I think I've also heard that third party managers quite often go in and are accountants, not managers, and that setting priorities is not something they are trained to do. It's as if when communities are in third-party management, everything or any progress is frozen because people can't trust. Clearly we need to change what we're doing if we can't free these communities up more quickly, or we need to put a better way in place to allow people to do the economic development they need to do, or if there are impediments to their accessing capital.

So whether on ATR or third-party management, go for it.

[Terry Goodtrack]

I could talk about the third-party management a bit I suppose.

With regard to accountants, whatever the skill level, I think the thing you have to realize about the third party manager is that when they do go in, they're certainly representing the Government of Canada. Initially it was sort of AANDC funding and it would be scoped to that. Now under the common government reporting they're also getting Health Canada funding, so there will be one individual overseeing this. They don't actually oversee funds that are outside that scope, so it's very specific to the funding that is derived from the Government of Canada to ensure that that isn't at risk.

The third party managers are there for a specific purpose, which is to ensure that essential services are delivered. Going a little bit to your point, the issue I have with third party managers and certainly co-managers is that there are no real indicators of success within those agreements. So a third party manager can be there for quite a long time and not necessarily move the yardsticks too far.

I've certainly recommended to Aboriginal Affairs and Northern Development that we really need to come up with some better metrics of how exactly these people address whatever the default is, whether it's debt, a term or condition, or health and safety of individuals, as well as the capacity issue. The idea is to transfer capacity back to the community, so how exactly is that done?

I would argue in that case that they're probably not well trained to do that transfer. There has to be some other sort of area that is able to transfer that management capacity and financial management back to the community to maintain sustainability of the community in the longer term.

[Clint Davis]

For the question around ATRs, I believe it was stated a while ago by the Auditor General that on average it takes about nine years, or something like that, to transfer land over from non-reserve to reserve. As you can imagine, anything that creates a level of uncertainty around business is going to cause business to raise a red flag. Any delay that prohibits a first nation trying to report on some level of development will certainly have an impact on its ability to raise capital. I think that's a given. If this was a little more streamlined and more predictable, I think it would enhance the level of access to capital.

Around third-party management there are two things to consider certainly from the banking perspective. When there is that trigger around third-party management, it's an indication that the financial situation of the first nation may not be as strong as what it could be. As I mentioned in my testimony, when you look at and determine whether you're going to provide financing to a first nation, you have to consider the strength of the borrower. That's one consideration amongst three. Can they service the debt? What kind of security can you get? It's not to say a bank would never finance a first nation in third-party management. You'd have to look at all the circumstances, but without a doubt that would be seen as particularly a red flag.

What's fascinating around this—and not necessarily getting into, as Terry said, the need for metrics and so on, which I agree with—is having a look at where some of these first nations are in terms of third-party management. In some cases you look at some of the far northern communities in Northern Ontario—you know, significantly in third-party management, or some level of federal intervention—and the question to me would be, why? Clearly there isn't a pattern that people have this level of mismanagement. I mean, maybe it's funding level. I personally don't know. I haven't done the analysis around it, but when you map out exactly where they're located, in some situations it seems to be geographically based. They're isolated, fly-in-only communities where providing programs and services to their community members are very expensive. The question is what kind of federal funding levels are they receiving right now? I think that's one indication as well, if there is that certain pattern. It's not to say that every single community has no capacity, but if you're talking about far remote northern communities, is this really an issue of funding? Do they not have the ability to meet the growing demand of their communities is one question I would ask.

Thank you.

[The Chair, Conservative, Blake Richards]

Okay.

We'll move now to—

[Maxime Faille]

Mr. Chair, very briefly.

[The Chair, Conservative, Blake Richards]

Okay, just make it brief.

[Maxime Faille]

Very briefly, I echo what Clint has said with respect to additions to reserve. Adding to reserve land can potentially provide a source of revenue that in turn can help support greater financing, so that is key.

Third-party management to me speaks to the need to provide greater tools to allow communities to better govern themselves. An example I'll give—and I can say it's from a client, but it's something that they speak of publicly—is the Whitecap Dakota First Nation. It's a very successful community just outside Saskatoon. They were significantly in the red and on the verge of co-management or third-party management some 23 years ago. They asked the new chief to ask for government support for an accountant to help them get out of the mess, and it was refused. Ultimately they did cut a deal in which the government would support it for the first year and then the first nation would gradually take on the greater and greater cost. That community, as many of you may know, has emerged from a 70% unemployment rate to being a net importer of jobs from Saskatoon today. It is very much in the black and is one of the most successful communities. They were able to do it through their own governance, but initially they needed that outside support—not third-party management, but outside support—to allow them to get their financial house in order.

[The Chair, Conservative, Blake Richards]

Thanks.

We'll move now to Mr. Barlow, for seven minutes.

[John Barlow, Conservative, Macleod, AB]

Thank you, Mr. Chair.

Thank you, gentlemen, for being here today and fore the great testimony. It's much appreciated.

I want to start with Mr. Davis. You were talking about some of the programs that TD Bank has come up with. I think we found it interesting through this process that many financial services are coming up with innovative ways to address first nations specifically. You touched on creating the Aboriginal Banking Group. I wonder if you could talk about that a little bit more. How is it funded? Is it a partnership between TD bank and a group of first nations then? Can you just talk a little about that?

[Clint Davis]

It's a great question.

The Aboriginal Banking Group is our team within TD Bank. We're actually a part of the TD family, I suppose. We come forward with a significant level of expertise, really focusing in this particular market on trying to identify where the market opportunities are—a kind of understanding. It's interesting, because Max talked about this dark perception of what aboriginal business is and people not understanding it. My team brings that sort of knowledge forward. We monitor market trends and we try to source new business and deepen our client relationships. We have the experience to really focus on the nature of the borrower and some of the revenue streams of these communities. We look at who these communities are, what it means to be a strong community, what things to consider, as well as looking at a variety, a plethora, of different federal and provincial funding programs, own-source revenue, and so on, that has to be taken into consideration when we make a decision to finance the needs of a community.

[John Barlow, Conservative, Macleod, AB]

Maybe I'm being too simplified here, but is there a pool of dollars that goes with that group that is earmarked to be invested, or is it more of an overseeing role?

[Clint Davis]

We're a part of the business bank specifically. When we set our goals to say here's how we want to grow, we take the aboriginal market into account as well, taking into account those three major considerations, the strength of the borrower, the ability to service the debt, in terms of revenue streams, and so on. We're just a part of the larger machine, the TD business bank across the country. We're just another segment of the business bank.

[John Barlow, Conservative, Macleod, AB]

Right. So the Aboriginal Banking Group doesn't have a dedicated fund.

[Clint Davis]

No, we're out there providing lending facilities, either term loans or operating lines and so on, to communities.

[John Barlow, Conservative, Macleod, AB]

Are there some best practices that would come out of that? Are there some lessons you've learned through the Aboriginal Banking Group that we could take, maybe some programs or initiatives or changes to the system, that would be beneficial to providing capital to first nations?

[Clint Davis]

There is one specific example that I mentioned it in my testimony, which is that we've actually participated in some of the renewable energy projects that we've seen out of Ontario. The interesting thing about these projects is that they're looking at trying to finance equity. No financial institution across the country would finance equity; that's not the type of business that we're in, just because of the nature of the risk. But because there's this government guarantee in place, and because it's critical for first nations and Métis communities to participate—they want to participate in diversifying their revenue-operating mechanisms and need to have equity in this particular project—this guarantee provides an opportunity for us to provide a loan, which enables them to represent that piece of equity.

It's interesting because there's a part of that process.... We're talking, in some cases, about very sophisticated, big projects where in some instances the portion of aboriginal equity would be up to $20 million to $25 million, which would represent a project that's in excess of $100 million. So for us, trying to fully understand and taking the time to understand the nature of the borrowers, to understand the nature of the corporation, how the deal is going to work, and fully understand and be comfortable with the guarantee itself, demonstrates some of the innovative approaches that we've been able to do over the course of the last couple years.

[John Barlow, Conservative, Macleod, AB]

Okay, thanks.

I just wanted to move to Mr. Goodtrack really quickly.

You were talking about the programs for professional administrators and certified financial managers. I might be off on the numbers, but you said you had about 530 people who have gone through the financial management program.

[Terry Goodtrack]

Yes, there were 527.

[John Barlow, Conservative, Macleod, AB]

You were talking about making more money available for training. Is this a matter of being able to promote that these programs are available? What's the demand for these types of programs from first nations, people on reserve?

[Terry Goodtrack]

Any time you're managing a budget and there's insufficient funding, the first thing to go is training, right? Certainly, what we find is that our communities are saying, “We'd like to take your courses, but right now we don't have the funding available”. Training is one of those areas that's essential to invest in to improve the skill and knowledge level that solves a number of the issues going forward, right? That investment is key, as you know.

[John Barlow, Conservative, Macleod, AB]

Are the first nations themselves paying for the program? Are you subsidizing the program in any way, or...?