Tag Archives: Bureau of Indian Affairs

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Laws of the land: Navigating development in Indian Country

Gerrit Steenblik, Polsinelli

Gerrit Steenblik, Polsinelli

Anyone who has tried to develop on one of the 22 federally recognized Indian tribes’ land in Arizona has probably encountered the patchwork of land ownership that can sometimes make it difficult to build. Land on reservations can be owned by the tribe, held in trust and owned by an individual (both allotted property and non). Recently, Polsinelli’s Gerrit Steenblik and Anne Kleindienst shared that to negotiate a 55-year land lease for the development of the Noah Webster school on the Salt River Pima-Maricopa Indian Community, they had to work with many departments of the Salt River Pima-Maricopa Indian Community, including the general counsel’s office, the economic development division, the treasurer’s office, the education administration and the community’s public relations office, as well as the Bureau of Indian Affairs and the allotted land owners.

Each tribe functions as a sovereign nation and provides a variety of governmental services to tribal members.

Roxann Gallagher, Sacks Tierney

Roxann Gallagher, Sacks Tierney

“Because few tribes tax their members, many tribes engage in commercial activities to generate sufficient revenue to provide these services,” says Roxann Gallagher, attorney at Sacks Tierney. “As a result, we have traditionally seen a mix of bonds, either tax-exempt or taxable, issued to acquire, construct or improve both governmental and commercial facilities.”

With the introduction of the American Recovery and Reinvestment Act of 2009, came $2B meant to broaden the reach of tax-exempt funding for commercial development. A significant portion of that $2B volume cap for tribal economic development bonds are still available.

Native American communities can issue tax-exempt bonds to finance construction projects that will benefit their own community, such as government and community buildings. Various departments also offer federal grants to fund schools, pre-school programs, health care, and infrastructure, including water systems and roads in Indian country.

“Keys to success [with regards to building in Indian country] included the personal relationships, long-range planning to avoid last-minute glitches and the fact that the new Noah Webster School responded to a genuine need of the community, leading to a win-win result,” says Steenblik, who was the borrower’s counsel for the Noah Webster School being constructed on the Salt River Pima-Maricopa Indian Community. The construction of the new Noah Webster Schools-Pima project within the Salt River Pima-Maricopa Indian Community is being funded by a tax-exempt bond issued by the Industrial Development Authority of Pima County that is only available to tax exempt, nonprofit and non-Indian owned business.

“Construction financing undertaken by a tribal government or tribal governmental entity has many of the same challenges as any other governmental financing in terms of timing, structure, respect for political processes, and adherence to regulatory requirements,” says Gallagher. “Most notably, however, there are some additional legal and business issues that must be considered if certain tribal real property or restricted revenues are intended as security for the indebtedness. For instance, there are federal restrictions on the alienation of tribal property, potentially complicated title issues, and limitations on recourse against some potential sources of repayment.”

Ed Rubacha, Jennings, Haug & Cunningham

Ed Rubacha, Jennings, Haug & Cunningham

Though Jennings, Haug & Cunningham’s Ed Rubacha says it’s unlikely for tribal communities to resist payment by declaring sovereign immunity after a project is completed, the disputes of the Hualapai Skywalk and Ranch can make some developers nervous. Granted, if it’s a large project, Rubacha says, with a well-known tribe it may be smart to ask for a waive of immunity. A recent example being the Navajo Nation waiving its right to declare immunity on a $500M purchase of a coal mine being purchased by the Navajo Transitional Energy Company.

In the early 2000’s, the Navajo Nation decided to build its first casino in Arizona. It wouldn’t break ground until 2011 or open until May 2013. Twin Arrows employs 1,300 people and will make $45M a year. Instead of enlisting the help of a commercial bank, developers worked with the Navajo government to secure adequate funding.

“In 2009-10, the capital market was really soft,” says Navajo Nation Gaming Enterprise Chief Executive Darrick Wachtman. “Wall Street wasn’t lending to the casino startups. There was no activity. It was a good opportunity for the nation to get good returns. The interest rate was higher than market. It’s dependent on the cash-flow leverage.”

As for developers, Gallagher reports positive feedback: “Sacks Tierney’s clients have found that successful tribal finance transactions are akin to hitting a perfect golf shot in that the result is well worth the effort.”

Shirley-Cover

Cover Story: State of the Navajo Nation

A president and the window to his Nation’s Future

By Peter O’Dowd

Somewhere on the Navajo Reservation, most often along Highway 264 between Arizona and New Mexico, a man holds his arm outstretched with a green flag fluttering from his fist. Instead of a thumb, the normal currency for hitchhikers in every other corner of America, the dollar bill is the fare he pays to do business off the reservation.nations_future

The scene escalates on the first of the month, on paydays, on weekends. On the busiest afternoons, a steady line of automobiles snakes from the center of quiet Window Rock, the Navajo capital, to Gallup’s commerce-laden main street. To some who worry about the state of the Navajo economy, the daily exodus is summarized by that single bill jutting from the hitchhiker’s hand—just one more dollar, among millions, sucked from the reservation.

Unemployment on the reservation is staggering, with estimates ranging from 35 to more than 60 percent. Miles of federal red tape has tangled generations of would-be entrepreneurs. Given one word to describe the Navajo business climate, those in the administration don’t shy away from pejoratives. Weak, they say. Hemorrhaging and tragic. Left unchanged, Patrick Sandoval, chief of staff to Navajo Nation President Joe Shirley Jr., believes the tribe will be bankrupt in 20 years. “Devastation,” he says, “if it’s not sooner than that.”

President Shirley has monuments to climb before delivering his constituents from financial purgatory. One of his latest challenges came last December when Navajos witnessed the shuttering of the Mojave Generating Station, a tangible symptom of economic malaise that sent a financial ripple through thousands of pocketbooks.

Still, there are signs of progress. For the first time in history, Navajos have approved gaming on the reservation. Plans are solidified to construct a major power plant that will deliver hundreds of tribal jobs. Dozens of economic development projects like these percolate through an arduous permitting process even as Shirley fights for a plan that would infuse the community with $500 million. But can business culture overcome the cycle of dependency that some call a way of life here? And in the midst of a presidential campaign, will politics unravel the entire process?

Dealings at the border
“I view the Navajo Nation growing like a giant oak tree,” says Shirley, in office since his election in 2002. “You don’t really see the tree growing, but you know its there. It’s a monstrosity; you can’t help but feel its presence.”

At any given time, Shirley’s administration can point to, and feel, a collection of monstrosities, whether it’s the nation’s double-digit unemployment rate, the complexity of its business leasing regulations or the bleeding of native dollars off the reservation. At last count, $2.75 billion circulated through the reservation from government funding, mom-and-pop shops and the countless ventures that support an economy. “Of that two and three-quarter billion,” explains Sandoval, “we estimate about 85 percent of it leaves the Navajo Nation…If we were a country suffering from those same types of economic imports and exports, we would close the border and say we’re going to end up committing suicide if we don’t do something.”

The problem is, as many will tell you, doing anything on the reservation can be complicated. The Navajo economy receives the majority of its dollars—Sandoval predicts up to 85 percent—from the Bureau of Indian Affairs and Indian Health Services. This dependency has perpetuated since the reservation was established in 1868, and an appendage of that relationship remains with the BIA’s business site leasing process. Critics say its existence is the most formidable barrier to Navajo economic development.

Because the federal government holds 17 million acres of Navajo land in trust, applications for business development must pass a series of stringent requirements: archeological clearance, appraisals, environmental assessments and legal surveys. Speaking before the Navajo Nation Council in 1996, Sen. John McCain said, “It takes three to five years to get the governmental approvals necessary to open a dry-cleaning shop in Window Rock. The same approvals can be obtained in Flagstaff in just three days.”

Allan Begay, Navajo executive director for the Division of Economic Development, says finding a single pottery shard on the premises can spark lengthy archeological investigations. To business hopefuls with limited resources, delays can be agonizing. “There has been an outcry from those with the entrepreneurial spirit against the bureaucracy that prevents them from getting from point A to point B,” Begay says.

There is reason to be hopeful, however. The Secretary of Interior approved in July regulations that will streamline the business-lease process. Omar Bradley, acting director of the BIA’s Navajo region, says in most cases the Navajo government will be able to sidestep the BIA altogether.

The bureau also continues to support and fund a program engineered to spur economic enterprises with loans from private lenders. Bradley says the BIA has requested a five-fold increase in the debt ceiling available to entrepreneurs. “Navajo really is at a crossroads,” Bradley says. “The implementation of the business-site leasing regs will give them an opportunity to step out and start grabbing a firm commitment on which way they want to go.”

While the business leasing issue hasn’t gone away, University of Colorado Law Professor Charles Wilkinson, who specializes in American Indian issues, says bureaucracy will continue to improve. “The business-lease approval situation is a vestige of the old-style, wet-blanket presence of the BIA,” he says. “It’s just a bureaucracy that grew over the years and much more than most bureaucracies. It was stultifying.”

Its past grip, however, has developed into today’s symbol of the hitchhiker en route to Gallup, Flagstaff or Farmington—communities that gleam with wealth when juxtaposed with their Navajo neighbors. Dan Brown, mayor of Page, says his local economy is buffeted by Navajos who not only shop, but also live in town. “Of the city’s population, approximately 30 percent of those are Native Americans, mainly Navajo.” he says. “I have a greater Native American population in Page than in the surrounding chapter.”

Of course, the anatomy of any economy is comprised of many parts. Even if proper permits are secured, can investors ever feel secure doing business in an environment where 95 percent of Navajo Supreme Court decisions have gone in favor of the government? And what of sovereign immunity—a tribal reality that protects the government from suit under federal common law? “How do you expect the world to do business with you if you enter into a contract and say, ‘I can sue you if you breach the contract; however, you cannot sue me if I breach it.’ Yet that is largely the position taken here,” a 2003 Navajo development report states.

Even as Shirley pushes for economic health, he and others realize some things will never change. There are those who see clinging to the status quo as dependency on decades of federal welfare; others simply call it the Navajo way of life—a cultural difference. “Do we even want to catch up?” Shirley posits. “Maybe we want to be who we are, the way that we are.”

A man with a plan
Shirley knows he’ll never recoup every cent siphoned away from the reservation, but he believes change can happen slowly—2 percent regained one year, 3 percent the next—so that decades from now doing business on Navajo land is not only attractive, but also a reality.

Early in his first term, Shirley proposed a $500 million financing plan that would have kindled scores of economic development projects: trauma centers, court houses and up to 10,000 jobs. The proposal failed to find support in the Navajo Legislature and ultimately died, but the president maintains its importance.

“Politics on Navajo land are fierce,” Shirley says from a cell phone between engagements scattered across the country. “That had a role in its failure, but the biggest hindrance was that this had never been done by any president or any legislature. There was talk about putting our children and grandchildren on hawk and I guess some thought it was a big risk.”

Some close to the president say if the bond package had passed, Joe Shirley would have had a “hell of a thing to hang up” on his reelection campaign. Meanwhile, with November’s election nearing, Shirley refuses to drop the issue, saying his administration still wants to take the risk. “We need to go out there and educate our populace to bring them to an understanding of what it means to talk economics,” says the president, who is pushing the federal government for a $500 million interest-free loan. If that doesn’t work, he’ll look beyond America’s borders.

“The Navajo nation is good for a loan,” Sandoval says. “We had banks from all over the world touting us, looking at our credit, saying ‘You can handle this.’ But the nation has never taken advantage of its credit rating.”

No one can put $500 million in the bank and expect the money to dispense itself. Sandoval says a capital infusion of that magnitude, which would nearly double the amount the nation now administers, requires skilled financial managers and better infrastructure. “You are essentially rebuilding a nation, but we were prepared to deal with that,” he says.

As the president continues his quest for half a billion dollars, other projects near fruition. Legislators secured the reservation’s first permanent casino after years of struggling to convey the value of gaming to its constituents. Those against the casinos believed it would interfere with their native culture, but after a major financial setback, Begay says feelings slowly shifted. “In the past years, people have known there is a chance of Mojave Generating Plant going under,” he adds. “People sensed there was much money to be lost.”

But can these new destinations compete with already established casinos? How big should they be? The administration is confident they have answers to these questions, especially as consultants begin locating suitable sites along Interstate 40 and near larger cities. Ultimately, Arizona could see four new Navajo casinos. “We want to turn that vacuum on to suck money out of other economies,” Sandoval says.

Equally ambitious is the Desert Rock Energy Project, a $2.5 billion venture—rife with long-term revenue potential—that Shirley calls the single largest economic development project on native lands. The coal plant, mine and transmission line will be one of the most significant taxpayers on the reservation. A latex glove facility, a Raytheon expansion and a handful of other proposals slowly add up, Shirley says. “In 20 years, we’ll be well on our way to a position of viability.”

Window to the future
From Professor Wilkinson’s perspective, excitement swirls over America’s tribal lands. The BIA is slowly lifting its lock on the reservations and shedding what he says was a long-held belief that American Indians were uncivilized and in need of a heavy hand to navigate through their incompetencies. “We are seeing a real revival in Indian country and certainly at Navajo,” he says. “Financial freedom is happening in spades. It’s not easy to take an area larger than West Virginia and make changes, but they are making changes and they are deep.”

Arizona Business Magazine Aug-Sept 2006Shirley fears economic progress will slow if he fails to regain office in the November elections, but Wilkinson suggests that no matter the result, the sight of Navajo politics at work, where candidates are elected and defeated, is the sign of good government. Navajos have stable policy he says, and “the staying power is unbelievable. They are not going to quit taking control over their homeland.”

So perhaps the hitchhiker, with his dollar fluttering toward New Mexico, will someday vanish from the reservation. Or perhaps he’ll keep his fist outstretched, reveling as all Americans do, in the choice to spend wherever he wants. But if President Joe Shirley has his way, every hitchhiker en route to Gallup, Flagstaff, Farmington or Page will someday have the choice to use that dollar on Navajo land. And in this corner of America, rich in everything but economic freedom, that would be the biggest victory of all.