National Post continues their "Rethinking the Reserves" series with "Shackled by red tape"
National Post's Rethinking The Reserve series (that claims "proposes innovative solutions to problems that reserve communities have faced for 200 years")
Shackled by red tape
Even when First Nations wants to get ahead they find that leveraging their land is far from easy
Kevin Libin, January 26, 2008
Take a right a few dozen yards south of where Glenmore Trail, one of Calgary's busiest traffic arteries, crosses 37th street SW, and you will find yourself on a potholed gravel road, in front of a sign that says you have entered "Tsuut'ina Peoples' Lands." Below that is this quote: "My people once owned all this country and went where they wanted and now you would take away from us the small remnant that is left to us." It is attributed to Chief Bullhead, in 1906 - only, some wiseacre vandal has spraypainted over half of the great Sarcee warrior's name, so it now reads: "Chief Bull."
Even without the sign and the "No Trespassing" warning that alerts the rambler, or the lost, that he has stumbled on to reserve land, it would be hard to mistake this rugged, 300-square-kilometre plot, shouldered deep into Calgary's southwest, for much else.
New housing developments, power malls and office complexes have sprouted all along the reserve's north and eastern perimeter. But in this booming corner of the city, the Tsuu T'ina Nation 145 reserve is a conspicuous bald spot, a largely barren expanse of yellow hills and groves.
There is something pleasant about seeing such unspoiled wilderness literally across the street from a metropolis where bulldozers, cranes and cement trucks seem never to rest. Unless, of course, you are a young Sarcee trying to get ahead, in which case, serenity comes at a steep price.
The Tsuu T'ina are doing an admirable job trying to make the most of their select location, but there is only so much they can do. There is the Grey Eagle casino, just opened in December, a golf course and an asphalt plant, which ran into a bit of trouble with Ottawa this year for emitting headache- and vomit-inducing smells across several city neighbourhoods. The band built a 350-home residential neighbourhood outside the city, Redwood Meadows. But all of that is small potatoes compared to the kinds of development the band council has been chasing for years.
In the boardroom of the Tsuu T'ina's administration office, posterboards detail plans for multi-million-dollar office buildings, industrial parks, shopping centres and two hotels.
Chief Sandford Big Plume has made it clear, he's "tired of going to Ottawa for a handout." The Tsuu T'ina want to make a deal, many deals, to develop their land. "We want to do business with Calgary," the chief said, insisting that he wants the Tsuu T'ina community - which faces a grievous housing shortage and unemployment rates as high as 40% in the winter months - to become self-sustainable.
The projects are all in the works. In fact, they have been in the works for years. It would seem they're rather stuck there.
Peter Manywounds, a projects consultant with Tsuu T'ina, remembers when he was 11 years old and his parents took him to the initial planning meetings for Redwood Meadows, the non-native neighbourhood built on the reserve's west side. That was 1967. By the time the project started, it was 1980 and the city was slipping from glorious boom to dismal bust.
At the rate things are going, there is a real risk that by the time the band sees some genuine movement on their current projects - some of which have been on the drawing board since the days of disco - another one of Alberta's economic cycles may have again turned.
This is no way to do business. And were this land privately owned - truly owned, as Chief Bullhead recalled, in a way that allowed the Sarcee the freedom to use it as they wished - the malls and business centres would likely already be a reality on this reserve. But the idea that this is Tsuu T'ina land, in any meaningful way, is, to paraphrase the graffiti on that sign, bull. Every acre of the reserve is controlled by the Crown, as legislated by the 130-year-old Indian Act. Any business development on reserve land - even something as simple as building a supermarket - means vetting everything through the federal government, where over decades, several departments have inserted themselves in the process (Mr. Manywounds says Tsuu T'ina development plans are currently bouncing around no less than six different federal departments).
"It's not that they don't want to respond" to on-reserve economic development initiatives, Mr. Manywounds says. "The framework they exist in doesn't permit them to respond."
And so, for First Nations, getting into business necessarily means hiring experts to wade through knee-deep bureaucracy, sorting through mounds of red tape, persuading the federal government's lawyers to drop what can often be unreasonable conditions, all while bearing the risk that the project may not even be approved in the end. Or, even if it is, that the favourable economic conditions that got investors interested in the first place will no longer be there.
The cost alone "is the piece that kills most First Nations trying to go through the process," says Ted Williams, a former business development officer for the Cowichan Tribes' Khowutzun Development Corporation. "The band basically starts to borrow money from their internal departments to pay advisors, mostly legal, to help them try to get through that process. It just eventually catches up to them."
It takes about four times as long for even the simplest development plan on reserve land to come to fruition than it does off-reserve, estimates André Le Dressay, director of Fiscal Realities Economists, a B.C-based firm that works with First Nations to get them through the process.
"A marginal deal that you might do off-reserve, you'd never do here," adds Mr. Manywounds.
It takes an uncommonly patient investor, the kind with the deepest pockets, to tolerate the hassles and delays that are part of developing projects on reserves. "On a lot of First Nations, it takes between three to four years to actually get your property to the point where you can do any development on the land, because predominantly the band land is not owned by the people ... Off reserve, you can get a permit to construct in six months," Mr. Williams says.
No wonder then that most venture capitalists pass over First Nations areas in favour of easier places to do business. Mr. Manywounds says he has had potential partners simply throw up their hands at the complications and forget it.
The federal government knows well the obstacles First Nations face in attracting outside investment, and to its credit, Ottawa has in recent years created laws aimed at giving First Nations more flexibility in business development, by enabling, for instance, long-term leases to create something approximating a sale of lands to outside investors. The First Nations Land Management Act, passed in 1999, lets certified bands create a "land code," giving them the ability to manage zoning without continually seeking the minister's permission. The First Nations Commercial and Industrial Development Act lets bands apply provincial standards, such as environmental codes, to fill a regulatory vacuum that otherwise exists in on-reserve projects.
Although such legislation is unquestionably an improvement for those few bands able to use them, they stop short of overcoming the biggest obstacle hampering economic development on reserves: the inability of First Nations to exercise real control over their land, free of government paternalism. And as long as bands have to go through Ottawa to even get access to these tools, their impact will be severely limited: Two years after its passage, just two bands have managed to get permission from the Indian Affairs minister to use the Commercial and Industrial Development Act, while the average number of bands approved yearly since the Land Management Act was passed is six. Dozens of bands languish on waiting lists just for the chance to begin what will be an intensive, heavily bureaucratic process. At this rate, with 615 First Nations in Canada, it could take a century to get through them all.
Implementing long-term land leases have proved less than optimal anyway - homes in the Tsuu T'ina's Redwood Meadows development, whose property leases expire in 2049, sell for sometimes 20% less than comparable homes in nearby Bragg Creek. These are simply imitations of genuine ownership, says Toby Baker, project manager at Squamish Nation in B.C., which has created its own long-term residential leaseholds on residential and commercial projects. Developers and homebuyers alike are looking for more than a place to camp out for a while. They want their investment to accumulate value over time. When you buy property, "you're building wealth for your family. You are building equity in your home," Mr. Baker says.
And leases have proven harshly inflexible for bands that try them. The Squamish nation, with its spectacular waterfronts and West Vancouver vistas, knows there's huge potential in condominiums. But such "stratified interests" just aren't possible under the existing framework. "People would love to be on the 30th or 40th story of a building [here] and are willing to pay millions to be there," Mr. Baker says. "We can't create that opportunity in the market right now."
And then there was the time the Musqueam First Nation attempted to dramatically raise lease-rates on non-native residents living on their Vancouver reserve to reflect the city's soaring real estate values. Angry homeowners ultimately blocked them at the Supreme Court, which ruled, in 2000, that Musqueam land was not worth as much as other city property because, well, it was located on a reserve. So, while First Nations aren't able to set their own lease rates and let the market determine whether they're appropriate, a panel of judges in Ottawa is apparently qualified to set the right price.
It is no surprise, then, that those who have spent years stymied by restrictions and seemingly endless red tape suggest it may be time to stop finding circuitous and ultimately inadequate tricks to keep trying to get around the problem, and just obliterate the problem itself - by treating First Nations "like grown-ups," as Mr. Le Dressay phrases it, with the same rights as everyone else to sell, buy, lease, develop and leverage their property.
For one thing, it's a basic way to build wealth: the equity millions of Canadian homeowners accumulate in their property that usually constitutes their most valuable asset. Without it, it's safe to say, most of us would be a lot less sure of being able to pull off a comfortable retirement. Meanwhile, no one would bother sinking resources into maintaining or, better, enhancing the value of a property they have no chance of one day selling. And so, many band-owned houses, paid for by the government, end up poorly cared for, gather mould, and fall apart. (The shoddy state of reserve housing was recently singled out by the Public Health Agency of Canada as a leading cause of soaring tuberculosis rates in First Nations communities; in November, residents of the Piikani Nation near Pincher Creek, Alta., were evacuated after Health Canada condemned their homes as unfit for human habitation.)
But while equity gives people incentive to create value in their existing property, it's the capacity to borrow against that appreciating asset that is most critical for building real wealth on reserves, enabling natives to leverage one asset so they might come to own more.
Peruvian economist Hernando de Soto concluded in his 2000 book, The Mystery of Capital, that property rights are the key determinant to why some national economies flourish while others fail. He has pointed out that in the North American economy, as much as 70% of starting businesses require credit to get off the ground, "and they get it on the basis of some kind of real-property collateral" - frequently, their own homes. It is hard to overstate the significance of this missing piece. Without an ability to leverage a valuable, legal land asset, most Canadian entrepreneurs would be unable to secure a loan to start businesses and most businesses would probably find themselves without the capability of issuing bonds or shares or of investing in new machinery and expansions.
In his book The Age of Turbulence, former U.S. fed chairman Alan Greenspan wrote that "the presumption of individual property ownership and the legality of its transfer must be deeply embedded in the culture of a society for free-market economies to function effectively." As long as Canadian native bands enjoy the same land rights as feudal serfs, it only follows that, for the most part, their reserves remain frozen in a pre-industrial era, exhibiting what the Assembly of First Nations calls "Third World conditions."
Yet, of the 2.6 million hectares of Canadian land occupied by First Nations, an amount roughly four times the size of Prince Edward Island, much of it has outstanding potential value. In cases like Tsuu T'ina, Enoch and Stoney reserves in Alberta, the Musqueam, Squamish and Kamloops in B.C., the Rama reserve outside Toronto, or the Kahnawake reserve across the St. Lawrence from Montreal, just to name a very few, we are talking about some of the most desirable property in the country. A study presented by Fiscal Realities to the Indian Affairs department last spring measured the potential value of land waiting to be unlocked from a sample of B.C. First Nations. On just the 68 reserves studied, the estimate was close to $4-billion - or about $60-million per reserve on average. Even some of the most far-flung reserves, north of 60, are thought to be sitting on top of billions of dollars in mineral and energy resources as yet untapped. There are, admittedly, reserves on land close to worthless. But while permitting private property ownership certainly won't enrich every single First Nation, doing something that benefits a good number of them should, nevertheless, be something well worth doing.
Whether or not some long-ago Indians, at some point, questioned the concept of land ownership (Chief Seattle's oft quoted anecdote - "How can you buy or sell the sky, the warmth of the land? The idea is strange to us" - actually came from a Hollywood film), the Crown's refusal to cede property rights on reserve land has benefited the federal government alone. Historically, it has allowed it to confine and displace aboriginals where it pleased, while laying claim to the most fertile lands for itself.
The land reservation system "never has worked, it was never intended to work," argues Clarence Louie, chief of the Osoyoos Indian Band, located in B.C.'s Okanagan. "Their first intention under the reserve system was to destroy the economy. The way you bring any society to its knees is to take away the economy first, and that's their ability to support themselves."
In fact, there is sufficient evidence that a tradition of property rights has existed in many native cultures. It was Europeans who "popularized the notion that aboriginal peoples ... could not possibly have the civilized and Christian attributes that would enable them to assert sovereign ownership," noted the Report of the Royal Commission on Aboriginal Peoples, issued in 1996. In reality, family-held estates existed and were passed down within several tribes, such as the Iroquois did with cornfields.
"I think that a lot individuals forget our traditional past," says Manny Jules, a former chief of the Kamloops Indian Band, and a longtime advocate for property reform on reserves. "We weren't some socialist utopia where nothing was owned by anyone. Those people who say economic development and ownership was not our way, really don't understand. It was a fundamental part of our way."
In any case, arguments over historical native real estate philosophies have little bearing on the fact that there exist scores of First Nations today who fully appreciate, and want to capture, the commercial value of the property that they have for decades been told is theirs, despite never having been entrusted with its actual proprietorship.
There are, of course, those who look skeptically upon the idea of private property possession, worried it will lead to some natives being exploited, losing their land to modern-day whiskey traders. And in some cases, it could. But there are available ways to limit the impact.
At the very least, bands should be entitled to group ownership: rather than reserves being designated as Crown land in trust to the federal government, Ottawa could transfer it ‘in trust' to First Nations. Just as provinces control their own Crown land - ‘in trust' to the province - First Nations would be free to do the same on reserves, enabling them to zone and develop their own property without forever seeking out Ottawa's blessing, free of the roadblocks put up by a dispassionate and overtaxed federal bureaucracy. That alone would represent a big improvement. Still, such a kibbutz-style approach ultimately falls short of letting individual aboriginals on reserves enjoy the economic freedoms and opportunities non-natives do to buy, sell, mortgage, exploit or develop their own, privately owned land.
But it is this scenario that most alarms more traditional-minded natives, since it would risk ending any historic or cultural integrity attached to reserve land, as land gets sold off to everyone from non-native yuppie families to multinational corporations. But that needn't be so. Consider that no landowner in any Canadian city has fundamental control over his property - the government always has the ability to take it away if it decides it needs it, or if you don't pay your taxes. And so a possibility for First Nations, says Mr. Le Dressay, is to follow the model, enshrining in band legislation a level of underlying control, using something like an "eminent domain" provision - the right of a government to expropriate lands under certain conditions and only with fair compensation. (In the U.S., the Fifth Amendment has been interpreted to mean that governments may force the sale of private land only for purposes of the "public use," say, to make way for a freeway.)
As off-reserve, while land can be bought, sold and mortgaged between willing traders, First Nations would, in principle, retain the right to expropriate for a limited, reasonable and legally testable list of justifications, while making those risks abundantly clear to buyers beforehand. For bands eager to make investors comfortable, though, such potency would surely be used sparingly. But the mere symbolism of such a fundamental power, even if it is never exercised once, would nonetheless go a long way toward assuaging fears among skeptics that creating individual deeds for reserve real estate would forever disconnect the property from culture.
There will, of course, always be risks, and certainly the occasional fiasco. But if Canada hopes to see its First Nations one day assume a mature level of self-sufficiency, it surely requires entrusting them with any attendant mature risks and responsibilities, and that means the freedom to make the same good and, occasionally, bad land deals as everyone else. There are, after all, a number of non-natives who protest the idea of private ownership of land off reserve, too. Canadians as a whole do not, however, choose to allow those people to run our national economy on the long failed model of collective ownership. Given the choice, there is no reason to expect most aboriginals would either.