A proposed regulatory change would allow Canadian first nations to issue bonds, which could raise tens of millions of dollars to be used for infrastructure projects in aboriginal communities across the country.
The issue of such a financial instrument would be a first for a first nation, said the federal government.
Under the current rules, the First Nations Finance Authority, a non-profit institution, can only use property tax revenue to back potential bonds. Such revenue amounts to about $3-million, which isn't enough to put out the financial instrument, according to a report by the Department of Indian Affairs and Northern Development posted on the Canada Gazette.
The proposed change would allow the FNFA to also use revenue from leases and permits, interest earned on deposits and investments and revenue from businesses, which are estimated to total about $82-million.
"As a result of FNFA's entrance into the market, First Nations will have access to fixed rate, long-term financing which is not currently available to them as it is to other orders of government in Canada," the department writes in the report. "First Nations will have the opportunity to plan long-term development, stretch their debt repayment capacity, decrease their interest cost, and undertake projects which were previously on-hold or delayed due to lack of affordable financing."
If the regulations are approved, the government's goal is to see the first bond issue at the end of the 2010-2011 fiscal year.
The department says some first nations have faced borrowing costs about 30 to 50 per cent higher than other levels of government, making it prohibitively expensive to secure financing for infrastructure such as roads and sewers.
Such projects, financed by bonds, could create jobs and help with the economic development of first nations who take part in the program, the government said.