The 3,200-member Lax Kw’alaams First Nation (LFN) is an economic powerhouse in Northwestern British Columbia, with 78 reserves on 12,000 hectares, and Band revenues of $200 million in 2012.
The Band is based 30 km northwest of Prince Rupert in Lax Kw’alaams (formerly Port Simpson), where approximately 700 of its members live. Through its wholly-owned and operated Coast Tsimshian Resources Partnership, the Band has used its forestry and fishery resources to create economic growth that has enabled the Band to expand its business networks and diversify into other industries such as wind power, bio-energy, marine services, housing construction and engineering services.
In 1999, Lax Kw’alaams was in a quite different situation, with the Band facing many of the social and economic problems that afflict other isolated First Nation communities in Canada. The roads were bad, housing was in terrible shape, unemployment was around 80 per cent. To make matters worse, the Band was effectively bankrupt and the balance sheet was a mess.
The Turnaround begins
That’s when the Band Council said enough was enough and they decided to bring in outside help. They needed a new Band manager and their goal was to bring in the best person possible, regardless of where they came from or whether or not they were First Nation.
They advertised province-wide and hired an outsider with decades of experience. Fourteen years later, the Band Manager has helped steer a turnaround beginning with a frank assessment of the Band’s finances and its future under the sytem they had in the late 1990s.
Faced with a bleak outlook, the Band Council embraced change and undertook several initiatives to improve it’s finances and generate income, including: separating administration from business, establishing clear roles and responsibilities for council and administration, cleaning up their balance sheet, and establishing budget procedures and processes.
The Lax Kw’alaams Business Model
Notably, the Lax Kw’alaams developed a model for business which has changed little since 1999. The model is based on three key principals: when it comes to risk, transfer as much of that risk as you can to others; when it comes to capital, let others bring in the capital; when it comes to capacity, look at the capacity you have internally, look at the help you need, and bring in that help to develop the business. While the band owns its forest and fishery companies 100 per cent, for other ventures the Band has been content to secure 51 per cent majority ownership.
The goal was to transition Lax Kw’alaams from a community dependent on social assistance (phase 1) to an EI-dependent community (phase 2) and finally emerging as an employment-dependent community (phase 3). Recognizing they couldn’t go from phase 1 to phase 3 overnight, the Band began by accessing funding to create five-week work programs to, among other things, renovate the community boardwalk and renovate the fish plant. They also looked at their on-reserve forest resources. They began by harvesting 7,500 m³ in 2001, followed by 15,000 m³ the next year and 54,000 m³ in 2003.
During this time, the Band also created a land use plan, which was an excellent community building exercise and provided the community with an opportunity to be engaged in deciding what would happen on Band land.
When New Skeena Forest Products went bankrupt in 2004, and no one bidding on its timber assets, the Lax Kw’alaams stepped in and, within 24 hours, arranged a financing package with the Royal Bank of Canada to buy the assets, including Tree Farm License No. 1, for $4.8 million.
“We were able to do it because we had started to build a relationship with RBC,” says the Band Manager. “We had a positive balance sheet by 2001, and our income streams were growing.”
The new tenure granted the Lax Kw’alaams an annual allowable cut of approximately 550,000 cubic metres. Around this time, the First Nation community also sought out and purchased the neighbouring Terrace Forest License.
Needing an entity to hold the licenses they had bought, they created Coast Tsimshian Resources and hired management companies to manage the logging for them and report to Coast Tsimshian.
While the Lax Kw’alaams First Nation owns Coast Tsimshian Resources and the Chief and three councillors sit on its Board, the Board of Coast Tsimshian operates independent of Band council to protect the Band from any risk associated with Coast Tsimshian’s forestry operations. The board Chair reports regularly to Band council.
Under the management of Coast Tsimshian’s private sector partner, Brinkman Forest Ltd., the Lax Kw’alaams’ forest business has thrived. These days, Coast Tsimshian Resources is a $100-million business, which employs 225 Band members and holds three forest tenures in Northwestern BC. Its business is focused largely on selling raw logs to foreign and domestic users, particularly China.
The potential of sales to China became so lucrative that, in 2008, Coast Tsimshian Resources became the first BC indigenous forest company to open a sales office there. Like the Lax Kw’alaams, the Chinese were frustrated by foreign companies coming to their land looking to profit without having first built relationships with them. “When people come into our territory, we expect them to build relationships with us,” says Lax Kw’alaams Band Manager. “So we put our office in China to do nothing else but build relationships and it’s been very successful. We also leveraged our relationship with the Provincial government because they have a fantastic office in China.”
LFN now also has offices in Los Angeles, New York and Boston and will be opening offices soon in Korea and Japan. “Those offices are there to represent our interests and build relationships. When they have two people competing for their business, they’re going to go with the one they know.”
Despite Coast Tsimshian’s profitability, opportunities for new business, and a combined allowable annual cut (AAC) of over 850,000 m³, its business decisions are always guided by the Band’s respect for the land, principles of sustainability and the quality of life of its people. That’s why one of the first things the Lax Kw’alaams did when they acquired Tree Farm License #1 and the Terrace Forest License, was reduce the allowable cut by 40%.
That decision was based partly on extensive consultation and planning with the World Wildlife Fund, the University of British Columbia and numerous other experts. It was also based on feedback from the community, a conservative approach, and a commitment to serving not just present Band members, but future generations as well with a forestry business model that’s based on the next 100 years instead of just the next twenty.
Coast Tsimshian Fish Plant
In 2005, with annual Band revenues of $50 million, the Band leveraged its resources to launch a state-of-the-art 40,000-square foot fish processing facility. Following a downturn in the processing and canning industry, the plant reopened in October 2012 after $8 million in upgrades that make it the most modern fish processing and freezing facility in Canada and the largest on BC’s coast.
The upgrades include an automated fish-cutting machine and equipment that can freeze up to 600,000 pounds of fish a day. The new freezing and cutting technology makes it possible to quickly freeze under-utilized ground fish and bottom fish for sale to customers in China and the United States.
The Lax Kw’alaams financed the renovations plant with the addition of $1.25 million from the Coast Opportunity Funds. It now employs more than 60 people.
Embark Engineering is an engineering company that is 51 per cent majority-owned by the LFN in partnership with Kerr Wood Leidal (KWL), an engineering firm whose experience includes working with the Kitasoo Band, the Squamish Nation and Lax Kw’alaams First Nation.
The company, whose focus is on engineering projects involving First Nations, is an example of the Band’s commitment to move as fast as business does. When Kerr Wood Leidal Consulting Engineers told LFN they had an interest in doing more work with First Nations, it took just two hours for the Band to negotiate and sign off on the joint venture. Created in April 2012, the company is expected do over $5 million in business in its first year.
The company is governed by a board of five people, including two Lax Kw’alaams Band members, two members from KWL and an individual agreed to by both parties. The company plans to build capacity within the Band through academic programs and scholarships.
PORT OF PRINCE RUPERT: GATEWAY TO PROSPERITY
Located in the heart of the traditional territory of the Tsimshian First Nation, the Port of Prince Rupert is becoming an increasingly important gateway between North America and Asia Pacific trading partners. To capitalize on this opportunity, LFN has entered into several significant agreements.
In June 2009, LFN and Metlakatla First Nation executed the Consultation Protocol for Natural Resources and Business Development. It provides certainty for companies by outlining Band guidelines for working with external partners and the process of consultation for doing business within Coast Tsimshian traditional territory.
Later that year, LFN signed the Coast Tsimshian Business Opportunities Agreement with Ridley Terminals (the federal crown corporation, which owns and operates the port’s coal terminal) providing its members with first refusal rights for contracts at the port.
An agreement with the Port Authority signed in 2010 was followed by an agreement with Saskatchewan potash consortium Canpotex, which is considering building its own terminal at the port.
In 2012, the Lax Kw’alaams and Metlakatla First Nations have just signed a contract with two non-indigenous companies for a $60 million joint venture project at the port. Through a Request For Proposal process, 13 companies competed for a chance to partner with the Lax Kw’alaams on the project. The two companies winning the bid will provide the capital and management expertise and assume the risk of the port joint venture, while the the Lax Kw’alaams will receive employment, training and the net income, along with the benefits of new corporate relationships, and a chance to further boost the capacity of its membership.
Since 1999, the Lax Kw’alaams First Nation has formed more than 10 companies using a business model based largely on having its business partners assume risk, provide capital and carry out contracted work.
In addition to using its successful businesses to provide economic and employment opportunities for its people, LFN is also working hard to build capacity within the Band. In each of its projects, the Band looks at succession planning to eventually transition the management of its businesses to Band members. Each business also provides employment and training opportunity for Band members.
On the training side, the Band has changed the way they’re building capacity and succession planning. Recognizing its members don’t like to go far away from home, the Band provides them with access to online course from BCIT and other post-secondary institutions. In the case of the fish plant, this approach is helping the Band train members to be 4th class engineers without having to send them to Vancouver. For K-12 students, LFN is currently building a $16-million school that will be physically connected to the existing $10.8-million multi-purpose leisure centre.
When it comes to recruiting members for those engineer positions, Band Manager Wayne Drury said, “We look for good non-working candidates and approach them. We’re also going into schools in grade 10 to say, ‘Who wants to be head of the fish plant? We’ll train you.’ We’re making it personal.”
Through its employment and opportunity office, the Band has assessed the jobs it needs over the next five years. To fill the positions the Band needs, it advertises for them and hires members that want the job. If they aren’t yet qualified for it, then they start as a trainee and their job begins with the training.
For First Nations communities that find themselves in the dire position in which the Lax Kw’alaams First Nation were in 1999, the Band Manager’s advice is simple:
“First, recognize that there’s hope. Then, do some strategic planning. Making changes takes focus and it takes help. Don’t be afraid to ask for help.”