Backgrounder
First Nations Fiscal And Statistical Institutions Initiative

Overview

To provide needed tools for economic development and improving the quality of life on reserve, First Nations are leading an initiative to establish, through legislation, four institutions which will be operated by and for First Nations. The proposed institutions include a finance authority, a tax commission, a financial management board and a statistical institute. The tax commission and finance authority will build upon the established reputations and expertise of the existing Indian Taxation Advisory Board and First Nations Finance Authority.

These institutions will provide First Nations with the access to capital markets available to other governments. They will further strengthen the First Nations real property tax system and provide greater representation for taxpayers. They will develop appropriate financial standards and increase financial management capacity. Finally, they will serve to fill the current gap in First Nations statistics.

First Nations Finance Authority (FNFA):

Community infrastructure is fundamental to the quality of community life and economic growth. However, First Nations seeking to borrow funds for such infrastructure currently face prohibitive transaction costs, processing times and interest rates. A dollar of First Nations tax revenue buys 30 to 50 percent less in capital works than that of other governments due to weaknesses in the legislative and institutional framework.

With the leadership of Westbank First Nation, a First Nations Finance Authority was created in 1995 to provide member First Nations with investment opportunities. Since that time it has worked hard, with an expanding circle of First Nations to find the means by which First Nations might use debentures, like other governments, for access to longer-term, more affordable financing. This circle has benefited from its partnership with an expert in the field, the Municipal Finance Authority of B.C. (MFA-BC), with 30 years' experience and a "AAA" rating.

The FNFA would allow First Nations, like local governments, to raise long-term private capital at preferred rates for roads, water, sewer, etc. They would do so by securitising a portion of their potential real property tax revenues or similar stable long-term revenues. It is estimated that $125 million in debt financing would be raised over the first five year by securitising (pledging) real property tax revenues.

First Nations Tax Commission (FNTC):

In 1988 the Indian Act was amended to allow interested First Nations to enter the field of real property taxation. Since 1989, the Indian Taxation Advisory Board (ITAB) has successfully nurtured and sustained the First Nation real property tax system.

In its first 10 years, ITAB exceeded expectations with 83 First Nations establishing real property tax bylaws and generating $168 million in revenues. It is building awareness of the real property tax system and providing the tools for its implementation. The First Nation real property tax system is being built within the context of provincial regimes and in partnership with the University of Victoria, for purposes of training tax administrators, and with Harvard-MIT for purposes of strengthening dispute resolution.

It is now proposed that ITAB evolves to become the FNTC. The FNTC would provide the additional services required for the securitisation of real property tax revenues, streamline the law approval process under the proposed First Nations Fiscal and Statistical Management Act, serve as an authoritative body to help balance community and ratepayer interests in rate setting, and have enhanced capacity for timely and professional dispute resolution. The FNTC would benefit from commissioners representing major ratepayers (residential, commercial and utilities) and a continued dialogue with recognized experts in the realm of real property taxation.

First Nations Financial Management Board (FMB):

This is a new institution. Its initial task would be to provide the independent and professional management assessment services required by those First Nations seeking entry into the FNFA borrowing pool.

The FMB will have two primary functions. First, the FMB will certify financial management systems, practices and standards, will monitor financial performance, and will provide intervention in exceptional circumstances for First Nations who have chosen to enter into property taxation and are looking to borrow against their property tax revenues. Second, for all other First Nations, the FMB will provide, on request, services relating to research and advocacy, policy development, capacity development and partnerships relating to financial management, and reporting and standards development.

First Nations Statistics (FNS):

First Nations statistical systems were designed in the 70s and 80s largely to support the needs of funding agencies. Today, individual First Nations lack the capacity to maintain the statistical systems needed to match their growing local decision-making responsibilities and accountability. The capacity for such decision making impacts on the day-to-day delivery of essential community services as well as the planning of major development efforts.

There are also significant gaps in the national databases with respect to First Nations information. For example, First Nations are not included within the Statistics Canada System of National Accounts which publishes key information on federal, provincial, territorial and local government revenue, expenditures and debt. Filling such gaps is critical to developing a new fiscal relationship with First Nations.

In response, the proposed FNS would assist all First Nations in meeting their local data needs while advising Statistics Canada on how First Nations may be better represented in the national statistical system.

Other Considerations:

The four institutions are designed to help develop a new fiscal relationship between Canada and First Nations, while helping meet the immediate practical needs of individual communities. Activities will include expanding revenue generating opportunities to support strong First Nation communities. First Nation participation in the initiative will be optional. Certain services, such as participation in the First Nations financing regime, will require that participating First Nations meet the standards set out in the legislation. First Nation participation is expected to grow progressively as First Nations who initially opt-in demonstrate to others the tangible benefits to their communities and help reduce the uncertainty that may make others reluctant to participate.

Parliamentary History:

The proposed First Nations Fiscal and Statistical Management Act was introduced as Bill C-19 in Parliament on December 2, 2002. When the 2nd Session of the 37th Parliament prorogued November 12, 2003, Bill C-19 was being debated in the House of Commons at Report Stage.

On that date, Prime Minister Jean Chretien called an end to Parliament and later announced his last day as Prime Minister will be December 12, 2003. This left the fate of the Bill C-19 - and all other legislation before Parliament - up to the new Prime Minister, Paul Martin, and his government.

On January 21, 2004, the new Minister of Indian Affairs and Northern Development, Andy Mitchell, announced his collaborative legislative strategy which included his intent to seek reinstatement of the First Nations Fiscal and Statistical Management Act.

The Minister reinstated the legislation on March 10, 2004 and the legislation became known as Bill C-23. The legislation was reinstated with amendments proposed by the Minister intended to improve its optionality. On May 4, 2004, there was a vote on Report Stage to accept the motions to amend and move to Third Reading.

Third Reading was scheduled for the next sitting of the House, which was the next day.

Debate on C-23 did occur the next day and continued on May 10, 2004. It went on until the close of business that day with no conclusion.

With the May 23^rd federal election call, debate on Bill C-23 officially ended.

The legislation is expected to be introduced in Parliament before Christmas.