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First Nations urge Canada to Choose Partnership over Paternalism in Federal Budget by Enacting Collaborative Funding Model to Close the Infrastructure Gap

OTTAWA, ON, March 22, 2023 /CNW/ – First Nations Finance Authority (FNFA) is urging Canada to embrace a new and innovative method of funding Indigenous infrastructure based on partnership rather than paternalism to keep its promise to bridge the infrastructure gap between First Nations and the rest of Canada by 2030.

“The federal model for funding infrastructure has failed to deliver the housing, clean water and other critical infrastructure that will improve the living conditions in First Nations communities,” said FNFA President and CEO Ernie Daniels. “We believe there is a better way, a way that works with First Nations as partners rather than the colonial approach that’s rooted in the almost 150-year-old Indian Act.”

FNFA and its Indigenous partners are urging the federal government to start by annually setting aside $200 million in the upcoming budget. FNFA will issue a debenture to build priority infrastructure and funds provided by Canada will service the debenture payments. This annual amount can increase each year as the program increases in size. The innovative new program is called Monetization – build now at today’s costs and repay over a preferred loan term. Monetization is the same way that provinces and municipalities pay for infrastructure.

FNFA is a federally legislated, non-profit financial institution with 151 borrowing First Nations members in all provinces and the Northwest Territories. It has provided $1.8 billion in loans to fund critical infrastructure and economic development projects in First Nation communities and has earned a rating among international bond rating agencies equal to that of Ontario and Alberta. All of the $1.8 billion in loans is supported by the First Nations own-source revenues. These revenues are not sufficient to materially close the infrastructure gap further. A partnership with Canada and the FNFA is needed.          

In fact, a new report from the Assembly of First Nations and Indigenous Services Canada pegs the infrastructure gap at a staggering $349.2 billion.

Monetization would be an alternative to the current government “annual cash” model and would leverage the capital markets through a FNFA debenture to provide long-term loans to qualifying First Nations to finance critical infrastructure. Monetization would focus on such community priorities such as housing, clean water, replacement of diesel generators with clean energy, schools, health centres, administration centres, and other community priorities.

Using housing as an example, $200 million in annual federal funding could finance a $3.6 billion FNFA debenture monetized over a 20-year term, which would build about 12,000 houses at today’s construction costs with work beginning immediately. Far fewer homes could be built under the current pay-as-you-go model with inflation impacting costs in the years ahead.

“Monetization would be a new tool that could put shovels in the ground now to address the critical shortage of decent infrastructure in our communities,” said FNFA Chair Warren Tabobondung, who is also Chief of Wasauksing First Nation in Ontario.

Last April, the Standing Committee on Indigenous and Northern Affairs recommended that the federal government work with Indigenous institutions to test monetization to transition remote Indigenous communities off dirty diesel fuel into cleaner energy.

“Monetization is not a silver bullet that will close the huge and growing infrastructure gap overnight,” said FNFA Vice-Chair of the Board of Directors, Derek Epp, who is also Chief of Tzeachten First Nation in British Columbia. “However, it could be a real game changer for those qualified First Nations that choose to follow this path in our journey toward economic reconciliation.”

For more information about Monetization, please visit: www.fnfa.ca/monetization/ 

About the First Nations Finance Authority (FNFA)
FNFA is a not-for-profit First Nation institution that plays a crucial role in the social and economic development of First Nations across Canada by providing qualifying members with access to the capital markets at competitive rates. Established by the federal First Nations Fiscal Management Act in 2005, FNFA is by First Nations, for First Nations. FNFA will continue to expand and diversify, looking to strengthen its credit rating and increase the financial benefits to its growing membership.

SOURCE First Nations Finance Authority

Naomi Mison, Communications Manager, Telephone: 250-768-5253, Email: nmison@fnfa.ca

Move First Nations away from managing poverty to sharing in Canada’s prosperity

Author of the article:

Ernie Daniels, Special to Financial Post

Published Mar 21, 2023  •  Last updated Mar 22, 2023  •  4 minute read

If the past has taught us anything, it’s that Ottawa doesn’t always know what’s best when it comes to policies that impact Indigenous Peoples.

Whether it’s residential schools, First Nations Child and Family Services, health, housing or economic development, paternalism doesn’t work. Initiatives that involve partnerships with Indigenous peoples on a Nation-to-Nation basis have the greatest chance of success.

As the Government of Canada prepares to announce the 2023 budget, First Nation peoples are hopeful that there will be new funds allocated to build the infrastructure that’s required to improve living conditions in their communities.

But will it be enough to eliminate the boil water advisories and build the housing, education centres, roads, health facilities and other infrastructure to lift Indigenous Peoples out of poverty?

The answer is almost certainly no, because the reality is that the infrastructure gap between First Nations and the rest of Canada continues to expand with each passing year despite Canada’s good intentions.

The Trudeau government has pledged to close the gap by 2030 as outlined in the prime minister’s December, 2021 mandate letter to Indigenous Services Minister Patty Hajdu. However, a new report prepared jointly by the Assembly of First Nations and Indigenous Services Canada and referenced at a recent AFN panel discussion puts the infrastructure gap at a staggering $349.2 billion.

The disparity, according to the report, is due to “decades of underfunding, failed fiduciary duties, and unfair distribution of Canada’s wealth as a country.”

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A monetization program would change how Indigenous infrastructure is funded, ending reliance on dirty diesel fuel and advancing reconciliation.

by Ernie Daniels

A recent report by Canada’s Commissioner of the Environment and Sustainable Development Jerry DeMarco declaring that the federal government has been “the worst performer of all G7 Nations” since 2015 for reducing greenhouse gas emissions offers additional evidence that we cannot “kick the can” down the road on climate change any longer.

In his statement on the speech from the throne, Prime Minister Justin Trudeau vowed to “go further and move faster on climate action,” while also moving to “close the gaps that far too many First Nations, Inuit, and Métis communities still face today and build a better and more equitable future.”

Our First Nations-governed non-profit financial institution, the First Nations Finance Authority (FNFA), believes that there is a way to make progress on climate change and reconciliation now at an annual cost that’s less than many Canadians might think.

One of the many goals that the federal government has set in its climate plan is to end the reliance on diesel fuel in remote communities by the year 2030. While some progress has been made, there are still almost 300 First Nations, Inuit, Métis and remote northern communities that rely on diesel to power their homes, schools, public buildings and workplaces.

Diesel is a dirty fuel that has potentially serious health effects on those exposed to its exhaust.

Research by the Pembina Institute shows the extensive downside of diesel. Transporting it can lead to spills that cause environmental degradation. Running diesel generators is also exceedingly expensive and unreliable and often leaves people shivering in the dark because of blackouts. It increases “fuel poverty,” which occurs when households are spending more than 10 per cent of their household budgets to heat their homes and keep the lights on.

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Although some progress has been made to reduce reliance, the Pembina Institute estimates remote communities burn almost 700 million litres of diesel and other fossil fuels per year to produce electricity and heat.

The up-front costs of installing diesel generators may be lower than alternatives but the ongoing costs are far more expensive and, in First Nations communities, paid by the federal government through Indigenous Services Canada. This includes operating and maintaining the generators as well as the cost of transportation and fuel.

While there seems to be agreement among scientists, Indigenous communities as well as the Trudeau government that Canada needs to end its dependency on diesel, the problem is, of course, money. Where do we find the funds to connect these communities to the cleaner, more reliable power that most Canadians take for granted, whether it’s connecting to an existing power grid or an innovative technology that involves wind, solar, tidal, biomass or small-scale electric?

The FNFA is proposing a rethink of how Indigenous infrastructure is funded, and we believe there is a way to begin replacing diesel now rather than in some distant timeline down the road.

Our proposal, called “monetization,” offers an alternative to the federal government’s “pay as you go” funding model for First Nations, which is pretty much as old as the Indian Act itself.

Monetization works like a mortgage. Most people do not save up the full cost of a home before they buy it. They put down a down payment and assume a mortgage to pay their house off over time. The same concept would apply to monetizing the funds required to finance the cost of converting communities from diesel to other forms of energy.

For example, $58 million per year in federal funding leveraged over 10 years could unlock $500 million in funds to begin our efforts to end diesel dependency for between 15 and 25 First Nations communities.

The FNFA would monetize the annual $58 million in federal funding by issuing debentures on international capital markets to raise the $500 million at today’s low interest rates, while the federal government would cover annual principal and interest charges.

These annual payments by Canada monetized through our non-profit institution would be offset to a significant degree by savings on the annual costs of burning diesel. Only those First Nations that currently rely on diesel and have a viable and costed alternative generation model would receive the funding.

It’s good for the environment, but it also makes sound economic sense to start building the infrastructure now at today’s costs, at today’s lower interest rates, rather than waiting another decade or so to wean communities off diesel when inflation would only drive the capital costs higher. Contracts can include requirements to ensure the infrastructure is adequately maintained throughout the life of the contracts.

There is also another major economic upside to monetization ─ getting the work started now on diesel alternatives could create jobs and other spinoffs in communities that have been hard hit by the ongoing COVID-19 epidemic. As the Pembina Institute puts it: “Achieving the clean energy transition requires wide collaboration; Indigenous community leaders can leverage economic opportunities on the path to energy security.”

Our Indigenous-led-and-governed institution is well positioned to take on a pilot project for those First Nations that want to take this step to end diesel dependency once and for all.

The FNFA has provided $2 billion in low-interest loans to First Nations since its creation by an act of Parliament in 2005. We have never had a default and we recently received a two-notch upgrade to Aa3-Stable from Moody’s Investor Service.

There is a massive $30-billion infrastructure gap between First Nations and other Canadians, which means we need to build homes, schools, community centres and economic development projects that will improve quality of life. Provinces and municipalities often issue debentures to finance critical infrastructure over time. Now is the time to offer the same type of financing to First Nations communities.

We believe that our monetization program has the potential to be a game changer that could contribute toward reconciliation while also bringing immediate help in the fight against climate change.