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First Nations Fiscal Act a glimmer of hope dimmed by inefficiency
Vancouver Sun
Monday, April 04, 2005
http://www.canada.com/vancouver/vancouversun/news/editorial/story.html?id=8696cf5c-c2c2-4264-9b7c-b3b4d4b06d4d
When the City of Vancouver needs money for a major infrastructure project, it
can tap capital markets by issuing bonds that are sold to investors.
Moody's Investors Service, Standard & Poor's and other rating agencies assess
the investment quality of these debt securities based on the issuer's financial
management and economic prospects.
Finally, after more than 15 years of often rancorous discussion and debate,
first nations communities can do the same thing.
The First Nations Fiscal and Statistical Management Act, which received royal
assent last week, gives aboriginal groups the authority to pool property taxes
they collect to use as collateral for bond issues, virtually assuring that they
will obtain an investment grade rating on par with Vancouver or Montreal.
Property taxes are considered by securities analysts as one of the most stable
sources of income.
This long-overdue legislation is a big step in the right direction, but it's
not without flaws.
Perversely, the majority of bands across the country have opposed it on the
fatuous basis that -- as one chief put it -- Canada "is cunningly divesting
itself" of its constitutional and treaty obligations to finance native groups.
To the contrary, that it is unlikely to do any such thing is one of the
problems with the legislation.
Ottawa will continue to pour taxpayers' dollars into aboriginal groups -- to
the tune of $8.8 billion this year alone.
The revenue generated from property tax will not be deducted from federal
transfers to first nations. The new legislation is an expansion, not a
derogation, of the Indian Act.
The Canadian Taxpayers Federation said it created a "have your cake and eat it
too" environment. As long as the Indian Act stands as the law that defines the
relationship between Canada and its aboriginal population, native Canadians
will neither enjoy all of the rights nor assume the obligations of citizenship.
Fewer than 100 of Canada's 614 aboriginal groups actually levy property tax,
which is largely paid by non-aboriginal leaseholders on the reserves, so not
all bands will be able to access capital markets to the same degree.
Some native groups will also have to overcome an indelible image of corruption
and financial mismanagement to sell bonds to institutional investors at
favourable rates.
To that end, the federal government is stepping in to backstop an insurance
fund designed to protect the new borrowing agency against default.
Finally, the cumbersome bureaucracy established by the new legislation is a
recipe for inefficiency. Four separate agencies will be set up -- a finance
authority to issue bonds, a tax commission to manage band bylaws relating to
property tax, a management board to set financial standards and a statistics
agency to meet local data requirements and encourage participation in
Statistics Canada's national systems. None appears accountable to anyone.
There is no practical need for this structure, which is expected to cost up to
$30 million a year to administer.
Ottawa could have simply delegated to the provinces the authority to include
native bands under existing regional financing bodies such as the Municipal
Finance Authority of British Columbia, which acts as the central borrowing
agency for all municipalities in B.C., with the exception of Vancouver, and on
which the new legislation was modelled.
Political sensitivity appears to be the only reason aboriginal communities
couldn't become part of such a system, which in B.C.'s case boasts a successful
35-year track record.
But native leaders are wedded to the notion that their relations with Canada
are nation-to-nation and refuse to be lumped in with municipalities.
Despite all of these deficiencies, the new legislation offers a glimmer of hope
that aboriginal communities will be able to dramatically reduce borrowing
costs, while providing the same level of infrastructure enjoyed by mainstream
municipalities.
[Non-text portions of this message have been removed]
Native News North
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