Indigenous and Northern Affairs Committee on Feb. 4th, 2022

[The Chair, Liberal, Marc Garneau]

I would like to call this meeting to order.

Welcome to the third meeting of the Standing Committee on Indigenous and Northern Affairs.

We're commencing our study on barriers to indigenous economic development.

We have three organizations that have agreed to come today: the First Nations Finance Authority, the First Nations Financial Management Board, and the First Nations Tax Commission.

We'll have 90 minutes to ask them questions before we proceed to other committee business.

Of course, as you know, those participating in person must follow the necessary health measures.

To ensure an orderly meeting, I'd like to outline a few rules that we're going to follow.

Members or witnesses may speak in the official language of their choice. Interpretation services available today are English, French and Inuktitut. In other words, you have four things that you can select on your screen. They are the floor audio, English, French or Inuktitut. If interpretation is lost, please inform me immediately and we'll ensure that interpretation is properly restored before resuming the proceedings. The “raise hand” feature at the bottom of the screen can be used at any time if you wish to speak or alert the chair.

For members participating in person, proceed as you usually would when the whole committee is meeting in person in a committee room.

Before speaking, please wait until I recognize you by name. When speaking, please speak slowly and clearly. When you are not speaking, your mike should be on mute. As a reminder, all comments by members should be addressed through the chair.

The representatives will have five minutes per organization for opening statements. We will then move into questions from committee members.

The first round of questions will allow members six minutes each in the following order: Conservative, Liberal, Bloc and NDP. The order and time for the second and subsequent rounds will be the Conservatives, five minutes; Liberals, five minutes; Bloc Québécois, two and a half minutes; New Democratic Party, two and a half minutes; Conservative Party, five minutes; and Liberal Party, five minutes. We'll recycle that for subsequent questions.

As I said, following our 90 minutes with our witnesses, we will reserve the final 30 minutes for other committee business in camera.

I'd now like to invite Mr. Ernie Daniels, president and CEO of the First Nations Finance Authority, to start us off.

Mr. Daniels, you have five minutes.

Thank you.

[Ernie Daniels, President and Chief Executive Officer, First Nations Finance Authority]

Thank you.

My name is Ernie Daniels, and I'm president and CEO of the First Nations Finance Authority. With me is Steve Berna, our chief operating officer.

First, I would like to thank the committee for undertaking this study as your first priority since the election. As you know, the FNFA's mandate is to issue debentures and make loans to first nations to finance infrastructure and economic development projects. We work with first nations that are scheduled under the First Nations Fiscal Management Act. The membership is voluntary. There are 140 first nations who have completed our membership process. We are governed by our board, made up of chiefs and councillors from our member first nations.

Since issuing our first debenture in 2014, we have made $1.7 billion in loans. This summer we expect to pass the $2-billion threshold. Using the Bank of Canada multiplier, our total economic impact to date has been $3.5 billion. If we apply the Statistics Canada formula, the projects we've financed have generated more than 17,000 jobs. While first nations are the primary beneficiaries, neighbouring communities, businesses and people also benefit from employment, supply and contract opportunities.

The debentures we have issued to date have been based on the ability of participating first nations to meet debt obligations using own-source revenues. There has never been a default on any of those loans we have issued, contributing to our excellent credit rating with both Moody's and Standard and Poor's. We can borrow at the same interest rate as the Province of Ontario, and we pass these rates on to the first nations.

We have reached a critical mass. There's demand for us to do a great deal more, but first nations are limited in their ability to generate their own-source revenues that fuel our model. It's a vicious cycle: Economic activity generates those revenues, but those revenues are needed to invest in economic activity in the first place. That's why we believe it's time to look at how we can work with the federal government to take things to the next level and significantly accelerate infrastructure and economic investment in first nations.

I'll give you a few points to set the stage. There's at least a $30-billion infrastructure gap between first nations and other Canadian communities. With construction costs growing faster than inflation, this grows every year. Indigenous Services Canada has a budget of about $2 billion a year. This isn't enough to keep up with the current need, let alone tackle the backlog. The current pay-as-you-go approach will not close the infrastructure gap any time soon, even though the federal government has committed to closing the infrastructure gap by 2030. Infrastructure is a precursor to long-term economic development.

In short, something needs to change. The existing funding approach leaves first nations farther and farther behind. At FNFA we believe we can play a greater role, and we want to be part of the solution. To that end, we've developed a proposal we call “monetization”. For those of you with municipal experience, monetization is very similar to how towns and cities finance their infrastructure. They obtain capital to invest today, based on their ability to service debentures in future years. Monetization would see FNFA issue debentures in the capital markets that could be used to fund infrastructure and other economic development, taking advantage of today's prices. This would create a greater overall impact than the current federal approach.

What's missing in the equation is a sufficient revenue stream to cover debt servicing and repayment. If first nations are expected to close this gap, their own-source revenues will be tapped out long before the gap is closed, leaving the federal government as the obvious partner. We don't propose to float a $30-billion debenture with federal backing, but we would like to work with the federal government to test monetization as a pilot project.

The example we've put forth is replacing diesel generation in remote communities. An agreement with Canada would allow us to issue a debenture raising the funds that would allow communities to develop reliable, sustainable and clean energy solutions. This would advance multiple government priorities. It would allow us to test the concept of monetization, and would do so at minimal, if any, cost to the government, as debt servicing would be offset by savings in diesel and transportation. All it would take is a willingness on the part of the government to try something new and innovative.

I want to thank you for this opportunity to testify in front of you today. We look forward to the opportunity to engage in further dialogue and answer your questions.

Thank you very much.

[The Chair, Liberal, Marc Garneau]

Thank you very much, Mr. Daniels.

We'll now go to the First Nations Financial Management Board and Mr. Harold Calla.

Mr. Calla, the floor is yours for five minutes.

[Harold Calla, Executive Chair, First Nations Financial Management Board]

[Witness spoke in indigenous language]

[English]

Good morning.

Thank you for the opportunity to be before you today.

When I appear before your committee, I'm always reminded that the FMA legislation, which created the finance authority, tax commission and the financial management board, was passed with all-party support. We have enjoyed the support of this committee since 2005 in hearing about the work we do and the things we have learned from our clients over the years.

FMB can now offer services to clients from offices in Vancouver, Winnipeg, Ottawa and Montreal. It's important to also remember that there 321 Indian Act bands across the country that have scheduled themselves to the act. The success our clients have achieved through using the tools provided by the FMA are apparent. The three institutions have all done their jobs, and have proved that indigenous-designed solutions work.

You have been provided with a PowerPoint deck on an initiative we are calling “RoadMap”. It represents our thinking on what economic and fiscal reconciliation implementation strategies should be designed to achieve. It addresses the more significant issues we see and have been advised of by our clients. “RoadMap” identifies the barriers to economic development and makes suggestions on how to overcome these barriers. There is no stand-alone, single step that will fix the problem. It will take many steps, which will require changes in attitudes, policy, legislation and regulations. We will be breaking “RoadMap” down into chapters, which we intend to release monthly for review and comment over the next six months.

These chapters are statistics and data; infrastructure; economic development; expanding jurisdiction and fiscal powers; strength through working together, which is talking about aggregation; and enhanced governance to manage risk. These six topic areas reflect where we believe impediments exist that need to be addressed. We will we welcome the opportunity to present these chapters to you directly. We'll ensure you receive a copy of each chapter as they are released.

The barriers to economic development remain. These are limited jurisdiction and fiscal powers; revenue sharing; poor infrastructure in our communities; limited access to monetization of revenue streams; the need for modern-day transfer arrangements between Canada, the provinces and first nation governments; and the need to modernize our administrative capacity to respond to the economic and governance matters that communities find themselves having to deal with.

On an optional basis, we need to allow the creation of a critical mass of communities to achieve the economies of scale that can offer the front and back-office capacities required to secure the information needed to meet the standard for demonstrating that FPIC has been achieved.

Capacity-building needs to be supported through emerging first nations institutions and organizations.

I think Canada needs to recognize that it can, itself, advance economic development in business communities through its approaches to procurement. The Trans Mountain project is a good example. As a member of the board, I can tell you that $2.7 billion in contracts have been awarded to indigenous joint ventures and businesses. That's 3,682 contracts awarded to 71 groups. Eleven per cent of the employees are indigenous. That's 2,064 hires. The value of MBAs is $619 million, or 68 agreements with 74 nations along the route.

Indigenous inclusion in all aspects that drive an economy needs to be encouraged. This knowledge transfer will facilitate a risk-based approach to economic development.

Thank you.

[The Chair, Liberal, Marc Garneau]

Thank you very much, Mr. Calla.

We'll now proceed with our third speaker, the representative from the First Nations Tax Commission, Commissioner Clarence Jules.

Mr. Jules, you have five minutes.

[Clarence T., Manny) Jules (Chief Commissioner, First Nations Tax Commission]

Good afternoon.

My name is Manny Jules. I am the chief commissioner of the First Nations Tax Commission.

Thank you for the invitation to appear before this committee to address your study on barriers to indigenous economic development.

The city of Ottawa has just witnessed a protest about pandemic restrictions. Many of the protesters were frustrated with their lack of economic freedoms over the last 20 months because of the pandemic. Indigenous people can sympathize with their frustration; we have been in an economic lockdown for 150 years because of colonization. Our economic freedoms were taken away when our jurisdiction, fiscal powers and title were legislated out of the federation and our peoples out of the economy. Our institutions were replaced with a federal bureaucracy. Our freedom was taken, and we became hooked on programs and dependency.

I remind you that it was this institution, the Parliament of Canada, in 1927, that made it an offence for us to raise taksis among ourselves to pay for a lawyer to fight for our land claims, or to build our own infrastructure. Our fiscal powers and lands were taken away. Parliament removed our economic freedom to get decent jobs, clean water, good health care and education, and a better future for our children. Parliament took away our freedom to enjoy the many things you take for granted as citizens of Canada.

I appear before you today to seek economic reconciliation.

I have provided this committee with a paper called “Closing the Indigenous Systemic Economic Gaps”, where we identify and measure six barriers to indigenous economic development caused by colonization. First, we face an infrastructure gap of at least $30 billion. Second, we face an access to capital gap of about $175 billion. Third, we face a fiscal power gap of about $32 billion. Fourth, we face an employment gap of about 75,000 badly needed scientists, engineers, mathematicians, doctors and economists. Fifth, our costs of doing business are four to six times higher than the rest of the country's. Sixth, we face a trade gap of about $12 billion.

Before I go through our proposals to address the root systemic causes of these barriers, let me remind this committee of what doesn't work. You cannot close these gaps with signals of virtue or with a government program. They only treat the symptoms and increase dependency. You cannot close these gaps by expanding the federal bureaucracy. This only raises the costs of doing business and slows innovations. All of these approaches prolong colonization and slow down economic reconciliation.

In my experience, there is only one effective way to close these gaps: We must develop innovative solutions ourselves.

I have spent my life working with leaders, like the late, great Chief Tom Bressette, Harold Calla, Ernie Daniels, Chief Robert Louie, Chief Alan Claxton, Chief Joe Mathias and many others. Together, we have built a three-part indigenous-led innovation system.

Part one is federal legislation that recognizes our jurisdictional space and institutions. These include the First Nations Fiscal Management Act and the First Nations Land Management Act. Part two is first nations having the option to use that jurisdictional space and these institutions. Part three is our institutions developing legal and administrative innovations with participating first nations to occupy jurisdictions to support economic growth and community goals.

Our system has worked well, as over half of all first nations are now using this legislation. We estimate that 80% of all indigenous laws in Canada are passed using this framework. We have supported billions in investment and public revenues. We have improved infrastructure and services for these communities. If you wish to help us remove the barriers to our economies, an effective option is to expand this indigenous innovation system.

First, we are proposing a new institution under the First Nations Fiscal Management Act, called the first nations infrastructure institute. This will complement our existing institutions to help interested nations build the necessary environmental and economic infrastructure to support sustainable communities. It will help lower insurance premiums, improve our access to capital and build better infrastructure faster.

Second, we are proposing an increase in fiscal powers to include fuel, alcohol, cannabis and tobacco taxes. We're proposing a first nations resource charge in our ancestral lands. Implementing our fiscal powers is the fastest way to end colonial-era dependency.

Third, we are proposing—

[The Chair, Liberal, Marc Garneau]

I'm sorry to interrupt you, Mr. Jules, but you've passed your five minutes. Could you quickly wrap up?

[Clarence T. (Manny) Jules]

Let's work together.

[The Chair, Liberal, Marc Garneau]

Thank you very much, Mr. Jules.

We'll go into the first round of questions. According to my notes, the first speaker will be Mr. Vidal from the Conservative Party.

Mr. Vidal, you have six minutes.

[Gary Vidal, Conservative, Desnethé—Missinippi—Churchill River, SK]

Thank you, Mr. Chairman. I appreciate the opportunity today.

I want to take a minute at the beginning to thank all the folks who are here today: Mr. Daniels, Mr. Calla, Mr. Jules and also Mr. Berna, who is sitting there quietly in the background so far. The work you've done is incredible. I've had the privilege of seeing some of that work and am looking forward to the opportunity to hear what you have to say today to help us in this study.

I want to be really clear about the reason why we put forward this study and why we asked for this study. I know that there are many new committee members and that this is our first study of the new session, but historically this committee has worked really hard to find better outcomes for first nations communities.

In one of the submissions we received yesterday, from Mr. Jules, I read that “The indigenous economy has the youngest population, the fastest growing labour force, [has] significant unused...capacity” and is “underutilized” significantly. I would suggest to you that we have to figure this out and that doing so is critical to the future of Canada's success.

If I've learned anything from my past meetings with you folks, it's that good governance leads to capacity, that capacity leads to success, both fiscally and otherwise, and that success is ultimately the path to self-determination.

Mr. Calla, you've presented the road map project. I've had the privilege of seeing some of your work on that a couple of times, so I want to focus my first question around the road map project.

My question is actually quite simple. What are the departments doing, or, maybe better, what are they not doing, to provide you the support you would like to see so that the road map project ultimately becomes a success?

[Harold Calla]

Thank you for your question.

We have presented the road map to both ISC and CIRNAC. They have received it. They're not opposed to it, but we'd like to see it dealt with, and with a better sense of urgency, okay? We can't wait for two years or three years for this stuff to be implemented. We need it to be accepted. We need them to declare that it will be accepted. We need it resourced through the parliamentary appropriation process. We think that the three institutions have proven, by what has been accomplished to date, the value for money when we ask for it.

What I would like to see is a declaration that the path to reconciliation, while not excluding other approaches, is defined in what we're doing, in what the road map reflects, and a commitment to ensure that all three of the institutions—because we're all speaking basically about the same kind of thing but saying it a little differently—get what they need to be able to implement their visions.

I think there's a difficulty, as I said in my opening comments. There needs to be a change in attitude, policies, regulations and legislation in order for these things to be achieved, and we have to agree that we have to start doing that now. We can't wait the 10 years that it took to get the FMA legislation passed for these kinds of changes to take place. There has to be an increased sense of urgency.

[Gary Vidal, Conservative, Desnethé—Missinippi—Churchill River, SK]

I'm going to pick up on what you've said there, Mr. Calla.

Ultimately, our study is looking at barriers. In response to your comments, would you agree that there's a historical relationship within the department and that relationship with first nations where there's a reluctance to change or a reluctance to give over some control of things?

Would it not improve the fiscal relationship to transfer, using data-driven statistical formulas that are predictable, instead of putting bureaucrats in places where they're handcuffed by existing structures and barriers and they're sometimes making decisions under crisis management in their place.... This is not necessarily a criticism of bureaucrats. It's just that they're placed in a position where they are forced to work within a system that has been the same for so long that it's hard to change.

I'm sorry. That may be a long way of asking this. Do you think that's true? Are there ways we could change that?

[Harold Calla]

It is true that the bureaucrats are challenged because of existing mandates. In fact, I would argue that the government itself is in conflict because it has the fiduciary duty, but it also has the responsibility to protect the Crown. Those two don't always align, in my view, and I'm not a lawyer but an accountant, so I'm sure that lawyers will want to argue with me.

I think it is a challenge, and bureaucracies are not encouraged at all levels to take risks. There is zero tolerance for risk.

What the institutions do is put themselves in a position where they can stand between the government and first nations, and we can manage that risk. We can identify that risk in management.

I think what we're saying is that government bureaucracies need to move away; indigenous organizations and institutions need to move in. What we've proven through the FMA is that indigenous-designed solutions work, and you need to give us the power to continue to create.

[Gary Vidal, Conservative, Desnethé—Missinippi—Churchill River, SK]

I'm going to jump back in with a really quick question, because the chair is going to cut me off here in about 20 seconds.

[The Chair, Liberal, Marc Garneau]

That's correct.

[Gary Vidal, Conservative, Desnethé—Missinippi—Churchill River, SK]

What could we, as legislators, do to help ensure that more first nations follow your scheduling accreditation process and some of the certification things your institutions have in place?

[Harold Calla]

Ensure that we have the financial resources to fulfill our mandate and our purposes under the act. We can do it, but we can't do it if all of us don't have the resources to be able to do it.

That was a big problem in the very beginning of this legislation. When you create institutions you need to ensure that they have sufficient resources to reach the indigenous communities across the country. I think that's a critical piece that we need right now.

[The Chair, Liberal, Marc Garneau]

Thank you, Mr. Calla.

Thank you, Mr. Vidal.

The second speaker from the Liberal Party is Ms. Atwin.

[Jenica Atwin, Liberal, Fredericton, NB]

Thank you so much, Mr. Chair.

Thank you to the members of our committee here today, and to our clerk and analysts and interpreters, of course. I would very much like to thank our expert witnesses for joining us and sharing their expertise with us today.

[Member spoke in Wolastoqiyik]

[English]

My name is Jenica Atwin. I am a member of Parliament for Fredericton and I am coming from the unceded, unsurrendered Wolastoqiyik Territory here in Fredericton.

I'd really like to dig more into the monetization of infrastructure. Through you, Mr. Chair, I found that really interesting, particularly when you were referring to the clean energy solutions' potential for northern and remote communities if they were given more buying power, perhaps through monetizing infrastructure.

I'm just wondering if you could provide more information on what it looks like to monetize first nations infrastructure. How would that help generate revenue, and what would be the best pathway to get there?

[Ernie Daniels]

Is that for me?

[Jenica Atwin, Liberal, Fredericton, NB]

Yes, please, Mr. Daniels.

[Ernie Daniels]

Thank you for the really good question.

Monetization is a really simple concept. As individuals we use it almost every day. When we're going to buy a house we don't usually have the money on hand to buy it. What we do is take out a mortgage that is based on our ability to service that mortgage, which is usually our salaries and any other income we make. In the simplest form, that's monetization.

Right now the problem is that it's the pay-as-you-go system that's in place with the federal government for infrastructure within indigenous communities. Whatever is in the budget, you'll pay for the infrastructure for that amount.

If we look at the overall infrastructure gap, we see that budget is about $2 billion. Not all of it goes to new infrastructure; it goes to repairs of existing infrastructure, especially in this age of COVID. We're going to need to improve the ventilation in our public buildings and our schools. That will probably take some priority.

At $2 billion a year, it's just not going to close it—it's just not. We need to be able to leverage a stream of revenue either from this $2 billion budget or from a new budget amount, and leverage that over it. For example, if we took $1 billion of this $2 billion and dedicated that to infrastructure, the FNFA, based on our ability to access capital and our credit ratings, can probably get about $25 billion. Just think about that. That's the power of leveraging; that's the power of monetization.

It's the same thing with the diesel generators. There are 300 communities in Canada that are on diesel, and it's not all indigenous communities, but there are many indigenous communities that are. The cost to do that, as I mentioned, could be offset with the savings in the purchase of diesel and transportation to implement greener energy-type projects that will be sustainable in our communities.

I'll ask Mr. Berna to add a little bit more to that, because he has been working on this file.

Steve.

[Steve Berna, Chief Operating Officer, First Nations Finance Authority]

Thank you, Ernie.

Mr. Chair, how much time do I have, please?

[The Chair, Liberal, Marc Garneau]

You have two minutes and 15 seconds.

[Steve Berna]

Perfect, thank you.

Ms. Atwin, the reason Ernie and I, on behalf of the First Nations Finance Authority, are promoting this is that our board is selected from amongst the chief and counsellors that make up our membership, and 321 first nations across all 10 provinces and the Northwest Territories have joined. They have asked us to pursue this on their behalf. This is a voluntary request that they're making of us.

We saw a five-point plan for this. The first part is that every government sets priorities and policies. They can do it for clean water, housing and infrastructure. That's step number one.

Step number two is that the first nations who want to participate would submit shovel-ready projects that meet within those priorities or policies. Canada would choose which ones proceed.

In step three, FNFA would be asked to raise the monies. Since we are governed by the first nations, we raise monies on behalf of the first nations. It is symbiotic.

Step four would be for Canada to get into a contract with FNFA and the first nations to cover the annual loan service payments. Just like you cover your payments on a mortgage over time, Canada would cover this over time also.

Step five is a key one. The current pay-as-you-go model is that you build it, you walk away, you hope it's maintained and you hope it lasts its useful life. Step five is that we have contractual arrangements with our first nation communities. We will ensure that maintenance does occur, so the 25-year useful life of a house will last 25 years or 50 years, whatever its useful life is. The contractual arrangement is what saves Canada from coming back and building it a second time.

Thank you.