WASHINGTON – An administration official and the chairman of a nonprofit group told Senate committee members on Wednesday that they support a bill that would provide Indian tribal governments with better access to bond financings and capital to support local infrastructure and spur economic development.
Speaking to members of the Senate Committee on Indian Affairs during a hearing, they said the Indian Community Economic Enhancement Act of 2016 (S. 3234) would help tribal governments by growing their economies, improving their infrastructure, and increasing lenders' willingness to do businesses with them.
The bill, introduced by Sen. John Barrasso, R-Wyo., chairman of the committee, and Sen. John McCain, R-Ariz., would create an Indian Economic Development Fund to support the Bureau of Indian Affairs' loan guarantees and the Community Development Financial Institution's bond guarantees for tribal communities.
In her testimony before the committee, Cheryl Andrews-Maltais, senior policy advisor to the acting assistant secretary of the Interior Department's Bureau of Indian Affairs, said the Obama administration has consistently supported avenues that foster and develop economies in Indian communities, which have "for far too long" experienced disadvantages.
"The department supports the goals and objectives of this bill…. to meet the unique economic and employment needs of Indian country," she said.
Under the bill, tribes could deposit funds into the Indian Economic Development Fund beginning one year after the measure is enacted. Funding allocation would begin two years after the enactment by the Treasury Department, and for each fiscal year, the Assistant Secretary for Indian Affairs would provide up to either $7.5 million or 40% of fund amounts in credit subsidies to the loan guarantee program of the Bureau of Indian Affairs under the Indian Financing Act of 1974.
Derrick Watchman, chairman of the National Center for American Indian Enterprise Development, said his organization supports such a fund but suggested providing greater incentives in order to get one created.
"This program will enhance and provide $250 million in loans in Indian country and that's very much needed," Watchman said. "By contrast, the fund will also take a considerable amount of time to establish."
"The sources and mechanisms for this fund can't be done overnight," he added. "There is no incentive to create the fund. Providing tax incentives to develop the fund would be a great enhancement. It would be good incentive."
Watchman commended the efforts of the Senate Committee on Indian Affairs in working with the Senate Finance Committee to expand tribal governments' access to tax-exempt bonds. Under the current federal tax law, tribes can only issue governmental bonds if the proceeds are used for "essential governmental functions" such as schools or roads. They cannot issue private activity bonds.
"Repealing the essential government function for tribal tax-exempt bonds is essential," he told the committee.
Also discussed during Wednesday's hearing was the unwillingness of lenders to do business with tribal governments. Andrews-Maltais said some hesitance has to do with a lack of familiarity, standardized codes that exist among tribes, and simply a lack of understanding of the "significant opportunities" in Indian country.
"Having legislation like this and working with the federal government and tribes to develop uniform codes would be advantageous for everyone involved," Andrews-Maltais said. "There are codes these outside entities can rely upon. This elevates both Indian country and their neighbors as well."
Mary Talbutt, the lead portfolio manager of fixed income for the Stanley-Laman Group in Berwyn, Pa., told The Bond Buyer on Wednesday that she has concerns with purchasing tribal bonds because tribes are their own nations and have their own laws. Talbutt compared tribal governments' own legal systems and nationhood "somewhat on par with the Puerto Rico situation."
"Any debt related to a tribal or territory issue I would very carefully read through the [preliminary official statement] to assure that my client or fund has some legal standing to sue as a bondholder or that there is an unconditional irrevocable guarantee from a U.S. agency or the Treasury," Talbutt said. "My initial reaction would not be to classify these securities as domestic issues without a U.S. Treasury guarantee similar to those on Overseas Private Investment Corporation issues."
Barrasso and McCain have said their bill would amend four existing pieces of legislation: the Native American Programs Act of 1974; the Native American Business Development, Trade Promotion, and Tourism Act of 2000; the Indian Trader Act; and the Buy Indian Act.
Barrasso said during the hearing that the bill has received "considerable positive feedback" from tribes, entrepreneurs and other groups during roundtables and hearings since its introduction this summer.
The bill, introduced on July 14 and referred to the Senate Committee on Indian Affairs, would accomplish three goals, Barrasso said. It would increase: access to capital for Indian tribes and businesses; opportunities for Indian business promotion; and the tools to attract businesses to Indian communities.
The other witnesses at the hearing, Harvey Godwin, Jr., chairman of the Lumbee tribe of North Carolina, and Kenneth McDarment, vice chairman of the Tule River Indian tribe in California, spoke primarily on two other pieces of legislation introduced in the House and Senate.
