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.