Vol. 144, No. 48 — November 27, 2010

Financing Secured by Other Revenues Regulations

Statutory authority

First Nations Fiscal and Statistical Management Act

Sponsoring department

Department of Indian Affairs and Northern Development

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Executive summary

Issue

The First Nations Fiscal and Statistical Management Act (the Act) establishes a bond financing regime based on property tax revenues. This regime benefits First Nations who wish to access low-cost, flexible term financing in order to invest in infrastructure projects and economic development within their communities. The First Nations Finance Authority (FNFA), one of four First Nations Institutions created under the Act, is currently working towards the issuance of its inaugural bond, and it has become apparent that critical mass cannot be met based on property tax revenues alone. In order to support the FNFA and the regime created by the Act, Regulations have been developed which would allow for the securitization of other revenue streams in addition to the property tax revenues currently permitted for this purpose under the Act.

The FNFA is projecting that $3 million in property tax revenues based borrowing demand and $82 million in other revenues based borrowing demand exist for the fiscal year 2010–2011. The importance of allowing the securitization of other revenues is clear.

Objectives

The First Nations Fiscal and Statistical Management Act (the Act) came into force on April 1, 2006, to support economic development and well-being in First Nations communities. The Act created four First Nations Institutions: the First Nations Financial Management Board (FNFMB), the First Nations Tax Commission (FNTC), the First Nations Statistical Institute (FNSI), and the FNFA. The Act allows for the use of property tax revenues to support bond issues through the FNFA, which translates into the raising of long-term private capital for roads, water, sewer, and other infrastructure projects.

These Regulations are being put forward in order to support the FNFA’s inaugural bond issue, because there is not a sufficient property tax revenue base currently available in order to reach critical mass. The objective of these Regulations, therefore, is to allow the FNFA’s inaugural bond issue to occur by the end of fiscal year 2010–2011.

Description

At the time that the Act was drafted, expanding First Nations borrowing powers to include other revenues was contemplated as possible regulations. Section 142 of the Act explicitly allows the Governor in Council to make regulations which would expand the purposes of the FNFA to include securing for its borrowing members, through the use of other revenues prescribed by regulations, financing for any purpose prescribed by regulations.

The proposed Regulations have been developed by adapting and restricting certain aspects of the current property tax regime created by the Act. First Nations may presently securitize their property tax revenues under the regime created by the Act. These proposed Regulations will further expand First Nations development power to include a broad base of other revenues which could also be securitized for use in infrastructure investments. The proposed Regulations would permit the FNFA to secure for its borrowing members, through the use of other revenues prescribed by regulations, financing for any purpose prescribed by regulations. Those other revenues which would be eligible for securitization under the proposed Regulations include revenues from leases and permits, interest earned by a First Nation on deposits, investments or loans (other than interest held by Her Majesty the Queen in right of Canada), and revenues received by the First Nation from businesses wholly or partly owned by that First Nation (including dividends from shares owned by a First Nation).

Regulatory and non-regulatory options considered

Until recently, First Nations lacked the legislative and institutional structure used by municipalities to finance community infrastructure development. As a result, First Nations faced borrowing costs which were 30 to 50% higher than other orders of government in Canada. In response to these issues, in 1995, a group of First Nations created a finance authority, the First Nations Finance Authority Incorporated (FNFA Inc.) to provide First Nations with better investment opportunities. Mentored by the British Columbia Municipal Finance Authority (BCMFA), a leader in the field of municipal finance, FNFA Inc. managed cash balances for First Nations as it researched ways and means for First Nations to secure lower-cost, longer-term private investment capital.

At the time that the Act came into force, FNFA Inc. became FNFA, an institution with powers to both issue bonds on behalf of member First Nations and continue the investment services previously offered by the FNFA Inc. No non-regulatory options have been considered to address the requirement of securitization of other revenues. Section 142 of the First Nations Fiscal and Statistical Management Act contemplates the development of regulations to broaden the revenue streams which could be used for financing through the FNFA.

Benefits and costs

First Nations who are named to the Schedule of the First Nations Fiscal and Statistical Management Act stand to become the greatest beneficiaries of the proposed Regulations. First Nations have, until recently, lacked the legislative and institutional structure used by other orders of government in Canada to finance community infrastructure development. These Regulations will allow for access to affordable capital and flexible terms, thereby enhancing First Nations’ ability to invest in infrastructure, and strengthening the foundation for economic development and investment on reserve.

The expected benefits and savings of the proposed Regulations include interest savings on loans, and the realization of projects previously on hold — resulting in job creation and infrastructure development. The Regulations could also translate into greater self-sufficiency for interested First Nations.

The FNFA has provided an estimate of $82 million in potential other revenues–based financing requirements in 2010–2011 among 10 First Nations in Canada. In all, the FNFA is estimating a 2010–2011 debenture of $85 million based on both property tax revenues and other revenues.

By the end of the first 10 years of debentures, the FNFA expects that other revenues–based financing demand will meet or exceed $116 million annually among 58 interested First Nations. This would result in an estimated 10-year interest rate savings of $77.7 million for First Nations in Canada.

Canada has committed $10 million in 2010–2011 for the purpose of funding the Credit Enhancement Fund established by the FNFA. This funding will support the FNFA being better positioned to secure the best possible credit rating for its borrowing members, and along with these proposed Regulations, will allow the FNFA to fulfill its legislated mandate and issue its inaugural bond.

The chart below indicates the present value of the net benefits associated with this regulatory initiative as $39,052,000. It should be noted that in the calculations used within the chart, a standard 8% discount rate has been applied to arrive at this benefit figure.

Chart 1: Financing Secured by Other Revenues Regulations — Cost-benefit statement

Cost-benefit statement		Base Year: 2011	Final Year: 2021	Total (PV)	Average Annual
A. Quantified impacts $
Benefits	First Nations Communities	$800,000	$15,100,000	$49,127,000	$6,310,000
Costs	Government of Canada	$10,000,000	—	$10,000,000	$1,601,000
	Indian and Northern Affairs Canada	$25,000	—	$75,000	$11,000
Net benefits				$39,052,000	$3,905,200
B. Qualitative impacts
Positive impacts	First Nations Communities	First Nations communities will be able to access low-cost, flexible term financing, which will enable infrastructure projects to be undertaken or completed. Some such projects include water and sewer upgrades, and construction of housing, schools and roads.
	Investors	Investors purchasing the bonds issued by the FNFA will view these investments as marginally superior or at least equivalent to other investment modes available.
Negative impacts	—	(No negative impacts are anticipated.)

Rationale

First Nations seeking to borrow funds for infrastructure investments currently face prohibitive transaction costs, processing times and interest rates. In fact, First Nations have faced borrowing costs which are 30 to 50% higher than for other orders of government in Canada. Without proper planning and access to affordable capital, the costs to finance infrastructure become too prohibitive and as a result, projects are not undertaken. Through this regulation, First Nations will have even greater access to low-cost FNFA financing based on two different revenue streams, and the flexibility to choose their loan terms to allow for longer repayment periods. Ultimately, by allowing for the securitization of OSR and thereby supporting the realization of critical mass, the FNFA will be better able to fulfill its mandate.

The FNFA has stated that there is not enough property tax base currently available among Scheduled First Nations in order to issue an inaugural bond based on this stream alone. Accordingly, the proposed Regulations, which would allow the securitization of other revenues, will ultimately permit critical mass to be met.

Consultation

Officials from Indian and Northern Affairs Canada, the Department of Justice, and the four First Nations Institutions have been convening on a regular basis. The focus of these meetings has been the development of the proposed Regulations.

The FNFA has been involved in an ongoing dialogue with rating agencies and its banking syndicate, which has informed the development of the proposed Regulations. The marketplace has expressed its support for the FNFA, as its investor safeguards are similar to those of the Municipal Finance Authority of British Columbia. The FNFA is a new issuer within the marketplace, which allows for diversification from the current issuers. FNFA has stated that it has already received broad support from potential investors.

The FNFA’s process of issuing a debenture will be the same as for any province, territory or local government in Canada; the same marketing plan and the same rating agencies will be used.

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. 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.

Retail banks do not offer fixed rate long-term financing for municipal or regional government infrastructure needs, and are reluctant to finance this type of activity for First Nations. FNFA financing for infrastructure (i.e. water, sewer and roads) creates additional financing demand (i.e. shopping malls, buildings and businesses) on the part of individual entrepreneurs or First Nation–owned businesses for bank term loans and mortgage lending activity.

Chartered banks are involved in banking syndicates that buy and market the bond. The FNFA will provide them with additional business, hence the support from the central bankers.

Investors will be provided with an additional investment product to diversify their portfolios. Pension funds and offshore investors have a large appetite for long-term subnational government lending because of its stability.

Rating agencies look forward to rating an FNFA bond as it will be the first First Nation government subnational bond created, and there is a known potential for more such activity in the United States.

Implementation, enforcement and service standards

The Regulations will come into force on the day of their registration. No additional resources or funding are required in order to implement the regime which will be created by the Regulations. FNFA has indicated that it possesses the expertise required to address other revenues, including more than 20 years of direct market experience. The FNFA has stated that this expertise is available at no additional cost to Canada and/or First Nations. Therefore, activities related to the implementation of the Regulations are included within existing funding levels to the First Nations Fiscal and Statistical Management Act institutions, and will not require additional funding to administer.

Performance measurement and evaluation

As per Indian and Northern Affairs Canada’s (INAC) evaluation plan, an evaluation of the First Nations Fiscal and Statistical Management Act will be conducted in 2011–2012. This will provide assurance on departmental risk management, control, governance processes and performance. The FNFA’s inaugural bond issue, and the overall operations of the regime created by the Act and regulations made pursuant to it, will also form a part of this evaluation. Evaluations are publicly posted on INAC’s Web site for public access.

Further, a Performance Measurement Strategy will be completed in consultation with INAC’s Audit and Evaluation Sector.

Finally, a legislative review will examine the provisions and operation of the Act, and the operation of the institutions. A report will be completed and submitted to each House of Parliament by the end of the 2011–2012 fiscal year, on the results of the review, including any changes that the Minister recommends relating to the evolution of the mandate and operation of those institutions.

Contact

Brenda D. Kustra
Director General
Governance Branch
Regional Operations
10 Wellington Street, 9th Floor
Gatineau, Quebec
K1A 0H4
Telephone: 819-997-8154
Fax: 819-997-9541

PROPOSED REGULATORY TEXT

Notice is hereby given that the Governor in Council, pursuant to paragraph 74(b) and section 142 of the First Nations Fiscal and Statistical Management Act (see footnote a), proposes to make the annexed Financing Secured by Other Revenues Regulations.

Interested persons may make representations concerning the proposed Regulations within 15 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to Chris Rainer, Director, Professional and Institutional Development Directorate, Department of Indian Affairs and Northern Development, Room 18J, 10 Wellington Street, Gatineau, QC K1A 0H4 (tel.: 819-994-3446; fax: 819-997-0034; email: chris.rainer@ainc-inac.gc.ca).

Ottawa, November 18, 2010

JURICA ČAPKUN
Assistant Clerk of the Privy Council

FINANCING SECURED BY OTHER REVENUES REGULATIONS

INTERPRETATION

Definitions

1. The following definitions apply in these Regulations.

“Act” « Loi »

“Act” means the First Nations Fiscal and Statistical Management Act.

“other revenues” « autres recettes »

“other revenues” means the revenues described in section 3.

“secured revenues trust account” « compte de recettes en fiducie garanti »

“secured revenues trust account”, in respect of a First Nation, means an account, established by the First Nations Finance Authority and the First Nation, in which other revenues to be used for financing under these Regulations are maintained.

Adapted references

2. (1) In these Regulations, a reference to a provision of the Act or any regulations made under it — including a reference that occurs in any provision that is adapted by these Regulations — is to be read as a reference to that provision as adapted or restricted by these Regulations, except if the reference is made for the purpose of specifying the provision that is being adapted or restricted.

Adapted references

(2) In relation to financing secured by other revenues, a reference in the Act or any regulations made under it, or in any notice or other document issued under the Act or any regulations made under it, to the Act, the regulations or any of their provisions, is to be read as a reference to the Act, regulation or provision as adapted or restricted by these Regulations.

PRESCRIBED REVENUES AND PURPOSES

Other revenues

3. For the purposes of paragraph 74(b) of the Act, the following revenues may be used to secure financing for the purposes set out in section 4:

(a) tax revenues and fees imposed by a First Nation, other than tax revenues administered by Canada on behalf of the First Nation and local revenues;

(b) royalties payable to a First Nation under the First Nations Land Management Act or the First Nations Oil and Gas and Moneys Management Act;

(c) royalties payable to Her Majesty in right of Canada under the Indian Act or the Indian Oil and Gas Act on behalf of a First Nation that has assumed control of its moneys under the First Nations Oil and Gas and Moneys Management Act;

(d) revenues that are from leases, permits or other instruments authorizing the use of reserve land issued under the Indian Act and that a First Nation has assumed control of under the First Nations Oil and Gas and Moneys Management Act;

(e) revenues from leases, permits or other instruments authorizing the use of reserve land issued under the First Nations Land Management Act;

(f) revenues otherwise payable to a First Nation under any contract with a person other than Her Majesty in right of Canada, other than revenues collected by Her Majesty in right of Canada on the First Nation’s behalf;

(g) revenues, other than local revenues, received by a First Nation from businesses wholly or partly owned by it, including dividends from shares owned by it;

(h) transfers from a provincial, regional, municipal or local government to a First Nation;

(i) transfers from Her Majesty in right of Canada if the agreement governing the transfer specifically permits such a use and if any other applicable conditions are satisfied; and

(j) interest earned by a First Nation on deposits, investments or loans, other than interest held by Her Majesty in right of Canada on the First Nation’s behalf.

Other purposes

4. For the purposes of paragraph 74(b) of the Act, other revenues of a First Nation may be used to secure financing for any purpose that promotes the First Nation’s economic or social development, including financing for

(a) capital infrastructure that is to be wholly or partly owned by the First Nation, including infrastructure for the provision of local services on reserve lands, housing, plants and machinery, buildings and other capital assets;

(b) rolling stock that is to be wholly or partly owned by the First Nation;

(c) land that is to be wholly or partly owned by the First Nation;

(d) shares or any other ownership interest in a corporation whose purpose includes the ownership, operation, management or sale of products of power generating facilities, waste or wastewater treatment facilities or other public service utilities or facilities;

(e) lease financing of capital assets for the provision of local services; and

(f) short-term financing to meet cash flow requirements for capital purposes or to refinance a short-term debt incurred for capital purposes.

APPLICATION

Adaptations applicable to other revenues

5. The Act is adapted so that the provisions of the Act and the regulations made under it apply to the use by a First Nation of other revenues to secure financing for a purpose set out in section 4, subject to the adaptations and restrictions set out in these Regulations.

ADAPTATIONS TO THE FIRST NATIONS FISCAL AND STATISTICAL MANAGEMENT ACT

Inapplicable provisions

6. The Act is adapted so that the following provisions do not apply to financing secured by other revenues, to laws made by a First Nation to secure that financing or to laws made by a First Nation under paragraph 5(1)(b) or (d) of the Act in relation to other revenues:

(a) section 6;

(b) subsections 8(4) and (5);

(c) section 11;

(d) section 13;

(e) subsections 31(1) to (3);

(f) sections 32 and 33;

(g) section 35; and

(h) subparagraph 84(5)(b)(ii).

Reference to local revenues

7. (1) The following provisions of the Act are adapted so that a reference to local revenues is to be read as a reference to other revenues:

(a) paragraph 5(1)(b);

(b) subsection 52(1) and paragraphs 52(2)(e) and (3)(d);

(c) subsections 53(1), (2) and (4);

(d) section 54;

(e) paragraph 55(2)(c); and

(f) subsection 86(4).

Reference to local revenues

(2) The following provisions of the English version of the Act are adapted so that a reference to local revenues is to be read as a reference to other revenues:

(a) paragraph 5(1)(g); and

(b) subsections 53(3), (5), (6) and (8).

Adaptation to subsection 5(2)

8. Subsection 5(2) of the Act does not apply to a law made under paragraph 5(1)(b), (d), (f) or (g) of the Act in relation to borrowing by a First Nation from the First Nations Finance Authority that is secured by other revenues.

Adaptation to subsection 5(3)

9. Subsection 5(3) of the Act is adapted as follows:

Coming into force

(3) A law made under subsection (1) comes into force on the day set out in the law.

Adaptation to section 14

10. Section 14 of the Act is adapted as follows:

Reporting of other revenues

14. If a First Nation is using other revenues as security for a loan from the First Nations Finance Authority, the First Nation shall account for all of its other revenues — including other revenues that have not been used as security for the loan — separately from its other moneys, and must provide that accounting information to the Authority and the First Nations Financial Management Board on request.

Adaptation to section 51

11. Section 51 of the Act is adapted as follows:

Required intervention

51. On receipt of a notice from the First Nations Finance Authority under subsection 86(4), the Board shall either require the First Nation to enter into a co-management arrangement in accordance with section 52 or assume third-party management of the First Nation’s other revenues in accordance with section 53, as the Board sees fit.

Adaptation to subsection 52(1)

12. (1) The portion of subsection 52(1) of the Act before paragraph (a) is adapted to be read without reference to the local revenue account.

Adaptation to paragraphs 52(1)(b) and (3)(c)

(2) Paragraphs 52(1)(b) and (3)(c) of the Act are adapted to be read without reference to paragraph 33(3)(b).

Adaptation to subsection 53(1)

13. (1) The portion of subsection 53(1) of the Act before paragraph (a) is adapted to be read without reference to the local revenue account.

Adaptation to paragraph 53(1)(c)

(2) Paragraph 53(1)(c) of the Act is adapted to be read without reference to paragraph 33(3)(b).

Adaptation to subsection 53(2)

(3) Subsection 53(2) of the Act is adapted so that

(a) paragraph (a) applies only to laws made under paragraphs 5(1)(b), (d) and (f) of the Act; and

(b) the rights and powers of the Board are to be read to include the power to act in place of the council of the First Nation

(i) in relation to assets of the First Nation that are generating other revenues, including any powers of the council to terminate an agreement, or to enter into a new agreement, in relation to those assets, and

(ii) under laws made under paragraphs 5(1)(b), (d) and (f) of the Act in relation to other revenues, to manage all other revenues of the First Nation, and to undertake any necessary borrowing.

Scope of Board’s powers

(4) The rights and powers of the Board referred to in subparagraph (3)(b)(ii) include the power to manage other revenues held by a First Nation that were received before, or that are received after, the Board assumes management of the First Nation’s other revenues, including those that are comingled with other moneys of the First Nation.

Scope of Board’s powers

(5) The rights and powers of the Board referred to in subparagraph (3)(b)(ii) do not include the power to manage other revenues of the First Nation while they are in the secured revenues trust account.

Adaptation to subsection 53(8)

(6) Subsection 53(8) of the Act is adapted to be read without reference to the First Nations Tax Commission.

Limitations

(7) If under section 53 of the Act the Board acts in place of the council of a First Nation in relation to assets that are generating other revenues and exercises powers conferred on the council under the Indian Act,

(a) the powers of the Board are subject to any limitations imposed under that Act; and

(b) the Board acts as an agent or mandatary of the council in the exercise of those powers.

Scope of powers

14. For greater certainty,

(a) the rights and powers of the Board under sections 52 and 53 of the Act extend to all other revenues of the First Nation, including other revenues that have not been used as security for a loan from the First Nations Finance Authority; and

(b) the rights and powers of the Board exercised under these Regulations in relation to a default by a First Nation on a loan secured by other revenues do not extend to management of the First Nation’s local revenues or local revenue account.

Adaptation to section 54

15. A reference to a local revenue law in section 54 of the Act is to be read as a reference to a law made under paragraph 5(1)(b), (d), (f) or (g) of the Act in relation to borrowing by the First Nation from the First Nations Finance Authority that is secured by other revenues.

Adaptation to subsection 78(1)

16. Subsection 78(1) of the Act is adapted as follows:

Priority

78. (1) If a First Nation is insolvent, the Authority has a priority over all other creditors of the First Nation for any moneys that are authorized to be paid to the Authority under a law made under paragraph 5(1)(b) or (d), or under an agreement governing a secured revenues trust account, for any debt that arises after the date on which the First Nation requests from the First Nations Finance Authority financing that is to be secured by other revenues.

Adaptation to section 79

17. Section 79 of the Act is adapted as follows:

Limitations

79. The Authority shall not make a loan to a borrowing member that is to be secured by other revenues unless

(a) the borrowing member has made a borrowing law under paragraph 5(1)(d) and forwarded a copy of it to the Authority;

(b) the Authority is satisfied that the borrowing member has the ability to repay the loan;

(c) the borrowing member has obtained a certificate from the First Nations Financial Management Board under subsection 50(3) and forwarded a copy of it to the Authority;

(d) the borrowing member has opened a secured revenues trust account that is

(i) managed by a third party acceptable to the Authority, and

(ii) subject to terms that require the third party managing the account to periodically pay to the Authority the amounts required to be paid to the Authority under the borrowing agreement with the borrowing member, at the times set out in that agreement, before paying any remaining amount to the borrowing member; and

(e) the borrowing member has required the payors of other revenues being used to secure the loan to deposit those other revenues into the secured revenues trust account throughout the period of the loan.

Adaptation adding section 79.1

18. The Act is adapted by adding the following after section 79:

Maintenance of Authority registry

79.1 (1) The Authority shall maintain a registry of every law in relation to other revenues that is forwarded to it under paragraph 79(a).

Publication in First Nations Gazette

(2) Every law made under paragraph 5(1)(d) in relation to financing secured by other revenues shall be published by the Authority in the First Nations Gazette, and shall be posted by the Authority on a website maintained by it within 30 days after the day on which it received the law from the First Nation pursuant to paragraph 79(a).

Adaptation to subsection 84(1)

19. (1) Subsection 84(1) of the Act is adapted as follows:

Debt reserve fund — other revenues

84. (1) The Authority shall establish a debt reserve fund for financing secured by other revenues that is separate from the debt reserve fund for financing secured by property tax revenues, to make payments or sinking fund contributions for which insufficient moneys are available from borrowing members in receipt of financing secured by other revenues.

Adaptation to subsection 84(2)

(2) Subsection 84(2) of the Act is adapted to be read to require the Authority to withhold 5% of the amount of any loan secured by other revenues and to deposit that amount in the debt reserve fund established for financing secured by other revenues.

Adaptation to subsection 84(5)

(3) Subsection 84(5) of the Act is adapted so that

(a) in relation to the debt reserve fund established for financing secured by other revenues,

(i) a reference to borrowing members is to be read as a reference to borrowing members in receipt of financing secured by other revenues,

(ii) the total amount contributed by borrowing members is calculated as the higher of

(A) the amount that would have been in the debt reserve fund if no payments from the fund had been made, and

(B) the total of all amounts contributed to the debt reserve fund under subsection 84(2) of the Act, and

(iii) the balance of the debt reserve fund is calculated without reference to any amounts contributed to it from the credit enhancement fund; and

(b) in relation to the debt reserve fund established for financing secured by property tax revenues, a reference to borrowing members is to be read as a reference to borrowing members in receipt of financing secured by property tax revenues.

Adaptation to section 85

20. Section 85 of the Act is adapted by adding the following after subsection (1):

Repayments to credit enhancement fund

(1.1) Payments made from the credit enhancement fund to a debt reserve fund established for financing secured by other revenues shall be repaid within 18 months after the day on which the payment was made — or if more than one payment has been made, within 18 months after the day on which the first payment was made — and no further payments shall be made from the credit enhancement fund to the debt reserve fund until the debt reserve fund has been fully replenished under subsection 84(5).

Adaptation to paragraph 86(1)(b)

21. Paragraph 86(1)(b) of the Act is adapted to be read without reference to the First Nations Tax Commission.

ADAPTATIONS TO THE DEBT RESERVE FUND REPLENISHMENT REGULATIONS

General adaptations

22. The Debt Reserve Fund Replenishment Regulations (see footnote 1) (“DRFR Regulations”) are adapted as follows:

(a) a reference to the debt reserve fund is to be read as a reference to the debt reserve fund established for financing secured by other revenues;

(b) a reference to a borrowing member is to be read as a reference to a borrowing member in receipt of financing secured by other revenues; and

(c) a reference to a defaulting member is to be read as a reference to a defaulting member in receipt of financing secured by other revenues.

Adaptation to section 4

23. Section 4 of the DRFR Regulations is adapted as follows:

Calculation of charges

4. On the expiry of the period referred to in subsection 2(1), the Authority shall send

(a) to the council of each defaulting member, a notice requiring that member to pay the charge determined under section 3; and

(b) to the council of each borrowing member that is not a defaulting member, a notice requiring that member to pay a charge equal to the amount determined by the formula

[A / (B - C)] × (D - E)

where

A is the amount initially contributed by the borrowing member to the debt replenishment fund at the time the loan was made,

B is the total amount initially contributed by all borrowing members to the debt replenishment fund at the time the loan was made,

C is the sum of the amounts initially contributed by all defaulting members to the debt replenishment fund at the time the loan was made,

D is the amount of the shortfall in the debt reserve fund set out in the notice referred to in section 2, and

E is the amount charged to defaulting members under section 3.

ADAPTATIONS TO THE LOCAL REVENUE MANAGEMENT IMPLEMENTATION REGULATIONS

General adaptations

24. The Local Revenue Management Implementation Regulations (see footnote 2) (“LRMI Regulations”) are adapted as follows:

(a) a reference to a local revenue law is to be read as a reference to a law of a First Nation made under paragraph 5(1)(b), (d), (f) or (g) of the Act in relation to other revenues; and

(b) a reference to local revenues is to be read as a reference to other revenues.

Inapplicable provisions

25. The LRMI Regulations are adapted so that the following provisions do not apply:

(a) paragraphs 5(1)(b), (c), (h) and (l); and

(b) paragraph 6(1)(a).

Reference to First Nations Tax Commission

26. The following provisions of the LRMI Regulations are adapted to be read without reference to the First Nations Tax Commission:

(a) paragraph 5(1)(a);

(b) paragraphs 21(1)(c) and (f); and

(c) section 22.

Adaptation to paragraphs 5(1)(f) and (g)

27. Paragraphs 5(1)(f) and (g) of the LRMI Regulations are adapted as follows:

(f) the First Nation’s other revenues and all expenditures of other revenues, including the accounting information required under section 14 of the Act;

(g) any deposit, loan or investment, or any other agreement with a financial institution, relating to other revenues or any secured revenues trust account;

Adaptation to subsection 15(1)

28. Subsection 15(1) of the LRMI Regulations is adapted to be read without reference to the tax administrator.

Adaptation to paragraph 18(1)(d)

29. Paragraph 18(1)(d) of the LRMI Regulations is adapted so that a reference to the local revenue account is to be read as a reference to the secured revenues trust account.

COMING INTO FORCE

Registration

30. These Regulations come into force on the day on which they are registered.

[48-1-o]

Footnote a
 S.C. 2005, c. 9

Footnote 1
 SOR/2006-244

Footnote 2
 SOR/2007-245

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