Thank you, Mr. Chairman. I am here to present Bill 10, Northwest Territories Heritage Fund Act. The
purpose of this act is to establish a trust fund for the future benefit and use of the people of the Northwest Territories.
This bill responds to our commitment to introduce legislation to establish a Northwest Territories Heritage Fund before the end of the 16th Legislative
Assembly. During the October 2009 revenue options consultation and roundtable undertaken by the Department of Finance, we heard from many respondents that the NWT needs such a fund in anticipation of achieving control over our non-renewable natural resources. In response, in March 2010 we launched public discussions specifically on the concept of a Heritage Fund. The support received then for the creation of a fund, as well as the numerous indications of support from Members of the Legislative Assembly, has resulted in the bill that you have before you right now.
A Heritage Fund is a way to save for future generations. This legislation will establish a trust fund as a long-term investment fund into which surplus funds may be transferred at the discretion of the Legislative Assembly. Once transferred, these monies become part of the principal of the fund. For the first 20 years of the fund both the principal and income generated in the fund will be retained within the fund. After 20 years have passed transfers out of the fund into the Consolidated Revenue Fund may be made through a special act, although these transfers would still have to go through the regular budget process. The legislation will limit the transfer out of the fund to an annual withdrawal of 5 percent of the year-end balance of the fund, provided that the principal of the fund is not removed. Even after the 20-year period is complete annual deposits may continue to be made and will become part of the principal of the fund.
The Financial Management Board will be the fund’s trustee under the proposed legislation and will monitor the performance of the Heritage Fund, appoint the auditor, and direct and supervise the secretary of the board in exercising the duties of investing and disposing of assets of the fund. This is in keeping with the structure used for other public agencies. This will not prevent the establishment of an arm’s length investment management body to oversee the administrative and investment functions of the fund. However, in the first years while the fund is building principal there is no need to incur the cost of additional administration. The bill includes a requirement for the Legislative Assembly to conduct a review after 10 years of the provisions and operations of the Heritage Fund Act, including recommendations on how to seek public input and advice on expenditures from the fund and whether independent oversight and management of the fund is required.
The Legislative Assembly will receive an annual report on the performance of the Heritage Fund. While financial results will be disclosed separately from other accounts, the Heritage Fund’s investment income, including any capital gains or losses, will be consolidated into the government’s general accounts just as investment income from other government accounts is treated. Similarly, on the statement of financial position the Heritage Fund’s assets will be included along with the government’s other financial assets.
As reflected in this proposed legislation, the single objective of the Heritage Fund’s investment policy is to maximize the long-term growth in the Heritage Fund while avoiding undue risk. The investment management will be guided by accepted investment principles.
We recognize that we are unlikely to be in a position to contribute to the Heritage Fund until we are in a surplus cash position. However, the recently concluded devolution agreement-in-principle is a first step to ensuring that NWT residents receive the fiscal benefits from the development of our territory’s non-renewable resources. We will be prepared, when the day comes, to contribute toward a legacy for future generations of Northerners.