An analysis of the First Nations Finance Authority as a viable off-ramp to the inadequate First Nations property rights framework under the Indian Act

This capstone provides an overview of the inadequate property rights framework that First Nation communities are subject to under the Indian Act, describes some of the major off-ramps to the Indian Act, and analyses the effectiveness of the First Nations Finance Authority (FNFA). First Nations of Canada have lower quality of life indicators compared to the average Canadian. This is in part due to an inadequate framework of property rights under the Indian Act, which prohibits fee-simple ownership. The inability to leverage reserve land and assets as collateral has resulted in First Nations people being subject to high interest rates due to uncertainty. This pushes them further into the cycle of poverty and substandard living conditions. In the past, governing First Nation reserve lands under the Indian Act has been lengthy, cumbersome, and difficult mainly because the Department of Indian and Northern Affairs (INAC) has decision-making power over First Nations. Independence on INAC and the Indian Act can only be achieved through sustainable economic growth from private investment in and independent revenue from capital, research, new technology, human capital, etc. As a result, several off-ramps have been recommended and implemented, which offer more autonomy and control to First Nations people. These mainly include: 1) Property taxation under the Fiscal Management Act allows First Nations to address issues regarding economic development, services, and fiscal integration; seek professional advice; access affordable long-term financing; attract investment on their land; and work towards building partnerships with other governments. 2) Land management under the Land Management Act allows First Nations to opt out of 1/3 of [viii] the Indian Act’s provisions and create their own land codes to legally manage their land, enter contracts, borrow money, and expend and invest money. 3) Self-government under Section 35 of Canada’s Constitution Act allows First Nations to have decision-making authority and jurisdiction upon some or all of their affairs, upon signing a treaty or agreement with the provincial and federal governments. Despite several advantages, these off-ramps do not help First Nation communities to borrow money for community, land, or infrastructure development. This is resolved by the FNFA, a relatively new and less-studied off-ramp, a not-for-profit Aboriginal led financial lender. FNFA provides continuous access to low interest and long-term (up to 30 years) loans to First Nation communities collectively, without collateral. FNFA calculates every community’s unique borrowing capacity based on their revenue-generating activities. A “revenue intercept mechanism” allows FNFA to directly collect its repayment from the community’s revenue-pool, with certainty. To date, there has been no default on an FNFA loan. FNFA loans are tailored to meet the unique needs of each First Nation; are legally bound and enforceable under the Fiscal Management Act and Financing Secured by Other Revenues Regulations; create high investor certainty; promote accountability and transparency; establish a system of regulatory oversight in case of non-compliance; are relatively quicker to implement; have all-party support; and most importantly allow First Nations to hold decision-making power. To date, FNFA has 91 member First Nations across 8 provinces and 1 territory and has loaned over $634 million dollars which have generated an economic output of over $1.4 billion and 6,786 jobs. Despite several successes, FNFA faces geographical, linguistic, political, bureaucratic, legislative, and conceptual challenges and limitations. However, continuous efforts [ix] are being made to address these, which makes it a viable off-ramp to the Indian Act. The off-ramps discussed throughout this capstone project have created several opportunities for First Nations in Canada. However, they are more favorable to already well-organized First Nations. Property tax only works if there is something worth taxing; land management is only useful when the land is valuable, self-government is a very lengthy process, and even borrowing from the FNFA can only significantly help those communities who have a sufficient revenue stream to pay it back. Therefore, a majority of First Nation communities are continuing to struggle. However, efforts made by the First Nations, federal and provincial governments are steps in the right direction and must be recognized and appreciated.

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