FMB/CGF

Ten Times Harder

The role of the FSMA in levelling the private sector

playing field.

Outline

• Why First Nations need the FSMA.

• How it works.

First Nations Need the Private Sector

• Private investment is 5 times greater than public.

• First Nations receive a relatively tiny share of private investment.

• Public resources cannot replace “missing” private investment.

• First Nations must receive their share of private investment to meet their aspirations.

First Nations Need Private Investment

Source: Statistics Canada

Why the FSMA

• It is 10 times harder for a First Nation to attract private investment.

• The FSMA will help change this.

The FSMA Is

• A First Nation led piece of enabling federal legislation that creates four First Nation institutions that will:• Provide First Nation access to debenture

markets and

• Improve the First Nation investment climate

Basic Messages

The FSMA….• is not a subsidy

• is not a special right

• creates a net fiscal benefit

• creates job opportunities on reserves

• improves infrastructure on reserves.

• allows the market to work better on First Nation lands.

FMB/CGF

How Economies Grow

In a typical Canadian community

$1000 in annual property tax

finances $6000 in infrastructure

every $1 of infrastructure generates $5 of private

investment

$30,000 private investment Which

means

Jobs, More Revenues and Better Services

Typically, communities can finance $6 in infrastructure for every $1 in annual tax revenue.

A typical Canadian community attracts $5 in private investment for every $1 of new infrastructure.

Private investment creates the capacity to provide jobs, improve services, and raise incomes.

If this capacity is used properly, the community prospers

A typical Canadian community collects property tax and other local revenues.

The federal and provincial governments may make other revenues available.

FMB/CGF

How Economies Aren’t Growing

In a typical First Nation community

$1000 in annual property tax

finances only $2000 in infrastructure

every $1 of infrastructure generates $1.50 in private

investment

$3000 in private investment Which

means

10 times fewer jobs

and revenues

A First Nation community can collect property tax.

A typical First Nation community can finance only $2 in infrastructure for every dollar in tax revenue.

Some First Nations can’t get a loan Delays in processing loans Shorter borrowing terms Higher interest rates Higher collateral requirements

First Nation infrastructure improvements attract on average only 1.5 times their value in additional investment.

Unclear property rights Cumbersome regulatory processes Fiscal uncertainty Lack of investor awareness and confidence Lack of administrative expertise and

quality statistics Less efficient infrastructure

First Nations are receiving only one tenth the investment they might otherwise generate.

Many First Nations have still not parlayed private investment into improved communities and job opportunities.

FMB/CGF

What the FSMA Does

Using infrastructure to develop business

10 times fewer jobs

and revenues

$1000 in annual property tax

finances only $2000 in infrastructure

every $1 of infrastructure generates $1.50 in private

investment

$3000 in private investment Which

means

Some First Nations can’t get a loan Delays in processing loans Shorter borrowing terms Higher interest rates Higher collateral requirements

Unclear property rights Cumbersome regulatory processes Fiscal uncertainty Lack of investor awareness and confidence Lack of administrative expertise and

quality statistics Less efficient infrastructure

We are not fixing all the problems with this initiative

More work is necessary

More confidence in local account More fiscal certainty Improvement in administration Quality information Simplification of regulatory environment More efficient infrastructure investment

FSMA Brings No collateral requirements Lower interest rates Longer term of loans Faster processing

3 times fewer jobs

and revenues

2 times fewer jobs

and revenues

FSMA – Creating Four First Nations Institutions

• First Nations Tax Commission (FNTC)

• First Nations Financial Management Board (FMB)

• First Nations Finance Authority (FNFA)

• First Nations Statistical Institute (FNSI)

FSMA – Improving the Investment Climate

• Greater confidence in local government account• Financial statements (FMB)

• Fair Treatment (FNTC)

• Quality information (FNSI, FNTC, FNFA, FMB)

• Recourse (FNTC, FMB)

• Fiscal prudence (FNTC)

FSMA – Inspiring Confidence

• Greater confidence in local government account• Financial statements (FMB)

• Fair Treatment (FNTC)

• Recourse (FNTC, FMB)

• Fiscal prudence (FNTC)

FSMA – Improving the Physical Infrastructure

• Improving access to capital will significantly lower financial thresholds for First Nation capital projects.

• Improving First Nation statistics will enable First Nations to better match infrastructure requirements with their economic and community development plans.

FSMA – Improving the Information Infrastructure

• Public and private investment is only as good as the information it is based on.

• The FSMA will allow better information regarding:• First Nation finances in general.• Local revenues and expenditures.• Debt and Debt servicing obligiations• State of infrastructure.• Social, demographic and economic data pertinent

to performance measures and investment facilitation.

Unfinished Business . . .

• The FMSA does not solve all problems with the investment climate. Examples: • New revenue sources are required.• Coordination with land management is required.• Marketing of First Nation opportunities is required.• Regulatory vacuums create uncertainty.• Most First Nations need improved investment facilitation.• More decision making is required at the local level.• More certainty is required over the regulatory and fiscal

environments.• Human resource capacity must be supported• First Nations with an interest in investment need a political

vehicle.

The Returns to the FSMA

• Pre-FSMA: $5 million in annual property tax = 150 job opportunities

• Post-FSMA: $5 million in annual property tax = 1800 jobs opportunities

• In five years the FSMA will deliver $79 million in new infrastructure and $218 million in new investment.

The Cost of Delaying the FSMA

• Every day this legislation is not passed costs First Nations $98 000

• Every minute this legislation is not passed costs First Nations $68

FMB/CGF

Thank you

To learn more visit www.FNFI.ca