First Nations businesses sought financial aid weeks prior to $306 million COVID-19 fund

First Nations financial authorities were sounding alarms about the impact COVID-19 will have on First Nations economies as early as March, prior to a $306 million funding announcement by the federal government, according to documents obtained by CBC News.

A letter sent April 9 to federal ministers by officials from the First Nations Financial Management Board (FMB), the First Nations Finance Authority (FNFA) and the First Nations Tax Commission (FNTC) said First Nations communities are "the least able to respond" to financial fallout, and proposed that the federal government implement new measures to lift the financial strain on First Nations.

The three institutions oversee the finances of up to 295 First Nations in Canada operating under the First Nations Fiscal Management Act, optional legislation that allows First Nations to, among other things, create laws regarding property taxation, charge fees for the use of reserve lands or services, and borrow money.

The financiers provided the federal government with comprehensive strategies to recover First Nations economies on March 24, according to the letter.

The federal government announced Saturday that it will provide $306 million in funding to help up to 6,000 "small and medium-sized" Indigenous businesses suffering the economic effects of the COVID-19 pandemic, but it's still unclear which businesses will be eligible.

The funding will be administered by the National Aboriginal Capital Corporations Association (NACCA), which provided loans to over 1,200 loans to Indigenous businesses in 2017, according to its website.

Billions at stake

The letter from executives of the FMB, FNFA and FNTC, sent to the ministers of Finance, Crown-Indigenous Relations and Indigenous Services, states that if physical distancing orders are in place for longer than six months, the financial fallout could be "devastating."    

"We know that a virus doesn't discriminate based on race, income or location," the letter reads.

"Our success depends on how well we all abide by public health prescriptions, how much immediate poverty we prevent, and how well we prepare the economy for recovery."

Using a sample of financial data from 43 First Nations, the institutions estimated the economic effects of maintaining physical distancing requirements for six months, and for 12 months. 

In the six-month scenario, the projections included:

• An estimated 40 per cent decline in total business revenues which could equate to roughly $1.8 billion.

• A potential $38.8 million loss in taxes collected by First Nations

In the 12-month scenario, their projections included:

• An estimated 75 per cent decline in total business revenues, which they equate to roughly $3.5 billion.

• A potential $72.2 million loss in taxes collected by First Nations

Addressing the lost revenue, the letter reads, is critical to providing confidence to those investing and lending to First Nations and reducing the growth of poverty in communities. 

"We are aware, like you, that increased First Nations poverty will increase COVID-19 transmission rates and prolong the pandemic health, economic and fiscal impacts not only in our communities but for all Canadians," the letter reads.

The officials state in the letter that First Nations are "the least able to respond" to financial fallout from the situation, due to their economies being weakened by the effects of colonization. It says First Nations businesses may have higher rates of failure and bankruptcy, and First Nations tend to be more dependent on revenue from business ventures than taxes.

As well, it says because First Nations don't have the same access to public debt as provincial and federal governments, they are more likely to require financial assistance.

The recommendations made to the federal government by the organizations for immediate strategies include interest-free or forgivable loans of up to $72 million and providing assistance to First Nations-owned businesses. Longer term recommendations are aimed at developing a more sustainable First Nations fiscal and economic system.

In an email statement sent to CBC News on Friday, a spokesperson for the department of Indigenous Services Canada said First Nations businesses can already benefit from measures within the federal government's COVID-19 Economic Response Plan, like the Business Credit Availability Program (BCAP), where Indigenous businesses may be eligible for a loan through their own financial institutions. 

"The Government of Canada recognizes more support may be needed and will continue to offer financial support for Indigenous communities to meet their evolving needs," the statement read.

'A tough, tough situation'

The letter references the economic condition of Membertou First Nation in Nova Scotia, which the institutions consider to be "widely recognized as a model economy." 

The Mi'kmaw band generated over $67 million in revenue in 2019, according to its website, with just over $19 million coming from government transfers. 

Membertou stands to lose millions in own source revenue — revenue made by collecting taxes and its own business ventures.

"We're one of the largest employers in the area here … and we're down to pretty well zero revenues," said Membertou First Nation Chief Terrance Paul.

"We're in a tough, tough situation." 

In Membertou, Paul said, federal funding falls short of the band's administrative costs by "a few million," so the own source revenue acts as a "top-up," allowing the band to provide essential services for community members.

He said without making adjustments in light of the pandemic, the band stands to lose $14 million. Membertou has laid off 280 employees, nearly half of the workforce, whose paycheques were funded by the community's own source revenue. 

Paul said the layoffs will ensure the band can maintain community services, but estimated the community may still have a deficit of $3 million. Depending on the state of the pandemic and results of the discussions with federal ministers, Paul said there may be more layoffs to come.

A 2016 study by the Atlantic Policy Congress of First Nations Chiefs (APC-FNC), an advocacy and research organization that represents a majority of bands in the region, found that First Nations contribute over $1 billion to the Atlantic region economy. Paul said the amount is closer to $1.5 billion in 2020. 

"We contribute a lot to the Atlantic region, and yet at the same time, a lot of these [financial relief] programs that the federal government has announced, the First Nations governments aren't eligible for," he said. 

The 34 Atlantic region First Nations communities have been allocated $10,559,000 of Canada's total $305 million Indigenous Community Support Fund, according to the ISC website. The fund is aimed at maintaining essential services and preparedness measures.

Each community will receive a base amount of $50,000 and the amount will be adjusted for remoteness and the community's score on the federal government's Community Wellbeing Index, which measures social and economic health in each region. 

Paul said the region's First Nations are "very grateful" for that support, and are in discussion with federal ministers about what to do about revenues as the measures to fight the spread of COVID-19 evolve.