• FMA TOOLKIT: CAPITAL INFRASTRUCTURE TOOLS

These FMA law options are available for First Nation governments to help pay for needed infrastructure.

• Development Cost Charges:
  A DCC is a unique local revenue. It is a one-time charge collected from developers of reserve land at the time of building or development approval. DCCs are used to offset some of the infrastructure and land costs directly or indirectly attributable to development.
• Services Taxes:
  The Service Tax law power provides First Nations with the power to levy taxes that are used to pay for the costs of providing services to reserve lands.
• Borrowing Laws:
  First Nations have the ability to use their tax revenue to access long term debt financing for capital infrastructure projects.

The FNTC has established Standards for the Form and Content of Capital Infrastructure Laws. You can find the standards, guides and samples on right sidebar: or below on small screens:

• Development Cost Charges Law

First Nations may enact a Development Cost Charges (DCC) Law under the FMA.

DCCs are one-time fees that are collected from developers working on reserve lands to offset some of the capital infrastructure costs required to service the needs arising from the new development. DCCs are generally payable by the developer at the time of the building permit, subdivision or development approval or, where subdivision approval is not required.

These levies may only be collected for capital costs that are required in order to service, directly or indirectly, the development for which the charge is being imposed.

DCCs can only be used to help pay the capital costs associated with one or more of the following:

• Providing, constructing, altering or expanding sewage, water, stormwater drainage and transportation facilities
• Providing and improving park and recreation land

Prior to law development, a First Nation must undertake a number of capital planning steps to determine the types of services that will be required, the scope of the projects, and the appropriate DCC charge for each DCC class of service. This information will inform the law development process.

The capital costs used to determine the DCCs to be levied must comply with all statutory requirements, any regulations made under the FMA and applicable FNTC standards and be supported by a long-term capital plan, a local government regional growth strategy, official community plan, or other regional development plan, or a service agreement with a local government.

The FNTC has established Standards for First Nation Development Cost Charges Laws.

• Service Tax Law

First Nations may enact a Service Tax Law under the FMA.

Unlike property taxes, which provide local revenues that may be expended in a number of areas, service taxes are collected to fund a specific service being provided by or on behalf of the First Nation.

All revenues and interest collected from a service tax must be spent only on the specific service for which they are collected.

Service taxes are often levied to fund a specific capital improvement, and are levied for a fixed number of years to pay for the cost of the improvement.

Capital improvement projects that may be funded by a service tax include:

• Transportation infrastructure
• Sewer and water systems
• Park acquisitions and improvements

The cost of the work undertaken as a provision of services is usually paid up front by the First Nation then recovered from property owners through the service tax. Service taxes may apply to the entire reserve, or only to a defined area.

Service tax laws enacted under the FMA must comply with all statutory requirements and regulations made under the FMA, along with applicable FNTC standards. The FNTC has established Standards for First Nation Service Tax Laws, and can be found on right sidebar: or below on small screens:

• Borrowing Laws

First Nation governments have the ability to use their tax revenues to access long term debt financing for capital infrastructure projects or to refinance existing capital projects.

Under the FMA, First Nation governments can participate in the debenture financing system and borrow money based on the certainty of collecting property tax each year. Local revenue debt financing principally involves the FNTC, the First Nations Financial Management Board (FNFMB) and the First Nations Finance Authority (FNFA).

Under the system, participating First Nations pool their financing requirements and the FNFA sells the collective debt in the form of an investment grade fixed income security (i.e., a debenture or bond). First Nations repay their loans over a long period (usually between 15 and 25 years) by using a portion of their annual property tax revenues.

Most non-Indigenous governments borrow the capital needed for infrastructure projects by issuing bonds and debentures based on the strength of stable and predictable revenue streams within their jurisdiction such as taxation. FNFA debt financing ensures access to affordable financing for First Nations the same as other orders of government.

In order to participate in this system, First Nations must be certified by FNFMB and borrowing members of the FNFA, and make a borrowing agreement law.

In addition, each loan from the FNFA must be authorized through a borrowing law made by the First Nation. FNTC standards calculate borrowing capacity based on the amount of local revenues available to service borrowing costs. Before passing a borrowing law, you should contact the FNTC for help in determining debt servicing costs and borrowing capacity.