After 22 Years, Canada’s Aboriginals Issue First Bond – by Ari Altstedter (Bloomberg News – June 19, 2014)

When Deanna Hamilton returned to her British Columbia Indian reserve after taking early retirement, she found herself revisiting a mystery she had encountered as a child.

Unlike her reserve, the city of Kelowna across the lake didn’t suffer from foul-tasting drinking water, unlit streets or sewage-saturated lawns that discouraged children from playing outside.

In short order, Hamilton discovered an explanation in one of capitalism’s most basic tenets: Kelowna could finance its superior infrastructure by raising money in the debt markets — an option not open to her Westbank First Nation reserve.

From there, it was simply a matter of gaining acceptance for an aboriginal bond — a process that tested her perseverance through 22 years. This is the week Hamilton, 71, should finally see the First Nations Finance Authority, which she helped create, issue Canada’s first bonds backed by aboriginal governments.

Ernie Daniels, chief executive officer of the finance authority, said he expects to sell C$90 million ($83 million) worth of 10-year notes with National Bank of Canada as the lead underwriter.

The issue would represent a major breakthrough for aboriginal groups by holding out the promise of both quality-of-life infrastructure improvements and native investment in major resource projects.

Northern Gateway

The timing couldn’t be more propitious after the government approved Enbridge Inc. (ENB)’s Northern Gateway pipeline to ship Alberta oil-sands production to the Pacific coast over the objections of local bands, known as First Nations.

Both aboriginal leaders and Prime Minister Stephen Harper’s government have said the bond market offers a way native groups can get the capital they need to become partners in, rather than opponents of, resource development.

The Canadian government has estimated there will be C$650 billion worth of natural-resource developments in the next decade. Many could hang on aboriginal participation.

“What we need to bring to the table now is the ability for First Nations to access the kind of capital that’s going to be required to have meaningful participation in these projects,” said Harold Calla, executive chairman of the First Nations Financial Management Board, one of the institutions created to facilitate Canadian aboriginals’ entry to the bond market. “We’re talking projects now that are in the billions, the multibillions of dollars.”

‘Encourage Investors’

Hamilton’s odyssey began in 1991 when she returned to the reserve after 28 years away, during which she worked in both the private and public sectors and in real estate development. At Westbank, she was quickly reminded of disparities that had first troubled her during childhood Christmas and Easter excursions across the lake.

While Kelowna, then a city of 76,000, could float a bond to upgrade its water-treatment plant or build a sewage system, the Westbank reserve, 1/28th its size and with a different legal and cultural standing, was forced to live off its meager current revenue.

“You cannot do proper economic development and encourage investors to come to your land if you don’t have sewers, water, roads,” she said in a telephone interview from Westbank, where she still lives. “Honestly, I didn’t think it was going to take 20 years.”

Another Trip

Distressed by the differences between Westbank and Kelowna, Hamilton volunteered to set up her band’s property tax system, thinking that was where the answer lay. She soon recognized it would take years of revenue accumulation before the band could afford new sewers or street lights.

That led to another trip across the lake where Hamilton concluded the real answer lay in tapping large pools of capital through the bond market.

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