The federal government says it is considering a parliamentary committee’s recommendation for Ottawa to work with First Nations agencies on a pilot project that would use financing raised on public markets to pay for replacing diesel power in remote communities.
The project is one of the suggestions contained in a recent report from the House of Commons standing committee on Indigenous and northern affairs. It would involve a concept called “monetization,” under which Indigenous communities would use long-term loans to pay for infrastructure instead of depending on annual federal funds. First Nations agencies say the new funding model could help tackle chronic infrastructure backlogs.
Because First Nations rely mostly on annual federal funding arrangements, they often don’t have the ability to raise debt or acquire assets for the public good, said Harold Calla, executive chair of the First Nations Financial Management Board, an agency that helps First Nations develop financial management plans. Monetization would allow them to use that federal funding to secure loans.
“Indigenous communities are looking for the ability to do the same thing as other orders of government do ... and that is, if the constituency agrees it wants to raise debt, it can,” Mr. Calla said. “But we need the tools that the private sector recognizes to do that.”
Indigenous Services Canada spokesperson Kyle Fournier said in an e-mail that the government is “closely reviewing” the project proposal, and that monetization is “one potential instrument” that could help support communities as they transition away from diesel fuel.
The federal government’s climate program calls for rural, remote and Indigenous communities that currently rely on diesel fuel to switch to clean energy by 2030.
The Financial Management Board is one of three institutions set up under the First Nations Fiscal Management Act, which came into effect in 2006. The others are the First Nations Finance Authority (FNFA) and the First Nations Tax Commission.
Representatives from all three groups, including Mr. Calla, spoke as witnesses at meetings related to the committee’s report, which was released on April 22.
In a submission to the committee, the FNFA described the current funding model as a “pay as you go” system.
Under that system, the submission says, Indigenous Services Canada gets an annual funding allocation, from which it in turn funds as many projects, at current prices, as it can.
The current amount of annual capital funding available through ISC is around $2-billion, while the infrastructure gap – the amount of spending required to bring infrastructure in Indigenous communities up to the standards of non-Indigenous communities – is estimated at $30-billion.
Communities stand in line for funding each year, the submission says. Those that aren’t selected stand in the same line next year, meaning the gap continues to grow.
Under the model proposed in the report, the federal government would partner with the FNFA on First Nations projects. The FNFA would issue debentures in the capital markets and loan the proceeds to qualifying First Nations, while the federal government would direct funds to the FNFA to service the debt payments.
The committee’s recommendation does not include a specific budget figure for the pilot project. In its submission, the FNFA proposes a $500-million debenture that “would generate a critical mass, allowing a number of projects across Canada to move forward.”
To date, the FNFA has raised more than $1.7-billion in the capital markets and is on track to exceed $2-billion this year, the submission says. In 2020, it loaned $250-million to the Mi’kmaq First Nations Coalition as part of a landmark $1-billion deal in which the coalition and Premium Brands Holdings Corporation acquired Clearwater Seafoods Incorporated.
The monetization proposal is designed to make more effective use of government funds and help communities address economic and social challenges, Mr. Calla said.
“We’re saying to Canada, ‘Use the tools you helped create, with the Fiscal Management Act, which we have proved work. And if you’re apprehensive about that, let’s start with a pilot project,” he said.
The report contains 26 recommendations, including that the federal government consider options to improve access to capital for Indigenous communities. The government has until late August to provide a response.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.