Ending the Crown’s practice of collecting and holding money on behalf of Indigenous people is a good start to freeing up desperately needed funds for housing.
One of the most anachronistic and paternalistic aspects of the Indian Act could finally come to an end in large part when amendments are made to the First Nations Land Management Act and the First Nations Fiscal Management Act. Changes are being proposed for nine articles that deal with the Management of “Indian Moneys”, which the Indian Act describes as “all moneys collected, received or held by Her Majesty for the use and benefit of Indians or Bands.”
These are changes that the National Indigenous Economic Development Board, the Senate Standing Committee on Aboriginal Peoples and the First Nations Finance Authority have been advocating for for some time, and calls for change have been expressed in previous audits and evaluations.
The changes can be found deep within the 884-page Budget Implementation Act, 2018 (Bill C-86), on pages 325 and 336.
The Crown still collects, receives and holds a considerable amount of money on behalf of “Indians” because legal title to reserve lands still rests with the Crown, and federal bureaucrats continue to sign leases, permits and licenses on behalf of First Nations (or “Indians”).
Yes, this is 2018.
As of August 2016, more than $676 million of so-called Indian Moneys was being held in the Consolidated Revenue Fund and, based on data from 2006 to 2016, approximately $200 million of Indian Moneys is being deposited into this fund annually.
To gain access to this – their own – money, First Nations are required to follow strict, time-consuming procedures. The provisions of the Indian Act that permit First Nations’ access to these revenues evoke the most odious characteristics of a colonial relationship, including, perhaps most offensively, “any other purpose that in the opinion of the Minister is for the benefit of the band.”
The money largely sits idle, effectively punishing First Nations. The interest paid by the government of Canada on Indian moneys in the fund is well below what it costs First Nations to access financing from conventional sources.
This interest-rate differential costs First Nations more than $45 million annually in higher interest costs by some estimates. Over a generation, these entirely unnecessary higher interest costs could amount to $2.1 billion wasted.
That is just the cost of idle capital. There are also foregone opportunities.
The proposed changes to the two acts would allow First Nations to put that money to work.
For example, using the First Nations Finance Authority’s pooled borrowing mechanism created under the First Nations Fiscal Management Act, the revenue stream from Indian Moneys could be leveraged into $1.3 billion of capital.
This capital, in hand today, could be deployed for much-needed housing, infrastructure, schools and other public works. Since 2014, the First Nations Finance Authority – the FNFA – has raised more than $550 million from the institutional capital markets on the strength of 53 First Nations’ own-source revenues (other than those defined as Indian Moneys). It is a proven model.
Giving First Nations access to their own revenues isn’t only right. It is smart. And the government should be applauded for taking this step.
But why stop at Indian moneys? Why not consider other financing innovations? The proven FNFA model presents additional financing opportunities that are improvements on existing funding models.
Canada cannot hope to address the serious shortages of on-reserve housing and infrastructure by maintaining the existing “pay-as-you-go” practice of funding housing and infrastructure.
Jane Philpott, minister of indigenous services, has conceded that: “We cannot do this alone. The gap is too big, and we certainly can’t address this gap by doing business as usual.”
An unacceptable number of Indigenous families – 118,500 of them – live in homes that stretch them financially, require significant repairs or are too small. That is one estimate that comes from a recent report from the Indigenous caucus of the Canadian Housing and Renewal Association, which describes the households as living in what’s called “core housing need.”
The Assembly of First Nations has predicted a need for 130,000 housing units by 2031, with 44 percent of existing units requiring major repairs and 18 percent needing to be replaced.
Yet, even with new investments in First Nation housing and infrastructure in recent budgets, that housing need is barely being met.
Indigenous Services Canada’s estimates show that spending from the budget in 2016 had, as of the end of March 2018, paid for the construction or renovation of just 8,786 homes, with work underway on 5,178 units.
The First Nations Fiscal Management Act provides a structure through which First Nations could use long-term federal transfers to secure long-term, fixed-rate financing for housing and infrastructure through the First Nations Finance Authority.
This innovation has a number of advantages over the existing “pay-as-you go” model of federal funding:
First, more can be built today to meet today’s deeply pressing needs. For example, assuming a cost of $350,000 per house, monetizing $100 million over 10 years could build up to 2,600 homes today. Spending $100 million this year under the “pay-as-you-go” model would build 285 homes today.
Second, housing and infrastructure can be financed in today’s dollars, which is important because the cost of infrastructure has increased 30 percent over the last 10 years by some estimates.
Third, financing can be spread over, and support, all phases of the asset’s life-cyclewhich is currently not the case. Often, after construction is completed, First Nations are left to struggle with the maintenance and upkeep of significant infrastructure without any funding stream.
And, finally, First Nation capacity, institutions and accountability would be strengthened through certification by the First Nations Financial Management Board and the requirements of the First Nations Finance Authority’s borrowing structure and of the rating agencies and capital markets.
This innovation would also align with the government’s direction on long-term, 10-year financial arrangements for First Nations that meet minimum financial performance criteria.
Monetizing federal transfers could help significantly in addressing the considerable shortfall in housing and infrastructure for First Nations. It is not the panacea – as not all First Nations would immediately meet the stricter standards that the model would require – but the solution for First Nations housing is not “one-size-fits all.” The different conditions, needs, challenges and opportunities of First Nations require studied approaches.
The government of Prime Minister Justin Trudeau has evoked the promise of a renewed relationship with Indigenous peoples based on recognition of rights, respect, co-operation and partnerships. Building on the strength and experience of First Nations institutions – including the First Nations Finance Authority, the First Nations Financial Management Board and the First Nations Tax Commission – will go a long way to achieving that partnership and deliver real results for First Nations communities.
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