The Future of First Nations Finance 2013 CANDO - Winnipeg

October 29th, 2013

FIRST NATIONS FINANCE AUTHORITY “Helping Aboriginal Communities Build Their Own Futures on Their Own Terms”

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WHAT IS FNFA’S MANDATE?

To provide First Nations with access to the same financial loan opportunities that are

available to other levels of government:

Why? First Nations continue to struggle when it comes to raising financing for community

economic and social development.

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TWO RECENT FNFA CLIENTS’ STORIES

Membertou: refinanced existing bank loans plus infrastructure. Per Chief Terry Paul:“My community is saving $140,000 per month by refinancing our bank loan with FNFA . These savings are being re-invested into needed community infrastructure.”

Tzeachten: borrowed for 4 infrastructure projects. Per Chief Glenda Campbell: “Never in my lifetime did I think Tzeachten would have access to affordable financing. What we currently pay banks to service a $1 million bank loan we can now service a $3 million FNFA loan.”

FNFA RECENT LOANS

The following loans have been made recently: Membertou = $16,000,000 @ 2.50% (Note 1)

Tzeachten = $5,800,000 @ 2.50% (Note 1) Osoyoos = $10,200,000 @ 2.50% (Note 1)

Sts’ailes, Splatsin, Tk’emlups, We Wai Kai, and Taku River

loan requests being processed Note 1: these loans will be rolled into a debenture in Fall/Winter 2013

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The FNFA: What is it?

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Created under “The Fiscal Management Act, 2005”

Not a Crown Corporation, AANDC or an Agent of Canada

Non-profit; 100% First Nations owned and governed

Board of Directors are all First Nation Chiefs/Councilors

Structured after very successful pooled borrowing models

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FNFA BOARD 2013 - 2014

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The FNFA welcomed a new board elected at the Annual General Meeting held on July 4th, 2013 in Westbank, BC

- Chief Terry Paul – Membertou (re-elected as Chair) - Councillor Jody Wilson-Raybould – We Wai Kai Nation (re-elected Deputy Chair) - Councillor Catherine Hall – Tzeachten – (re-elected Director) - Councillor Veronica McGinnis – Osoyoos – (re-elected Director) - Councillor Garry Albany – Songhees – (re-elected Director) - Councillor Patrick Courtois – Mashteuiatsh – Director - Councillor Katy Gottfriedson – Tk’emlúps te Secwépemc – Director - Chief Harvey Underwood – Tsawout - Director

Regulates and streamlines the approval of property tax

and new local revenues Builds administrative

capacity through sample laws and accredited training

Reconciles First Nation government and taxpayer

interests

Assists First Nations in strengthening their local financial management

regimes Provides independent certification to support

borrowing from FNFA and for economic development

Provides access to qualifying First Nations to work co-

operatively in raising long-term capital at preferred

rates through the issuance of debentures

Also provides investment services to First Nations

First Nations Tax Commission

(FNTC)

First Nations Financial Board

(FMB)

First Nations Finance Authority

(FNFA)

First Nations Fiscal Management Act (FMA) Enacted April 1, 2006

WHY IS CANADA IN GOOD SHAPE?

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CANADA'S LENDING FACTORS ARE CONSERVATIVE COMPARED TO THE REST OF THE WORLD

CANADA’S BANK RULES

USA’S BANK RULES

EUROPE’S BANK RULES

MONEY IN THE VAULT

“LEVERAGING” MONEY IN A BANK’S VAULT

$1 $7:1

$1

$1

UP TO $28:1

UP TO $70:1

CANADA VS. WORLD (IE. CANADA’S CAPITAL MARKETS ARE SOLID)

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0100200300400500600700800

USA EUROPE ASIA CANADA USA EUROPE ASIA CANADA USA EUROPE ASIA CANADA

MARKET CAP OF FINANCIAL INSTITUTIONS ($BILLIONS)

2007 (before crash)

Jan. 2009 (after crash)

Jan. 2013

WHY DO FIRST NATIONS WANT ACCESS?

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AANDC

Capital Markets

BILLION

0

25

50

75

100

125

150

175

200

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

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Global Capital Markets

First Nations Fiscal Mgm’t Act:

FNFA, FMB &FNTC

HOW GOVERNMENTS ACCESS THE GLOBAL CAPITAL MARKETS

FIR

ST

NAT

ION

S

MU

NIC

IPA

LITI

ES

P

RO

VIN

CE

S

Provincial Statutes

& Auditor General

Municipal Act &

Ministry of Municipal

Affairs LOANS: - Below bank prime - Long repayment

terms – you choose the term

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WHAT PROJECTS DOES FNFA LEND FOR?

FNFA Lends for Projects that are: - Economic Development - Social Development - Community owned housing - Equity involvement (power projects, pipelines, etc…) - Land purchases - Infrastructure - Vehicles and equipment

ELIGIBLE REVENUE STREAMS TO SUPPORT AN FNFA LOAN

The FNFA allows First Nations to support loans with their choice

of revenue sources:

Other Revenues: Royalties, Business revenues, Contract revenues, IPP revenues, Other Transfers from Government

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THE FNFA and BANKS COMPLIMENT EACH OTHER

Each First Nation can choose what works for them! FNFA’S purpose is to provide loans for: economic and social development purposes. FNFA cannot lend to people or private businesses.

Bank’s can lend to people and to for-profit businesses. Also for infrastructure, etc. REVENUES

BANKS

FOR PROFIT BUSINESSES

FIRST NATION

FIRST NATION

FNFA LOANS

PROPERTY TAX OTHER REVENUES

LAND

ROADS/WATER/SEWER

EQUITY PARTICIPATION

COMMUNITY BUILDINGS

HOW MUCH CAN A FIRST NATION BORROW FROM THE FNFA?

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A First Nation can request FNFA loans to as much as their revenue streams can support:

20 years 25 years 30 years Federal/Provincial Transfer 10.35 11.37 12.26 Municipal Transfers 9.79 10.76 11.60 Independent Power Projects (IPP’s)

10.18 11.19 12.06

Provincial Gaming Revenues 7.95 8.74 9.42 Land Benefit Agreement 5.66 6.21 6.70 Contracts & Leases 7.27 7.99 8.61 Band Business 7.27 7.99 8.61

The “Borrowing Factors” for each $1.00 of revenue are:

CAPITAL/EC. DEV. PLANNING

FNFA’s role in the planning process:

First Nation – outlines their desired capital and economic

development projects Prioritize these projects Determines financing needed

FNFA – outlines for each community how loans can be

structured to allow more than one capital/Ec. Dev. project to start simultaneously

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*Appoints C&C’s Rep

*Authorizes FN to enter into Borrowing Agreements and pass Borrowing Laws

*Defines the working relationship between the FN and the FNFA

*Loan Request *Identifies Project and Revenue Stream

Borrowing Agreement

Law

Borrowing Agreement

Borrowing Law

Steps in the Borrowing Process

Other Revenues

SRTA Account

FNFA LOAN BANK ACCOUNT

FIRST NATIONS BANK ACCOUNT

Assignment of Receivables Agreement authorizes revenue to flow directly into the SRTA.

Diversion of revenues provides comfort to the Capital Markets that loans will be repaid = lower rates

SECOND: Balance in SRTA paid to First Nation

OTHER REVENUES LOANS “INTERCEPT MECHANISM”

First Nation controls spending of these monies.

FIRST: FNFA paid its loan amount.

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SAFEGUARDS FOR FNFA DEBENTURE HOLDERS

The following apply to all Debenture Holders: 1. Financial Management Board (FMB): Certification Process -- FMB’s vetting process is a pre-requisite to any FNFA loans 2. Revenue Leverage Factors Set by Capital Markets: -- Each revenue stream has a loan leverage factor that cannot be

exceeded 3. FNFA’s reserve funds: -- Debt Reserve Fund (DRF) = 5% of loan requests withheld

-- One DRF for Property Tax; one DRF for Other Revenues

-- Credit Enhancement Fund (CEF) = $10 Million supports both DRF’s 4. Borrowing Members approve other Borrowing Member’s loan

requests. 5. Trust Account System ensures loan repayments.

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TO CALCULATE YOUR COMMUNITY’S BORROWING POWER

Use FNFA’s website: www.fnfa.ca

Once in the website choose “Calculators” tab at

the top of the page Once “Calculators” has been chosen use: “Property Tax Calculator”

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CONTACT INFORMATION

First Nations Finance Authority PH: 250-768-5253

Frank Busch Director of Information and Marketing

fbusch@fnfa.ca Visit our website:

www.fnfa.ca = @thefnfa

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