Speaking points – resource gap

1. Speaking points – resource gap Ontario First Nations Technical Services Corporation Water Symposium March 2010 Sébastien Labelle Director, Policy, Programs and Procedures, Community Infrastructure Branch, INAC

2. What we do now: • Most capital investment in infrastructure for major projects in First Nations’ Communities on reserve is financed through INAC’s Capital Facilities and Maintenance Program (CFMP) ($1.1 billion per year). • Infrastructure funding is on a cash basis – annual CFMP funding to First Nations communities based on First Nations Infrastructure Investment Plans. • Cash for major capital projects is allocated by regions based on the National Priority Ranking Framework.

3. First Nations communities don’t have the infrastructure they need… • First Nations have identified significant gaps in infrastructure on reserves. • Federal funding is significantly lower than the demand from First Nations. • Current approach of cash-financing of infrastructure places even greater financial pressures on governments.

4. … we want to work together to find a way forward • More funding alone is unlikely to provide all of the answers; even if it were available. We need to work together to develop ways of making better use of funding. • Need to find creative new financing tools to enable First Nations communities to develop infrastructure more quickly, to meet community needs. • Also need to build sustainable water infrastructure that costs less to build, and less to maintain over its life cycle.

5. Budget 2010 • $330.8 million over 2 years for the First Nations Water and Wastewater Action Plan. • Has been stable level of funding since 2006. • Builds on investments of $179 million from Canada’s Economic Action Plan (2009-2011). • The Government will undertake a comprehensive review of its current approach to financing First Nations infrastructure. To be undertaken in partnership with First Nations representatives • The review will focus on ways to more effectively support access by First Nations to alternative sources of financing, and approaches to improve the life-cycle management of capital assets.

6. What isn’t working • Unsustainable – As more assets are built, O&M needs increase, leaving less for new assets. Costs of high priority capital investment needs outstrip budget every year. • Unresponsive to need and capacity – One-size-fits all financing for the diversity of First Nations communities. • Unpredictable – fluctuating annual funding levels to First Nation communities decreases ability to plan long-term. • Slow – Projects that are needed and “shovel ready” can still take start depending on available funding.

7. Financing tools used by other governments:Municipal practices • 52% of municipal revenues are from taxes, 31% from user fees and permits and 17% from grants. • Provincial grants decreasing, and increasing use of property taxes and user fees • Full cost recovery models – user fees for the full cost, including costs to eventually replace assets (re-capitalization) • Long-term capital savings funds used to save for large infrastructure projects over time. • Leveraging of private financing for major projects, including issuing bonds.

8. Financing tools used by other governments:“The New Deal for NWT”: • Since 2006 all communities (including First Nations) receive funding for O&M and construction/renovation of water and public facilities on a formula basis. • Each community is provided with 2% of the capital budget plus a share of the remaining envelope based on: • population; • a relative cost indicator, and; • the value of existing infrastructure. • Using formula funds, communities are responsible for funding all capital infrastructure investment including new construction, renovation and operations and maintenance.

9. Possible financing tools • First Nations Finance Authority • Private lending, paid through user fees (like municipalities) and own-source revenue, or potentially partially from INAC formula funding. • Loan guarantees for non-housing infrastructure. • Private loans for First Nations to advance access to funds for major capital, First Nation pays interests and INAC guarantees to pay principal when investment planned in INAC capital plans (eg. Quebec regional practice). • Public-Private Partnerships (P3s) as used by provinces and federal government for capital investment, could be facilitated by First Nations or INAC.

10. Moving Forward… • Any solutions will have to take into account the unique situation of First Nations Communities: • Rural and remote communities, small populations • Difficulty accessing private financing • Treaty issues • Community capacity and finances • Varied approaches to planning and oversight