Proceedings of the Standing Senate Committee on
Aboriginal Peoples
Issue 3 - Evidence - January 29, 2014
OTTAWA, Wednesday, January 29, 2014
The Standing Senate Committee on Aboriginal Peoples met this day at 6:50 p.m. to examine and report on the federal government's constitutional, treaty, political and legal responsibilities to First Nations, Inuit and Metis peoples, and on other matters generally relating to the Aboriginal Peoples of Canada.
Senator Dennis Glen Patterson (Chair) in the chair.
[English]
The Chair: I would like to welcome all senators and members of the public who are watching this meeting of the Standing Senate Committee on Aboriginal Peoples either in the room or via CPAC or the web.
I am Dennis Patterson from Nunavut, chair of the committee. Our mandate is to examine legislation and matters relating to the Aboriginal peoples of Canada generally. In order to understand the concerns of our constituents, we regularly invite witnesses who can educate us on topics that are currently of importance to them. These sessions are invaluable in helping the committee decide what future studies it will undertake to best serve the Aboriginal community.
The witness today has been invited to provide general background on the broad question of financing infrastructure on reserves which could relate to capital projects, schools and housing. I am delighted this evening that we will hear from the First Nations Financial Management Board, one of four institutions created by the First Nations Fiscal and Statistical Management Act that enables First Nations to establish their own financing through property tax and borrowing regimes.
Before hearing from our witness, I would like to go around the table and ask the members of the committee to introduce themselves.
Senator Moore: Good evening. I am Wilfred Moore, a Liberal senator from Nova Scotia.
Senator Dyck: I am Lillian Dyck, Liberal senator from Saskatchewan.
Senator Tannas: Scott Tannas from Alberta.
Senator Beyak: I am Senator Lynn Beyak from northwestern Ontario.
Senator Raine: Senator Nancy Greene Raine from B.C.
Senator Wallace: John Wallace from New Brunswick.
Senator Ngo: Senator Ngo from Ontario.
The Chair: Members of the committee, please help me in welcoming our witness Harold Calla, Executive Chair, First Nations Financial Management Board, who has appeared before our committee previously.
We look forward to your presentation, followed by questions and dialogue from senators.
Harold Calla, Executive Chair, First Nations Financial Management Board: Thank you. It is a pleasure to be back before the Senate to talk about important issues.
As you indicated in your opening remarks, the First Nations Financial Management Board is one of the institutions created under the First Nations Fiscal Management Act. Part of the goal of that act was to provide First Nations, for the first time, the opportunity to access financing in a pooled environment in the same way other orders of government do. I would like to remind everyone that this piece of legislation received all-party support when it was passed.
The First Nations Financial Management Board is the only First Nation legislative body in this country that publishes standards for First Nations financial management systems and performance. Upon request, the FMB certifies First Nations compliance to those standards. They are then eligible to apply to become a borrowing member of the First Nations Finance Authority and are permitted to borrow, pledging the property taxes or other revenues to repay the loans.
The housing shortage and the infrastructure deficit within First Nations and Inuit communities have been well documented in recent years and have received national attention in the Canadian media. The severity of the deficit can range depending on the source. For example, Aboriginal Affairs and Northern Development Canada estimates the housing shortage is 35,000 to 40,000 units, while the Assembly of First Nations estimates between 80,000 and 85,000 units. Regardless of which number you look at, the housing deficit is somewhere in the range of $3 billion to $5 billion.
Whatever the true figure may be, it is clear that there is an immediate need to address the housing infrastructure situation on reserve. There are approximately 108,000 housing units on reserve, and a survey of on-reserve housing conditions indicated that 37 per cent of those units needed major repairs and 34 per cent needed minor repairs. If you do the quick math, it indicates that approximately 40,000 units needed major repairs and 37,000 needed minor repairs.
AANDC reports that Government of Canada funding and the First Nations' own funding investment result in, on average, construction of about 1,750 new units a year and the renovations are about 3,100 units a year. At this rate it will take 23 years to address the AANDC estimate of the current housing shortage and 49 years to address the AFN's estimate. In addition, it would take 25 years to renovate the units that currently need repair.
It is noted that none of these figures account for the growth in the housing shortage or need for renovations over the respective timelines. When you consider we're the fastest growing demographic in this country, this is a severe issue.
The 2011 National Assessment of First Nations Water and Wastewater Systems revealed that 39 per cent of the drinking water systems of First Nations communities are considered high-risk and 34 per cent are moderate risk, which means that 73 per cent of systems pose risk to First Nations communities. The report also indicated a need of $4.7 billion over the next 10 years to address the water and waste water issues alone.
Infrastructure is critical in attracting and supporting economic development. In order for Aboriginal people to reach their economic potential and become meaningful participants in the Canadian economy, the on-reserve infrastructure deficit must be addressed. Northern communities in particular lack the basic infrastructure that most Canadians take for granted, such as on-grid electricity, transportation corridors and connectivity to communication technologies.
Both the housing shortage and the infrastructure deficit are exacerbated by the fact that the Aboriginal population is the fastest growing demographic in this country, so the staggering figures will just increase.
The problem or overarching issue in addressing the on-reserve housing and infrastructure gaps is the fact that there is just not enough money. You can slice it and dice it however many times you want, but when you throw two dollars up and it lands on the table, unless there is divine intervention, it's still two dollars. Money is going to be needed to address this issue.
In terms of federal transfers, infrastructure, including housing, has the same cost drivers faced by other AANDC programs, including the 2 per cent departmental escalator cap that has been in effect for the past 15 years. Inflation, the remoteness of many communities, and the population growth on reserve all put strain on how far AANDC capital monies can be stretched. In addition, capital assets incur ongoing operational maintenance costs and eventually need to be replaced.
AANDC's infrastructure monies come from the Capital Facilities and Maintenance Program, otherwise known as the CFMP budget, which is approximately $1 billion a year. However, the AFN has reported that according to AANDC records, funding has decreased to about $770 million annually. Regardless, it is clear that federal transfers have failed to keep pace with the infrastructure requirements of Aboriginal communities.
Most Aboriginal communities are highly reliant on federal transfers because they have not been able to generate own-source revenues. Own-source revenues such as taxation, royalties, proceeds from business ventures and other economic interests can provide a means of funding capital projects and obtaining financing. Many Aboriginal communities need support in terms of capacity resources, start-up capital and other tools to access and take advantage of economic opportunities that could result in own-source revenue.
It has been well documented in this country that we're at a threshold. We have tremendous natural resources, both in minerals and oil and gas. They're in the North. We have before us an historic opportunity for those communities to participate in that economic growth and address many of the issues that are here. Part of our objective of the financial management board and others is to engage in a discussion that would see First Nation communities be able to participate and benefit economically from these activities so that sustained income streams can be driven into First Nation communities in a way that will allow them to become more self-reliant and determine for themselves what future they would like.
One of the biggest challenges we face at the moment is that the current infrastructure funding program does not support infrastructure for economic development, so it's a vicious circle. Until we acknowledge that we need healthy communities, that we need people to not only occupy a home but to maintain it and to have an income, I think we're going to continue to find ourselves challenged.
I think that the status quo and the reality of the allocation and use of government resources will need to be looked at to find appropriate solutions.
Whether it stems from political unwillingness or the lack of a local economy, the fact is that many First Nations have been unable to establish a successful rental regime for housing within their communities. Collecting housing rents can provide a source of revenue that would assist in repairs, renovation and construction of new housing. The process of establishing a fair and community-supported housing program, including the collection of rents, is not an easy task.
More support is required to help First Nations communities not only establish sustainable, on-reserve housing programs but to create local economies that will facilitate the payment of rents.
To date, the large majority of on-reserve capital infrastructure projects has been funded by cash contributions from AANDC, and often the Aboriginal community, over the course of construction. Generally, other levels of government will attempt to finance the cost of this kind of infrastructure over the useful life of the asset. We're trying to do it with 12-year cash flow funding, and it will not work.
First Nations have not had, until recently, the opportunity to secure long-term financing in a pooled environment. The significance of that is the cost of borrowing is significantly less as a result of that for infrastructure to support their community and economic development needs.
The fiscal management act created the management board and the First Nations Finance Authority, who worked together to provide the opportunity for First Nations to collectively pool their debt requirements and go to the capital markets directly to get access to the monies they need to support their community development.
This debt is secured, as I said, by taxation and own-source revenue.
The reality is that today many of these communities don't have any of those, particularly the northern communities. So we will need to look at innovative solutions to provide the opportunity for securitization to respond to these issues.
The First Nations Market Housing Fund was established in 2008 to help alleviate the housing shortage in First Nation communities by providing First Nation members an opportunity to finance their own homes. Although the First Nation Housing Market Housing Fund has approved $630 million in credit for 53 First Nations, resulting in the potential for 3,700 loans, the FNFA has only issued 55 loans to date.
I want to talk about that, because this is a program that I think needs continued support. Certainly things take time to evolve in First Nation communities, but this particular program not only is funding the homes but is providing valuable resources for capacity development of First Nation communities that are going to be essential to successful implementation.
First Nation members who meet the criteria then qualify to get support from a credit institution and the loans are then provided, but the bottom line is you still have to pay for it. You still have to have a job. There still has to be household income.
The scarcity of federal funding for capital and own-source revenues for First Nation financing contribute to an inability to plan for community development. Infrastructure planning enables the community to identify priorities and opportunities for economic development.
Further problems exist within the status quo of on-reserve financing beyond the issue that there just isn't enough money. Improvements need to be made in capacity development and the capture of economic spin-offs from on-reserve capital projects. Anecdotal evidence suggests that that transfer of knowledge and applicable skills is often lacking when capital projects occur on reserve, particularly in northern communities. In many cases, when community members are hired as part of the project, they are not given meaningful training or responsibilities for the project. As well, contractors and suppliers from outside the local area are engaged to provide the goods and services to the project.
In such instances, the economic spin-off benefits that would help create a local economy are not being captured by the community. Enhanced support for on-reserve capital project planning may help address these issues.
The opportunity: As mentioned above, the large majority of on-reserve infrastructure projects have historically been financed from cash from the federal government to the First Nation over the course of construction. However, the more appropriate way to finance capital assets is over the course of their useful lives. This type of financing is available to First Nations through the First Nations Finance Authority, but this borrowing program requires a certificate from the financial management board that you are ready, and the pledging of property taxes or other own-source revenues. These requirements are necessary to preserve the credit strength of the FNFA program but have been an obstacle to many First Nations interested in participating in the initiative.
You should appreciate that the First Nations Finance Authority recently went to the capital market rating agencies and investment banks and got a credit rating. It secured an investment-grade credit rating and will shortly, over the next year, issue somewhere between $300 million and $350 million worth of debentures to support First Nations economic development and infrastructure.
So we know this opportunity is real: We have examples of it. We think that the federal government needs to start looking at these kinds of options and consider securing some of its annual funding for on-reserve infrastructure.
At the end of the day, unless there are further appropriations to supplement that, it is not, in any way, shape or form, a permanent fix. Will we spend 1 million a year, or 2 or 3 billion a year? That's the option that we have here.
If you look at the federal funding programs, the housing component of AANDC is about $150 million annually. If it was securitized at 4.1 per cent over 10 years, it could produce $981 million. If it was securitized over 30 years at 4.85 per cent, it could produce $1.8 billion. As you go down the line and keep adding up the sums of money, they just get bigger. On a 30-year program we could raise somewhere between 1.8 and 12.5 billion to address these issues. That's the order of magnitude we have to start to consider. This is not a million-dollar issue anymore; this is a billion-dollar issue.
I think this new approach to on-reserve infrastructure financing could also function as an introduction for First Nations to long-term capital financing made possible by the FNFA. They could start investing their own-source revenue and creating and attracting economic development opportunities in their traditional territories.
The single biggest reason why there aren't economies in First Nation territories is because we do not have infrastructure. Once economic development opportunities are realized, these First Nations will have their own-source revenues. They could then securitize through the program to respond to their community's infrastructure needs and position themselves to be less reliant on federal transfers for financing capital projects, housing and other programs and services.
As I mentioned earlier, northern communities have historically been unable to access other sources of revenue due to a number of factors, including lack of infrastructure, limited capacity, access to resources and lack of regional and/ or local economic activity. But I think we really need to look at the fact that the economic climate for northern communities has changed in recent years. If you go from the Ring of Fire to resource extraction on the Prairies and oil and gas in Alberta, British Columbia and Saskatchewan, these northern communities have the potential to participate in those projects and turn their world around. This is an historic opportunity for all of us.
We would then see the ability of those First Nations to develop community plans, engage in partnerships with companies that could expedite their capacity development in terms of gaining knowledge and business acumen, and how to operate in the mainstream economy, in an international economy. By engaging with these First Nation communities and providing them with the opportunities to benefit from these initiatives, you would see them become more responsive to the needs of this country and Canadians.
We will have to make some pretty basic choices in the next little while, because if you listen to those who speak, how do we sustain our quality of life if we don't diversify? Those are some of the issues that we need to face. I think Indians and the Indian issues and First Nations no longer need to be looked at as part of a problem, but they need to be incorporated as part of a solution — a solution that will require a sharing of benefits.
Mr. Chairman, the First Nations Financial Management Board has done some work that at some future time I would like to come and report on to this committee. That work is about how First Nations might participate in these initiatives in ways that don't add a layer of cost, don't call for increased transfers and respond to the demands that this country needs.
In concluding, while there is an opportunity to securitize annual federal funding, I don't believe that is a long-term solution; it is a short-term one and will dramatically increase the level of funding available in the short period of time, but it is not the long-term solution in and of itself.
We need to develop economies. We need to examine the fiscal financing relationship between Canada, the provinces and First Nations in this country because you can't just look at housing and infrastructure and believe that is the extent of the challenges in the relationships we have. The entire fiscal financing relationship needs to be addressed and First Nations need to be positioned so they are incented to become more self-reliant and to participate in the economy and develop wealth — an unheard of word when you talk about the Aboriginal file. However, we are in a position where we should be enabling the creation of wealth by First Nation communities in this country.
We have four recommendations: assist communities in generating own-source revenue, including taxation, royalties and user fees; provide safeguards to communities generating their own-source revenues, guaranteeing that their core funding will not be reduced and that they will not be penalized; find ways to accelerate the process through which communities can benefit from financing provided by the First Nations Finance Authority; and, I think, an acknowledgement that the great opportunity that is before us in this country in energy and resource development can provide a significant solution to providing the needed resources to First Nation communities to support their community aspirations and get us out of this unacceptable position where the First Nations in this country find themselves with the statistics that I read to you earlier.
With that, Mr. Chairman, I would thank you for your patience and courtesy in listening to me and I will respond to questions.
The Chair: Mr. Calla, I would like to thank you for a most thoughtful and stimulating presentation. I can see you put a lot of thought into the narrow and the broader issues.
I will take the liberty of asking you, for my benefit and perhaps those of some of the participants at this meeting, to describe what you mean by ``securitization.'' I know the table you presented talks about AANDC providing funding of $150 million per annum. I believe you said they are spending about 770, but if they were to provide $150 million, it could generate capital, depending on the amortization period of 10 or 30 years, of almost $1 million to almost $2 billion. Could you please spell out in plain language how this could work and what you meant?
Mr. Calla: First Nations would come together under the Fiscal Management Act. They would become a borrowing pool, much like a credit union or a cooperative. They would go to the capital markets, the investment banks and private investors and say, ``We want to issue a debenture and will you buy them?''
We have been engaged in a process with the capital markets since the inception of this concept, and I am advised by the finance authority that the debentures they are about to issue are already pre-sold. Securitization is a fancy way of saying we're going to borrow money, take the money that's provided annually and use it to service debt.
The Chair: If I may pursue that, what's to stop that from happening now?
Mr. Calla: Well, from the department's perspective, they might get $1.8 billion but they will have to commit that money on an annual basis; so unless they get increased appropriations, they will not be able to deal with anything else.
The Chair: I know you have working relationships with the department. Has this concept been discussed with the ministry?
Mr. Calla: The concept of using federal capital monies to support securitization was discussed around the time the legislation was developed. It is not a new concept. It has never been acted upon because we are just now proving to ourselves and everybody else in the world that we can actually issue debentures. A lot of theory until the last year or so, but it will all work out.
I think that the department would not be opposed to the concepts if they knew there would be increases in funding. What we are proposing is really an illustrative approach. It's not suggesting go out and do it. This is an illustrative example to have the senators appreciate the potential of securitization. But unless you backfill it with incremental funding, this is not a solution. It's this kind of thinking that has to go into it because at some point in time, if these First Nation communities develop economies, some of this can be replaced.
Too often we've looked at this file as a social issue. It's not a social issue; it's an economic development issue. There are social consequences because we don't have economies. Our economies were displaced, but I think we're now in a position where we can turn that around. We have to start to function in the same way that the Government of Canada does, the same way as the Province of Ontario does, and the same way as the regional districts and municipalities do.
I don't know about you, but I didn't pay cash for my first house; didn't pay cash for my second or third one. The concept of debt financing is a reality that we all have to face. These kinds of assets are generally paid for over time. If you wait to raise the money for it, you may never get it. That is what annual appropriations and using cash flow says, in my view.
The Chair: That is most interesting.
Senator Moore: I am glad you asked that question about securitization.
Thank you for coming here, Mr. Calla. I am looking at this table. The first line program is ``Housing component of CFMP`` and the ``Funding source'' is the department. Are you saying that if they commit to provide $150 million in funds per year for 10 years, that will enable the operation of the sale of bonds to the extent of $981 million?
Mr. Calla: That is correct.
Senator Moore: Right. But having the department commit to put that money up each year is the issue right now, the obstacle?
Mr. Calla: You have to backfill it with real money.
Senator Moore: In order to raise the nearly $2.2 billion, they have to commit to that sum every year for 30 years. What is the current commitment?
The Chair: Your current presentation is that according to AFN it is between 770 million and 1 billion.
Mr. Calla: Yes, but the housing component of AANDC in this particular category is only $150 million a year. We are saying if you take all of that as an illustrative and if $1 billion a year was provided, you could securitize that today and raise $12 billion. The securitization concept is what this is intended to illustrate and to say that whether it comes from First Nations own-source revenue, the Government of Canada or the taxing jurisdiction — which is another issue I would really like to talk to you about one day — there needs to be annual cash flow raised to support billions of dollars of debt to be able to address this issue in a timely way.
This is no candy coating that reality. It has to be done or you are going to get a continuation of the circumstances that you are all too familiar with in our communities. We have not been willing or able to address this issue for I don't know how many years — pick a number. But it has brought us to this point. We haven't developed economies or training. We have an issue here that requires commitment, motivation, attention and resources.
The nice part of some of the presentations I have seen that have been given here is that we are talking about economic development. We have the fastest-growing population. There is a need for jobs in the North and skills training. I just came from the provincial government's LNG conference in Prince George and the private sector was there saying, ``We need people.'' Well, we have the opportunities now to create that.
With the incomes that they can generate from these, they can afford to pay for some of this so that at some point down the line the First Nation itself can be contributing to these kinds of things.
The Chair: Could you elaborate on how the borrowing pool that you described would work? What role would you see the First Nations Financial Management Board playing in this scenario?
Mr. Calla: We are the gatekeeper; we determine who gets in.
This legislation was designed to emulate municipal government financing models and in this case the Municipal Finance Authority of British Columbia, where the province doesn't guarantee its debt. It has a Triple-A credit rating and has never had a default. When we were looking at how we could emulate some model that would provide us with securitization opportunities, we looked at that. That is when we got the support of the department and the governments of the day to develop this legislation.
It requires a First Nation to voluntarily come forward and say it would like to be added to a schedule of nations that would find itself operating under the fiscal management act. They would come to the financial management board and we would ask them to develop a financial administration law and submit their financial statements to be considered for a performance certificate.
Once they have their law passed and their certificate, they would go to the finance authority and apply to become a borrowing member, which is much like a cooperative. The members of that pool then determine borrowing requirements and submit them to the finance authority — who has collected all of those, as they have now — and say, ``We have borrowing laws now that say over the next year we need $350 million.''
Then they go to the capital markets and issue debentures. They recently returned from New York and advised me that it was a very successful trip and that those debentures have been pre-sold.
That is how the system works. It is a collective. They are working together and responsible for the debt that is being provided. I always jokingly say when we go to political meetings and they say ``all my relations'' that they will really mean it now because we will guarantee one another's debt. That's an approach that people have accepted.
One of the strengths of the system is that they do have to establish financial performance criteria and eventually implement financial management systems. At the end of the day, if there is a problem — and we don't expect there will be — much like the Inspector of Municipalities in B.C., he can go into a municipality and take it over if it is in trouble. If there is a default, the FMB has the legislative authority and the agreement of the First Nation that we can go in and intervene and get the debt service paid. That rather draconian approach is what gives the investment community the confidence that they will get their interest and principal back.
That is the backbone of the operation. It has been proven in British Columbia and other areas of the country as well.
Senator Tannas: My head is swimming with questions. I am wondering about the scenario where you mentioned rating agencies and them giving you tentative signals that they would provide investment grade ratings. You spoke about investment banks and a report that you got back where they had this theoretical bond issue, because they are not real at the moment, is that right?
Mr. Calla: That is right.
Senator Tannas: So would the theoretical bond issue and ratings include the assumption, or would the folks saying ``Yes, this sounds good'' be told that there would also be a theoretical increase, as we have talked about here, in committed allocations from the department?
Mr. Calla: No, they were not. We were not allowed to talk about that.
Senator Tannas: So you are able to get it purely on existing income statements, balance sheets, et cetera?
Mr. Calla: Yes.
Senator Tannas: That is fantastic; that is great.
Mr. Calla: I should mention that the revenue streams that were pledged were also reviewed by the rating agencies and were all Triple-A and Double-A.
Senator Tannas: They would all be government revenue streams —
Mr. Calla: Most of them were.
Senator Tannas: — or from commercial enterprises that had their own strong ratings, is that right?
Mr. Calla: On the document I saw, the lowest credit rating by the agencies of a revenue stream was A-plus; terrific, great.
Senator Tannas: I'm not familiar with borrowing rates. Do you have any sense of what the delta would be at 4 per cent or some amount? Is there a big difference between that and the Government of Canada borrowing rate? You know where I am trying to go. Shouldn't we just be borrowing the money? Why are we doing this off-balance sheet and paying extra to someone when this is a government problem?
Mr. Calla: That's a great question, but I don't have an answer for it.
We created the fiscal management act not only to support this particular government stream but also to support economic development; to preserve the opportunity for First Nations to have direct access to capital markets for the first time, without the challenges that may exist as a result of some risk assessment by one of the major lending institutions. I think that our interests are best served in the long-term if we have direct access to the capital markets, and I think the finance authorities will provide that opportunity for First Nations. I think the value of it will be better recognized by First Nations 10 years from now.
Senator Tannas: It would be your contention, I assume, that whatever delta it is, right now it is worth it to get this off the ground, right?
Mr. Calla: Yes.
Senator Tannas: I agree.
Senator Raine: Thank you very much. It's good to have you here.
We had a witness about a month ago talk about the difficulty of having houses built up to the standards of building codes and building inspectors, having to deal with substandard contractors, and winding up with houses with a lifespan significantly less than it should have been. If we are going to apply a financing model through your organization, is there any way that can be rectified? The quality of the product you finance will have to be carefully watched.
Mr. Calla: One of the biggest challenges our communities face is the inability to access money to supplement the contributions that come. You're stretching limited dollars, trying to accommodate a family home when the money just isn't there.
The per-unit revenue available to support the construction of a house, particularly in the North, has to increase to reflect the circumstances in the North. I don't believe they adequately do so today. Certainly, there have been some changes. I understand from those who have been here before you that you are now seeing inspectors in Aboriginal organizations, and they are look at improving the quality of construction on reserve.
I think those opportunities need to continue to exist. Frankly, the market housing fund has been instrumental in helping support those initiatives. So I think things will improve, but again the fact is you're building in the North; it will cost more than building in downtown Toronto or Vancouver. While your allocations are somewhat different within the department, in my view they are nowhere near adequate to respond to the differences. That, and because you are having some difficulty getting skilled labour up to the North, is part of that dilemma.
I think these things will have to be addressed as part of the process, but the communities themselves and the standards we adhere to are part of the capacity development that we are building and need to continue to build.
Senator Raine: It's a little bit like a chicken and egg. Right now you can see the need, yet it's hard to move forward when the capacity is not in place.
You're aware of what's happening in different parts of the country and the innovative design and technology that can be used. Have you seen something that we should have a look at?
Mr. Calla: Let me best explain it this way: If there was a desire to provide financing and $12 billion was put on the table, the private sector would line up at the door. That's where I think the improved construction standards and time frames to develop will come from. We need to get the private sector involved in this solution.
Senator Raine: I think we've all seen the housing that's sort of quasi-private sector, the typical on-reserve houses. It's a tragedy that they aren't designed for the climate and the lifestyle as well as they should be, so I agree.
Mr. Calla: We don't have the economies of scale, senator. Building one house or two houses is different from building 150 homes. When you're starting to address the gap with that order of magnitude at a community level, the options to deliver product and cost per unit cost becomes significantly greater.
Senator Moore: Mr. Calla, you just suggested to Senator Raine that if you build more, it will cost more. I thought when you build a lot of things at the same time the economies reduce the cost.
Mr. Calla: I suggested the per-unit cost would be reduced. The per-house cost would be reduced, but your overall capital requirement would be substantially more.
Senator Moore: With a property-tax secured loan, what is the property tax? Who is taxing whom? What is a property-tax secured loan?
Mr. Calla: In 1988, an amendment to the Indian Act, known as the Kamloops amendment, clarified the ability of First Nations to tax leasehold interests on their lands. I know it's not as common here, but out West many of our reserves are in urban areas. Unlike in British Columbia, local governments moved in and started taxing interests on reserve land; they didn't in Eastern Canada. Many First Nations were disappointed that they weren't able to collect the tax revenues off their lands.
In 1988, the law was changed and in British Columbia there was a provincial law that forced municipalities out of the property taxation field when the Minister of Indian Affairs signed a taxation law. I think there are about 100 First Nations across the country now involved in some form of taxation of leasehold interests on their lands. I forget the amount now, but it's significant. Over $50 million or $60 million a year is collected. It is those revenues that are like municipal revenues that First Nations would securitize in this program.
Senator Moore: Who are the tenants in those leasehold situations?
Mr. Calla: They are either commercial interests or in some cases homeowners or cottage owners.
Senator Moore: Are they non-native?
Mr. Calla: They can be. Most of them are, but they don't have to be.
Senator Moore: What percentage would be non-native? Do you know?
Mr. Calla: I don't have that information.
To give you an idea of what I am talking about, are you familiar with Vancouver?
Senator Moore: No, not really.
Mr. Calla: Do you know where West Vancouver is and the Park Royal Shopping Centre?
Senator Moore: Yes.
Mr. Calla: That is one of the properties on the Squamish Nation's lands that is taxed.
Senator Moore: So they could be very substantial.
Mr. Calla: Yes.
Back to my earlier point about developing an economy, if you develop an economy, then all kinds of other opportunities arise for First Nations to raise revenue. We need to start generating the authorities to raise revenues, like other orders of governments do, for the same purposes as other orders of government.
Senator Dyck: Thank you for your presentation tonight, Mr. Calla. Most of it has gone well above my head. I don't understand banking at all. I have been trying to follow this as best I can, but if my questions sound naive, they are.
This is what I think you said, which may be totally wrong: When you were talking about securitizing the annual funding received from Aboriginal Affairs and Northern Development, essentially you're taking that money and locking it away to invest it, and in 10 years or 20 years, you have greater capital. So in a sense, the need of a particular First Nation with respect to housing shortages or infrastructure needs then becomes the vehicle whereby you get money from the department, but that becomes capital that you invest because you don't want to take all that capital and then pay for the house up front. Is that partly right?
Mr. Calla: Partly. You've got the basic concept, but we're saying that you have a huge infrastructure and housing deficit. Billion dollars a year isn't going to cut it, so you will have to raise the money somehow.
Often the question is asked: How much money does the department need? Well, what we're starting to project here are incremental funding requirements that this department will need to support a meaningful engagement in addressing the infrastructure issues. Some of that can come from First Nations, but if you want to make a significant impact, you will have to get billions of dollars, and you need those billions of dollars now. So if look at this, it starts to give you an idea of how much more money the department is going to need if it remains the only source.
Senator Dyck: An individual First Nation then has to develop its own economies, and methods, such as taxing — initiating a property tax regime on their own particular reserve — or developing resources or something else.
Mr. Calla: You have to have revenue. First Nation governments need revenue, and they need more revenue that they can get from transfer payments. The 2 per cent cap has been absolutely destructive in our communities, and now it has built up to such a deficit that the numbers are frightening. Unless there is a significant increase in the department's funding allocations to address these issues, we're going to have to look outside the traditional forms to respond to the challenge. Borrowing money and paying it back — borrowing lots of money, much like you did with your house. You may have paid $100,000 for a house and you were paying $500 a month. Well, that's the same scenario here. That's what we're going to have to do if we want to make a significant impact in these challenges.
How does that money get paid at the end of the day? Some of it is going to come from government. Some of it could come from First Nations developing economies and own-source revenues. But these are staggering numbers.
Senator Dyck: When you say individual First Nations have to develop their own economies and generate own- source revenue, in your estimation, is this something most First Nations will be able to do? Are all First Nations going to be able to do that? I know that's a global question, but do you have an estimate as to how viable that option is?
Mr. Calla: First of all, I'd like to say that when I am suggesting that, I'm not saying they have to. What I am repeating is what I have heard from First Nation communities: ``We would like to have an economy. We would like our children to work. We'd like to be more self-reliant.'' That's where that comes from, and there is a desire that needs to be facilitated. Does there need to be capacity development to support that? Absolutely. It's part of why the financial management board, the finance authority, Aboriginal financial officers of Canada, the market housing fund and many others are all here to support that.
The other important aspect of your question is, I think, how many. I'm much more optimistic today because of the northern opportunities than I was five years ago, and I think a majority of First Nations would eventually find themselves in that position.
We need to support those who can move forward so that we can increase the support for those who are challenged, but we do need to move. Those who are willing and able need to be supported to start moving forward. Without question that means that there are policy considerations, and things have to change from what we're doing today.
The Chair: To follow up on that, you said in your statement that generating own-source revenues is really the key to fixing this problem so that financing can be secured. The amounts allocated today in the traditional way, especially with low, short life-cycle financing, is just not going to work. You also said that certain federal policies could be perceived as a disincentive to generate own-source revenues. Could I ask you to elaborate on that?
Mr. Calla: I would be pleased to.
There is something called an ``own-source revenue offset policy.'' You've heard of it; I can tell by the nods in the room. That, to many of you, is a disincentive. It has not been applied consistently, in my view. I think they're trying to stabilize it. But when I speak about the need to consider the entire fiscal financing issue, this is part of the discussion that needs to take place. There is no question that we have to absolutely ask questions about what services are being provided and how they are going to be paid for. The challenge with the existing policy is that there are own-source revenue offsets down to a floor. That's the concept for programs and services, that you don't control eligibility or content.
So there is a much bigger issue, and part of the challenge we face in any of these matters is an inability to move forward anywhere until this entire fiscal financing issue gets resolved. I don't think that's going to contribute to a solution on these issues. I think the sooner that Canada, the provinces and First Nations sit down to start talking — as I understand it, the provinces and Canada are going to have to do this year on the transfer funding. First Nations should actually have a seat at that table, in my view, and that conversation needs to start taking place.
The Chair: You said that we need to support those who can move forward, and you work in this field. I wonder if you would be able to either now or later give this committee — because with your analysis I think you've gotten to the core of what we're studying, which affects housing and other infrastructure — examples of First Nations that have figured it out, the kind of situation you spoke of, and who needs to be supported and can move forward. We'd like to look at examples of the leading edge of innovative financing. Would you know of examples of that kind that you could share with us?
Mr. Calla: Absolutely. If you went to the schedule that's required under the fiscal management act, you'll find that there's going to be another series of additions to the list from the Governor-in-Council. But at that point it will be about 128 First Nations across Canada from coast to coast that have said to the government: ``We would like to be scheduled to this act and we want to participate in this regime.''
Currently, 38 financial administration laws have been passed across the country, and we have 34 financial performance certificates that will constitute the first borrowing pool. We expect that number to grow over the course of the coming years. It could perhaps become exponential. Once this bond issue gets placed and once the infrastructure and economic development that will result from this start to occur on the ground, people are going to see it. We saw it when the interim borrowing arrangements were made, and places like Membertou and Tzeachten, a community in Vancouver, became the first borrowing members on the short-term program that the finance authority had. As northern communities find themselves with own-source revenue, you will see more come through the door.
When this legislation was introduced, there were many from coast to coast who didn't see themselves having opportunities that they could ever secure ties to anything, but the world has changed for them since 1998, since there is a duty to consult and accommodate. A number of revenue opportunities are now flowing to First Nations that were not there when this legislation was first conceived, so many more are coming forward and acknowledging that there is opportunity and they can create leverage.
Yes, 34 First Nations have their financial performance certificates, and 33 will constitute the first borrowing pool. That process has begun. There will be somewhere between 120 and 130 scheduled after the next Governor-in-Council session.
Those are the examples.
So you're looking at Kamloops and We Wai Kai in Campbell River. I will give you an example. I hope they won't mind me referencing them. They shouldn't because it's a very positive story.
We Wai Kai is engaged not only in development of the reserve, but they are borrowing to support an off-reserve development in which they will become involved in shipping coal from British Columbia, because they have access to capital.
I think you and all Canadians should appreciate that Aboriginal economic development is not just for Aboriginals. If you look at successful communities, and often we look south to those tribes, thousands of people migrate to reservations in the States to find work. That will happen here. In my community of Squamish, 1,500 people or so travel to the Park Royal Shopping Centre to work every day.
Aboriginal economic development supports regional economic activity. It creates jobs for people. The owners of the Park Royal Shopping Centre have just made a significant addition to the shopping centre. Again, that means jobs and taxes.
Aboriginal economic development is a solution. It provides benefits to this country and to the people who live in the regions in which our reservations reside.
Senator Tannas: Will the names of the 34 that will be in the first bond issue be public at that point?
Mr. Calla: I think they're public now. I think they're on our website.
Senator Wallace: Mr. Calla, as you made quite clear, there is a need for private sector investment — new capital — to supplement what was being provided by the federal government. To accomplish that, I am sure the private sector lenders look for certainty, and they're going to look to the governance of First Nation communities and have the sense that the money will be spent in the manner that the lenders expect it to be spent.
I guess that's where your board comes in. You do an assessment of each First Nation community and provide a certificate to confirm certain things. Could you expand on that? In terms of housing and other construction in First Nation communities, we've heard that there seems to be a lack of bylaw standards, the issuance of permits and so on. It seems to be somewhat different on reserve than what we would be familiar with in the rest of the country.
In that context, what does your board do? When you look at a framework community and you're being asked to certify and give confidence to the lenders that they can loan money and it will be spent in the manner they've intended, what do you look to?
Mr. Calla: Excellent question. How much time do we have?
The first thing I want to say in response is that is we need all of the strata that exist outside the reserve in terms of access to capital. So, yes, we need to securitize the governments; we need commercial banks and venture capitalists. We need all of that.
Providing confidence to those from whom you want to invest, whether it be in business, coming to your lands, et cetera, the scale of projects now is enormous. I like to say that if you're in an urban area, you can't build a gas station anymore; you have to build an $800-million shopping centre.'' The due diligence required for that kind of investment to be made is significant, as you can appreciate.
If you are in an urban area, most First Nations will have relationships with local governments. In my community in Squamish, we have such a relationship. We insist that our developments are inspected by them and that they adhere to their building code standards, as an example. The police and fire services come from them, and everyone wants to ensure there is complete harmony between the two building codes and standards. In that way, people who at times are putting their lives at risk know what they're coming into. That's part of what First Nations communities do.
The First Nations Tax Commission, the other institution created by the act that oversees the implementation of property taxation, has a whole series of support programs for First Nations and how you deal with local government services. What the financial management board does to certify is ask, first, that a First Nation develop a financial administration law much like your Financial Administration Act. We have standards on our website. They submit to us a law that they have passed with their chief and council, and we confirm that it meets our standards. If it doesn't meet our standards, they don't get in the door.
We then ask First Nations to submit five years of annual audited financial statements, and we run those financial statements through our system and analyze their performance. We look at seven major benchmarks. Again, all of this work has been shared with investment banks and rating institutions so they know exactly what we do.
We look at those measures, and if they meet the threshold within those measures — for instance, the fiscal growth rate is one of them. So which way are you going — up or down — and what's the range? We have that measure and then a threshold within that measure that we expect.
We look at those measures, and if they meet them, we start to acknowledge that they are probably eligible to get a certificate. Then we look at their financial statements in more detail and make notations in a schedule attached to our certificate about matters that a reader might want to look at. We give that to the First Nation, and the First Nation takes it to the finance authority that in turn, in working with the rating agencies, provides our certificate, the financial statements. That is how we got to where we are.
My understanding is that because this was the first one, the rating agencies went through five years of financial statements for the 33 First Nations who form part of the first borrowing pool. This analysis was exhaustive.
Once they get their financial performance certificate and their financial administration law and they're borrowing, they are expected, over a period of time, to develop a financial management system and have it certified by the financial management board. That financial management system, again, has standards, but it also incorporates a lot of matters around governance. If you were to look at our financial management system standards, we deal with issues of conflict of interest and independence, as examples. There is then an expectation — and we are giving them a number of years, because this is not something you pull down off the Internet and say it will work. You need people and resources to successfully implement a financial management system. We're beginning that work now with these First Nations.
Once they are certified, internally we made a policy decision that once every three years we will go in and do a compliance review to see if they're actually using the financial management system that they said they would.
All of this has given assurances to the rating agencies and the investment banks that sufficient due diligence is being done and that this, out of the gate, deserves an investment grade rating.
Senator Wallace: Would the standards and criteria that you've described and that your board applies be similar to what Canadian municipalities would be expected to provide in raising capital for water and sewage, roads and other capital projects?
Mr. Calla: I think they go beyond that.
Senator Wallace: Really?
Mr. Calla: Yes. We went into this saying that this can't fail. It took 10 years to get this legislation passed — 10 years. Sitting governments wouldn't use their majority to pass it. It took a minority government to pass this legislation. We had to go and get all-party support. Thank God we did, because now I can come and say you all supported this.
The fact is that there was a lot of thought, because we knew that there were people out there who wouldn't enjoy this ``succeeding,'' is the best way I can describe it. This will not fail because we can't allow it to.
If we have an inherent right under section 35, one of the fundamentals of governments is that we should have the right to formalize our direct access to capital in this country. You can't exist as a government if you don't have access to revenue and capital markets. It's the dependency regime, and we've had too many years of that. That is how we got to where we are today.
Senator Wallace: Thank you, Mr. Calla.
Senator Tannas: Does the disclosed use of proceeds happen in the bond issue as well?
Mr. Calla: Yes. Because we are lending on existing revenue streams, it is not as critical, but certainly we, as institutions, between the tax commission and the finance authority and ourselves, know what the purposes of those monies are. There is a requirement that these matters be reported to us.
Senator Tannas: But you mentioned cross-guarantees. Do the pool members know what their other pools members are using the funds for?
Mr. Calla: Yes.
Senator Tannas: Do you anticipate any problem with one borrower saying, ``I don't like what they are using the funds for over there; that's risky''?
Mr. Calla: No. When you're lending on existing revenue streams, that pressure isn't there. It's the credibility of those existing revenue streams that is the benchmark that the borrowing-pool members want to see.
Senator Tannas: Right. Thank you.
Senator Dyck: I want to follow up on a comment that you made when you were talking about the number of First Nations that have been certified and are able to issue debentures. You said there have been increased opportunities because of the duty to consult. Could you elaborate so that we are clear on what that means?
Mr. Calla: Initially, after the Delgamuukw, Taku and Haida Supreme Court of Canada decisions, there was what I would characterize as a limited response from all sides on how to implement or interpret those decisions. That kind of hiatus is over.
Again, it is my view that governments — and it doesn't matter whether it is federal or provincial — just hide and say to the private sector, ``You go out and do all this; you have to go and deal with those guys.''
The private sector started to, and the consideration became some net present-value number of nuisance money, in my view. ``If it takes six years and it's going to cost me this, this is what I'll pay.'' Well, that table has turned. It was actually a saying that I heard in Quebec: ``No more cash for the past; opportunities for the future.''
So the concept of getting a long-term revenue stream, participating in the economic activity and perhaps sharing in some of the risk of that participation is growing in First Nation communities. The result of that has been, for example, that my community purchased tree farm licence 38, Interfor, 238,000 hectares. We had a compensation requirement, and we said, ``Let's buy it.'' We went out and bought it, and we operate the tree farm licence.
There are five or six independent power projects that occur in our territories. We benefit from those arrangements and create an income stream from those. Many other communities experience similar opportunities across the land.
I think that's what I see as the hope that can respond to the order of magnitude required to address the issue. If you are participating in the Ring of Fire in a meaningful way and choose to support that project, there are all kinds of environmental — I mean, it's not just about business. Those that you do choose to support, if you are participating, it opens up a revenue stream that will have an enormous impact on this country in 10 to 15 years.
The Chair: I guess there is no housing problem in Squamish then, is there?
Mr. Calla: Yes, there is. Absolutely there is, because we still need to develop an economy. We may have land, but we still need to develop an economy. We need to create jobs. We need to provide hope. We need to get our children educated better. We need to provide them opportunity through our economic development.
I don't care how successful some of you think they are, there isn't a First Nation in this country that isn't facing the same challenges.
Senator Moore: I am encouraged, Mr. Calla, by some of the examples you spoke about in response to other questioners, but I want to ask you about the bottom of page 4 of your brief. You say:
Although the FNMHF has approved $630 million in credit for 53 First Nations, resulting in the potential for 3,700 loans, the FNMHF has only actually approved 55 loans.
Fifty-three First Nations applied. They had loans approved, so they must have applied somehow. I don't understand that process, but they applied, and they got $630 million approved. That's 3,700 loans. Does that mean 3,700 homes?
Mr. Calla: It would be 3,700 homes.
Senator Moore: So only 55 were actually approved; that is, 55 individual homes of the 3,700 potential. Why was that?
Mr. Calla: Why?
Senator Moore: That is the obvious question: 1.5 per cent. What is the answer?
Mr. Calla: There are a couple of challenges. There isn't any residential subdivision infrastructure funding available to First Nations because the government needs to address the water, so creating roads, sewer and water for residential subdivisions is scarce or non-existent. That is one of the issues.
The other matter is that you can't overcome the legacy of the reserve-based system in a short period of time.
Senator Moore: Could you explain that, please, for us and for the people who are watching this, hopefully, on television?
Mr. Calla: In order to participate in this, you need to be able to go to the bank and borrow the money. You have to have an income. You have to have a credit score.
Senator Moore: Are you talking about the individual homeowners?
Mr. Calla: The individuals.
Also, these things take time to germinate. If you go to John Beaucage's report, this is where we got the information because he provided this as testimony to you. They had seven last year.
I actually met with the CMHC this morning on this issue, and one of the recommendations I made is that this loan actually provides credit enhancement for the support of infrastructure development, not just houses. I think then you will start to see the number significantly increase.
The danger with all of these things is throwing the baby out with the bath water. The fact that you have 3,700 potential is a number.
Senator Moore: Yes. It is a big number.
Mr. Calla: And we will get there. The legislation was passed in 2005, and we got a board in 2007. It took a long time to get people to develop the standards to get people moving. We have been in this dilemma for several hundred years and we will not turn it around in ten. This is the right direction. We just need to stick with it and to support whatever advice we get from those who manage this fund and how it can be better taken up by First Nations.
Everybody will be looking and needs to look at how they change doing business. Policy issues are going to be in the forefront. They need to understand that they have political support to be able to bring forward without fear what some would say are radical changes in policy. Some of them you will throw out, but you have to instill that creativity without fear to find some solutions.
Senator Moore: We heard stories here about construction in the North and the contractor hiring the building inspector, along with the executive of the First Nations sometimes asking for inspections to be made, sometimes not, so there was a lack of adherence to the code. How does your organization or those that you certify make sure that a minimal building code standard is in place and is adhered to?
Mr. Calla: We don't do anything. It is way beyond our scope. I am an accountant by training, so it is way beyond what I am capable of doing.
Senator Moore: So who does that?
Mr. Calla: Understand that there are still banking relationships here. If you are going to draw down your loan from the First Nations Bank or the Royal Bank or the Bank of Montreal, you will have to meet certain criteria. It will be no different than off reserve.
Senator Meredith: Thank you, Mr. Calla. It is good to see you again.
You say this cannot fail. I like your optimism. I have always believed that we have to do things right in this country. I think that we are on the right track. You just stated that this wasn't brought on overnight; it will not be repaired overnight as well.
It is $3 billion to $5 billion for housing, and 4.7 billion for water and waste water treatment. You talk about own- source revenues. As an entrepreneur, I always believe in trying to do what I can to take care of my family and also to help put bread on other people's tables. The challenge that First Nations face is attracting those types of partnerships.
What has your organization done in partnership with the chief and councils to look at outside investors and at resources that are on reserve that could potentially be extracted so you could create those jobs and can pay First Nations people a decent wage so that they can afford to buy a home or rent a decent apartment? That is my first question, and then I have a couple more.
I believe in collaboration. I believe in doing whatever I can in terms of community development and ensuring that there is that strong partnership. You may have answered it in a roundabout way, but concretely for the committee, what has been done in that regard?
Mr. Calla: Our scope of operations is limited. We're not the be-all and end-all here. What we do is bring an awareness around the needs for governance, financial management and access to debt; the need to encourage private sector investment.
There are many others. I left a meeting this afternoon with the National Aboriginal Economic Development Board. They create these kinds of collaborative efforts. Each of us who sits on the board of FMB comes from a background that has experience and we can share that experience with people, but it is clearly not in our mandate.
I think that creating a financial administration law, becoming certified, borrowing money, and looking at a financial management certificate sends a signal to the private sector that you have someone who will be able to respond to the responsibilities of the partnership. That is what partners that I have dealt with over the years are looking for.
The private sector, I will say, needs to embrace the notion that it can, when asked, provide significant capacity development opportunities through secondments and those other kind of means. We have to bridge 100 years. We don't have 100 years to do it. We need to continue to invest in our education, not only in professionals but in trades. We need to be in a position where we are providing opportunities for those people to have meaningful employment within the communities.
All of those things are attractive to the private sector because they need all of it. They need labour; they need partnerships. The private sector can sometimes be painted pretty black, but, quite frankly, many in the private sector enjoy the prospect of doing something that is socially very good while making money, and we all want to make money.
What we try to do is bring that awareness. You have to have a governance system. If you want to be a partner, you have to come forward and honour those responsibilities that you undertake when you become a partner.
Senator Meredith: You talked about First Nations development being Canada's economic development, if I heard you correctly. Can you elaborate for me on the numbers? We've heard numbers touted around here from various organizations that have come and talked about economic diversification in First Nations. The key to moving these First Nations forward is providing them with the initial capital investment to generate their own revenues. With 612 bands across this country, can you give us a pan-Canadian perspective in terms of what that number would look like, providing that we get this mechanism right and we get the types of investments that are needed, both from government and from the private sector, so that these jobs can truly be created?
We're not just talking about it, Mr. Calla. There has been a lot of talk. Among the Canadians watching and those here tonight in this room and the senators sitting around this room there is an appetite to see movement and to see real development take place. Can you quantify that for us?
Mr. Calla: Fortunately, I think I can. You guys are asking tough questions tonight.
About two or three summers ago I was invited by four federal departments to participate in a public policy forum held across the country to talk about First Nations participation in major resource development. It actually produced a report. It identified that at that point $650 billion worth of developments in this country were subject to some form of consultation and accommodation, stretching from coast to coast.
In terms of order of magnitude, that's what it is. Now that's capital.
The First Nations Financial Management Board, with the support of the department, did an analysis of an illustrative LNG plan, a project in British Columbia, the size of which was roughly equivalent to the Shell proposal. One of the things we wanted to do was give people an appreciation of the value chain. We talk about it and pipeline companies come to talk about it, but how much is everybody getting out of this? What does that pie look like? While it is difficult to estimate that, we went out and got industry advice from the former President of Terasen Gas and the former CFO of Foothills Pipeline and they helped us produce a report. We identified that that particular $37 billion project would produce $200 billion worth of development in the first 25 years.
If First Nations were to acquire an equity interest in that — and the precedents have been set in the Mackenzie Valley and Pacific Trails Pipelines projects of 30 per cent to 33 per cent equity apiece — that translates on a 60/40 debt equity split to a $4.5 billion equity request from First Nations. These are the order-of-magnitude numbers that we're talking about. I'm not suggesting that's the end or just one, but everybody now is involved in billions.
Do you want to unlock $200 billion in value by getting First Nations participation at $4.5 billion in a rate-regulated utility model where the quality of the counterparties is so significant the risk is nominal? It's theoretical, I would say. There are a number of opportunities like that around the country.
What's at stake here is not billions; it's trillions at the end of the day. In Prince George, the premier of the Province of British Columbia said LNG represents a trillion dollars to the province. So what do we do?
Senator Meredith: That's the million-dollar question.
Mr. Calla: The million-dollar question is that consultation and accommodation are real. It needs to be supported. Federal and provincial governments need to get to those impact/benefit agreement negotiation tables. Equity participation by First Nations in these initiatives needs to be brought forward. We need to find solutions to that. More importantly, though, we need to get to a decision on these initiatives before these groups move elsewhere.
I have been provided opportunities to serve on the boards of CMHC and I currently serve on the board of FortisBC, a natural gas utility provider. I came to learn a bit about securitization through CMHC, particularly during the capital market collapse, and I've learned about the oil and gas industry, just enough to be dangerous, I always like to say.
What I do believe is real is we had the Ambassador to Japan appear before a First Nation-organized event in Prince George. The ambassador told us, and federal and provincial representatives, that in Japan they've shut down all their nuclear power. They are now converting to gas and buying it on the spot market, and it's killing their economy. They want to buy it from Canada, but they've got to get to a decision or they're going to go elsewhere. As I understand it, the nickel opportunity in the Ring of Fire is gone because China has moved elsewhere.
This is not a time for political posturing. It's a time for very significant considerations on how we want to move forward as a country. What will First Nations be? How will they participate? For too long we haven't seen First Nations as a source or an asset. There are many things in our cultural values that we bring to the table, quite frankly, that you may need in all of this. What I hear continually across the country is we are stewards of our traditional territory. I always joke and say you wouldn't believe the number of times I've been called by local officials about something they're upset about and said, ``Have you been consulted?''
I think we all want to be in a better position. Our communities are not happy living in the poverty and despair in which they live. We need to benefit from the activities in our traditional territories. For too long, we have not. Well, now the opportunity is there for us to do it and to do it in a way that we are benefiting from the growth in the economy, not from a contraction of the economy and not from increased transfer payments.
Transfer payments have got us where we are. Myself, I'd much rather be wealthy and not need them, if we ever got there.
I think where we go in this country is a really good question. A lot of those answers will come out of this city and provincial capitals in the next year. How are they going to embrace the concept of inclusion and how are they going to embrace the concept of First Nations actually generating wealth?
Those are interesting questions and there is no easy solution. That is why when I talk about the need for a national table on fiscal relations and other matters, it's because I see all of these issues that will have to be dealt with. However, we can't solve every one of these issues while we are trying to get to a decision on these major initiatives because the proponents, I believe, will leave and go elsewhere.
These international companies, some of whom had some not great years last year, have to sit down now and say, ``Where am I going to invest to get the energy that I am going to need six years from now?'' If they don't see themselves getting to a final investment decision in the next 12 months, they may be forced to consider other options.
If we're not bold, if we're not showing leadership, and if we continue to be mired in process and policy, my fear is that we won't realize the potential we have. Yes, housing and infrastructure are all part of it. We're trying to solve the problems of the world today, but what I am really trying to say is you can't just look at housing and infrastructure. There is a much bigger matter that we need to consider and we need to start seeing ourselves as allies.
I know that's not always easy, but I always like to use as an example the 2010 Olympics in Vancouver. We brought the four host First Nations to an event in Prince George to show the northern First Nations what we had accomplished as a consequence of that. We had the same overlap issues — traditional territories and all kinds of issues — but we came together for the Olympics because we realized there was a common good that we could all achieve and we began working together. We achieved great things out of the Olympics. That relationship between the four host First Nations has carried on today, post-Olympics. When I observe that, I think it is possible for us to come to together. I think it is possible for governments and First Nations to work collectively.
I remember being at a meeting with the province and they were addressing Chief Gibby Jacob from Squamish. They said, ``Gibby, we didn't get the Olympics because of you but we couldn't have got it without you.'' That's where we have to get to. We need to be part of what's going on in this country. I think we will and I think we can, but it takes some building blocks, patience and understanding that will not happen by 2020.
Senator Meredith: Thank you, Mr. Calla. I wish you much success as you go down this road. We will continue to be here to support these initiatives because I strongly believe — and the chair has heard me say this many times — that it is high time First Nations be brought to the level and the standard that all Canadians enjoy across this country.
The Chair: Speaking of bringing governments and First Nations together, would you comment on the P3 option? I know First Nations are eligible for the federal government's P3, public-private-partnership program. I don't think there has been much take-up of that option. It's very big in other parts of the country. There is a big federal pool of funds. Could you make any comment on whether that's another innovative solution to generating capital for infrastructure for First Nations?
Mr. Calla: Yes, it is. I also had the privilege for six years to serve on the board of Partnerships British Columbia. If you are not familiar with Partnerships British Columbia, I do not know how many billions of dollars of infrastructure we provided over a six- or seven-year period, and it's continuing today. I was able to learn a lot through that process about public-private partnerships. The significant advantage of public-private partnerships is innovation, the design of the product, timely construction and management of cost overruns. Those are really significant. Many governments could learn from that, I guess.
The thing that remains is the need to service it. If you're going to go to the private sector and borrow money, you still have to pay for it. The revenue side of that still must be managed somehow. Could there be innovations on how technical issues are addressed? Absolutely. Can there be more timely delivery? Absolutely, but you have to pay for it. Until you deal with the revenue issue, it's but words in many First Nation communities.
The Chair: Unless you can find a project that will generate revenue.
Mr. Calla: Yes.
The Chair: But they have not been able to.
Mr. Calla: It's starting, but many of the arrangements that are being reached in benefit agreements could result in those things. I'm hoping. I believe in public-private partnerships. I've seen the innovative projects and compared them to some of the other projects not done under that framework. I think the project overruns and the time delays can be avoided. It doesn't mean there doesn't have to be oversight.
When I served on the board, we had the opportunity to examine various projects and determine whether they were appropriate for P3. Not all of them are, but certainly that is an option and, hopefully, one that can be pursued.
Senator Raine: Thank you very much. This has been a great session and I appreciate what you have been telling us.
I have a slightly different angle. Land use planning on First Nation reserves is somewhat different from other communities in that we have a mix in most communities of single family homes, multi-family units, apartments and different things. Based on where it is, and to keep infrastructure costs from getting too big, we've made the communities more compressed, whereas most Aboriginal communities are quite rural and spread out.
In the ongoing solution to First Nation housing and infrastructure, is any thought being given in terms of effective plans and introducing multi-family housing and rental co-ops, those kinds of projects, so that people can afford a smaller apartment in the beginning and then move into larger housing as they need it? I know that First Nation families are often large and multi-generational, so the housing needs are different from the nuclear-type family. I understand that, but in terms of really being economical in how you design and build the communities, how does that work?
Mr. Calla: Community planning is absolutely essential. The department used to be supported in providing the resources to communities to do them. One of our former councillors used to say we need to take the long house and put it up like this. In some communities that could work.
We need to have a community plan, not just for housing but for economic development, for all kinds of issues. We're no different. We need an official community plan like everyone else, one that's supported by membership. In fact, in some of the work we do in terms of our financial management system standards, we speak to the issue of what is the community plan. What that is, we don't get involved in. Again, I'm an accountant, not a city planner.
Senator Raine: I am interested in the people taking advantage of your pooled financing. You said Membertou First Nation was involved. They're on the East Coast. You have members in your organization all across Canada, in the South and in the North?
Mr. Calla: I'm not going to deny that when this legislation was developed it wasn't unanimously supported across the country. There were always issues around fiduciary duty and Aboriginal rights and title. Provisions were put in, and the schedule, that kind of satisfied most people. That's why you have to get scheduled so it doesn't apply to you.
I think more importantly in that time people didn't see and didn't have economic opportunity. More of them do today. That's what the fundamental change is. Once you get a taste of it and begin to understand what is required to be in it, then all of a sudden the lights go on for some of these issues.
Yes, we're very encouraged by the fact that we do have communities almost in every province now, and there is growing interest. What's really exciting to me is that a whole bunch of us were excited about this, and we're kind of through the door now, but there are a bunch of people coming behind. That is really exciting from everyone's perspective, because I think it bodes well for the future.
The Chair: Very inspiring, Mr. Calla, and I think we all agree this has been very stimulating for us.
I have one final question. We don't usually go our full time in these evening sessions, so it's a tribute to you. But I did notice that you served on the board of CMHC, and I have got to ask you this question. We heard from a CMHC representative about First Nations housing. In relation to the issue of inspection and quality, she said, ``It's our expectation that First Nations hire a qualified inspector, but we don't double-check, although we might do so in future.''
I think the rationale was that they are a First Nation and have the authority to build and regulate, and we step back because we respect that sovereignty, I guess you could call it, or we respect that independence. Do you have any comments on that? You're dealing with First Nations, either with reference to CMHC or with reference to your own work. Where do you draw the line between respecting sovereign First Nations and demanding accountability? I think that's what puzzled us when we heard that report. Do you have any thoughts on that?
Mr. Calla: I have lots of thoughts, but in relation to the question you pose, it's in everyone's interest that these homes are built to a standard. Again, some of the work that CMHC and the Market Housing Fund have done is to begin building a professional core. I think that's the solution. It is not trying to win a battle of jurisdictional issues and forced measures. This is really saying, ``How do we work together? Let's create this cooperative approach.'' Both of the organizations, CMHC and the Market Housing Fund, have been doing that.
I have been to conferences where there is now an association of First Nation and Aboriginal inspectors. We need to continue to support the evolution of that at a community level, and to work with local governments. Regional governments can be a tremendous source of capacity development and transfer of knowledge, but how often do you see First Nations and local governments sitting down, particularly in the centre of Canada? I don't know because I'm not here that often, but I know it happens in British Columbia and I know it happens in Atlantic Canada.
You have to sit down, provide that capacity and support, and maybe create some critical mass. Some First Nations people are obviously working for local governments, providing services to everybody. That's what I would see as a solution to those issues, Mr. Chair.
Senator Moore: On that point, we heard that same day — I don't know which government program it was —that they did not recognize a building inspector's job as a career and therefore would not fund the education to build up that mass, which I didn't understand. Do you know of that, Mr. Calla?
Mr. Calla: Well, let me ask you: How do you provide that kind of administrative capacity when you're building one house or two houses a year? You have to buy it somewhere. Now, if we get a whole whack of money, we can build a lot of houses and maybe we can do something. But when you're looking at a housing allocation that doesn't see many homes built in a year, there is not enough critical mass to sustain the kind of a capacity like you have in a municipality.
Senator Moore: But doesn't everything start with one?
Mr. Calla: It always starts with one, and it's starting with the development of standards and an acknowledgment by those who are helping create this association across the country. It is starting there, but, again, it's a critical mass issue.
The Chair: To refresh our memories, our capable staff has informed me that it was said by HRSDC that they had not qualified housing inspectors as suitable for training.
In closing, I speak for the committee in saying this has been a most helpful and thoughtful presentation. I really appreciate the dialogue that developed with all of our committee members after your thoughtful presentation. We had a constructive discussion. I'm sure it will lead to further exploration by our committee and solid recommendations in our report, and I have a feeling we might want to see you again.
I know you came here from Squamish on the West Coast and it's really appreciated. Thank you very much.
Mr. Calla: Thank you, Mr. Chair.
(The committee adjourned.)