Debentures sold will fund First Nation’s work

Certification from the First Nation Financial Management Board will allow the Osoyoos Indian Band to undertake development at a faster pace than if it had to solely rely on government funding.

“We can get funding from the open market at interest rates below what banks can give us,” said Brian Titus, chief operating officer for the Osoyoos Indian Band Development Corp.

OIB, along with Songhees and Tzeachten, are the first First Nations to receive the certification. Although all three are located in British Columbia, Harold Calla, chair of the management board, said First Nations from across the country are coming on board.

Membertou First Nation in Atlantic Canada is one of the next five First Nations who will receive certification in the next month or so. Calla anticipates 15 or 20 more First Nations to meet the criteria established by the board by the end of the year and another 20 the following year.
“It’s a real opportunity for First Nations to access [dollars] that they need for economic development,” said Calla.

The mandate of the board is set out by the First Nations Fiscal and Statistical Management Act. First Nations must meet stringent criteria established by the board to gain certification. That criteria, said Calla, is in keeping with the control framework for financial management that was developed after the spate of accounting scandals in the United States.

First Nations that meet the criteria demonstrate to the private sector that they are a decreased investment risk. These First Nations become borrowing members of the First Nation Finance Authority, an institution created under the management act. It is the authority that sells debentures and, in turn, lends the money to the certified First Nation.

The advantage, said Calla, is that bands like Osoyoos can now borrow money at an interest rate of prime minus one instead of prime plus one and can also commit to long-term planning at a fixed interest rate.

“If you’re borrowing a substantial amount of money, two per cent makes a big difference,” said Calla, “and in some cases is makes projects viable.”

Osoyoos will be taking full advantage of this new standing with work planned for infrastructure projects. Up to 400 units of individual housing is being planned over the next 10 years for the Canyon Desert golf resort and upgrades to its 45-hectare Senkulmen Business Park, which opened last October, will continue.

“We’re actively pursuing a correctional facility with the government of British Columbia and this helps make us more attractive to do business with,” said Titus.

Long term planning is something First Nations have to embrace, said Calla, and having access to capital is essential.

“A lot of what we speak to when we go into communities is how they tie this initiative into their communities’ objectives and opportunities,” he said. “Many First Nations now need to consider doing these things well in advance of an opportunity arriving at their door.”

It took OIB a year’s worth of work to get certification from the  board, said Titus. However, he noted that OIB also has ISO 9001 standing, which means the band is in compliance with the International Standards Organization’s quality management systems.

“First Nations have to show they are financially stable and able to continue in a viable manner. That is difficult for some, but not for all,” said Titus. “It all comes down to good financial practises.”

The board’s access to capital on the open market for First Nations is unique.

“There is no other mechanism in the world for Aboriginal communities to access the capital market,” said Calla.