Pay your debt, reduce your spending, Nunavut Trust warns NTI

Nunavut Trust officials at NTI’s general meeting in Iqaluit Oct. 20. From left to right: Nute Arnauyumauq, Qikiqtani trustee, Fern Elliot, chief executive officer of the Nunavut Trust; and Sean Kulik, chief financial officer of the Nunavut Trust. (PHOTO BY STEVE DUCHARME)

Nunavut Tunngavik’s annual general meeting began Oct. 20 with a reminder from the Nunavut Trust that NTI should pay its outstanding debt to the Trust and reduce its spending because of stormy global markets looming on the horizon that threaten to reduce the Trust’s earning power.

But NTI executives did not seem overly concerned about curbing their spending habits.

“It seems like we are continually being reminded on our loan, which is okay,” said NTI vice president James Eetoolook after the Nunavut Trust delegation’s presentation.

The Nunavut Trust manages and invests the $1.114 billion settlement that Inuit received through the 1993 Nunavut Land Claims Agreement.

NTI borrowed more than $146 million in its early years to pay start-up costs for itself and the three regional Inuit organizations.

They were supposed to restore all the Trust’s capital by 2007 — but never did.

NTI has made substantial gains over the past few years in paying down that debt to the Trust —but they still owe over $32 million.

“I detect there’s a hint of being told not to spend so much, but if it wasn’t for us, the money wouldn’t be there,” Eetoolook continued.

Eetoolook was likely referring to the work of the original negotiating body for the NLCA, Tungavik Federation of Nunavut, which morphed into NTI after 1993.

NTI’s debt to the Trust represents subtractions from the original sum received through the NLCA.

And Fern Elliot, the CEO of the Nunavut Trust, reminded NTI delegates about how that debt was created.

“NTI could not have functioned effectively in the early years if it had not been able to borrow from the capital of the Trust,” Elliot said.

“There were simply not enough assets in the Trust to generate substantial income that could be distributed to NTI, and NTI had no other revenue sources.”

That money was used to transform the Tungavik Federation of Nunavut into NTI, which is financed each year from the Trust’s investment earnings.

NTI keeps some of this money for itself and distributes the remainder to regional Inuit associations.

Last year, the Nunavut Trust gave NTI $87.1 million to be spread between them and the three RIAs.

However, because the original capital loans to NTI were subtracted from the principal sum received through the 1993 NLCA settlement, it lessened the Trusts’ ability to earn money and the investment power of the Nunavut Trust was weakened.

So far, the Trust has missed out on more than $182 million in additional distribution money, in part because beneficiary organizations have been spending outside the Trust’s “ability to earn” each year.

The legal mandate of the Nunavut Trust is to maintain the original sum paid through the NLCA, accounting for interest, and to distribute the income earned each year on its principal to beneficiary organizations.

But in recent years, struggling global financial markets have seen the Trust’s earnings diminish.

In 2014, returns from investments — the income that gets distributed to beneficiary organizations — were worth 12 per cent of the principal sum, down from an exceptionally high rate of return of 24 per cent in 2013.

But halfway through 2015, returns from the trust are estimated at only 7.63 per cent.

Nunavut Trust has an internal objective to achieve a minimum return of 6 per cent annually to maintain the value of the principal, accounting for inflation, while still distributing a minimum of 4 per cent.

While they expect that returns will fluctuate from year to year, the current global market is affecting the Trust’s ability to maintain the substantial gains seen in 2013 and 2014.

“What we know is that the market is not going to give us those kinds of returns [in 2013 and 2014],” Elliot said.

The bright side of the Nunavut Trust’s sobering presentation is that NTI is currently sitting on $85 million given to them as part of a settlement agreement with the Government of Canada earlier this year in a deal that settled NTI’s longstanding lawsuit against Ottawa.

NTI is using an additional $175 million in settlement money from Ottawa to establish the Nunavut Inuit Training Corp., whose goal will be to help educate Inuit for government jobs.

The NTI AGM continues until Oct. 22 at Nanook School in Apex.