Overcoming Challenges to Business and Economic Development in Indian Country. Federal Programs/Initiatives Most Beneficial to Study Tribes

08/01/2004

Every tribe/Native corporation in the study benefited from one or more federal programs promoting BD/ED; however, no single program/initiative was especially beneficial to all tribes in the study. Which program was the most valuable depended on the unique needs, circumstances, and characteristics of the tribe/Native corporation. The programs/initiatives that were most helpful to the tribes in the study are gaming, USDA rural development in combination with the EZ/EC program, and the SBA 8(a) and HUBZone programs.

Gaming. Unlike other federal initiatives, the federal government has not provided financial support for Indian gaming. Rather, federal legislation provided the legal foundation for the growth of this industry. While gaming is generally regulated by states, the Indian Gaming Regulatory Act of 1988 (PL 100-497) authorizes and regulates gaming in Indian country.

Gaming has transformed some tribal economies and has provided a stimulus to others. Despite some significant successes, most tribes do not participate in gaming operations, and, despite significant investments, some tribal gaming operations have been unsuccessful and have closed. Others have produced only modest profits. Still, as of 2001, 201 of 561 then federally recognized tribes operated Class II or Class III gaming.(4) Total revenues for these operations were $12.7 billion (National Indian Gaming Association 2003).

The following descriptions show how gaming has transformed the economy of one of the tribes in the study (Gila River) and further stimulated the already strong economy of Mississippi Choctaw. The Gila River reservation, which covers nearly 600 square miles, is close to Phoenix, Tempe, and Mesa, Arizona. Before 1993, when the tribe negotiated a gaming compact with the State of Arizona, the tribe's primary economic activities were associated with farming. The unemployment rate of tribal members was greater than 50 percent, and informants said that many families lived in poverty. In 1993, the tribe constructed its first gaming facility with the aid of loans from local banks. The operation was a success, often drawing more customers than could be accommodated, and generating substantial profits. The tribe quickly paid off the original loans, expanded and improved the facility, and opened two more. The operation of these three facilities dramatically improved the tribal economy, providing nearly 2,000 jobs, 60 percent of which are filled by tribal members. Using the profits generated by its gaming operations, the tribe has diversified its investments by building a championship golf course (and contracting with an experienced manager to operate it); a 500-room resort and spa (managed by Starwood Hotels & Resorts Worldwide, Inc.); an equestrian facility; and two industrial parks.

The Mississippi Choctaw Tribe also operates successful gaming facilities and, like Gila River, is using the profits generated to expand its economy. However, unlike Gila River (and most other tribes), prior to implementing major gaming operations, the Choctaw had already developed a strong and diversified economy that includes manufacturing facilities (Chata Enterprise, Chata Electronics Enterprise) and operation of an industrial park. Before it implemented gaming, the tribe had become one of the largest employers in the region. The Choctaw have used the profits of their gaming operations to finance the development of:

  • A 15-acre water theme park with waterslides, a wave pool, a man-made island with waterfalls, and an 8-acre white-sand beach
  • Two major resort hotels with a total of more than 1,000 rooms and abundant meeting and convention space
  • A dozen restaurants
  • A championship golf course

The tribe is investing in the development of new ventures on the reservation, in other locations in Mississippi, and abroad, as well as acquiring existing businesses. Responding to competitive pressures, in 1998, a key client of Chata Enterprise (the Ford Motor Company), planned to switch to a manufacturer of automotive wiring harnesses located in Mexico. Rather than abandoning this business activity, Chata opened an automotive wiring harness facility in Guyamas, Mexico. Subsequently, two other tribal companies (Choctaw Electronics and First American Plastics) also opened facilities in Mexico. The tribe's decision to expand into Mexico has paved the way for the tribe's emergence as a competitor in international manufacturing markets. In its reservation, the tribe is working to replace low-skill, low-paying manufacturing jobs that moved to Mexico with higher-skill, higher-wage work in the technology sector.

USDA Rural Development Programs and EZ/EC. Informants at four of the tribes in the study (Colville, Citizen Potawatomi, Gila River, and Navajo) said the USDA rural development programs have been among the most beneficial of all federal programs to their BD/ED initiatives. USDA designated both Colville and Navajo as ECs.

The Navajo Nation and Colville Tribe offer examples of how rural economic development programs and EZ/EC designation can leverage resources for BD/ED. Along with their EC partners, these tribes were able to leverage funds from a broad range of federal, state, local, and tribal government sources as well as some private sector funding (Table 3.2).

The Four Corners Enterprise Community is located in parts of three states: northeastern Arizona, southeastern Utah, and northwestern New Mexico. This area, which includes the northern portion of Navajo Nation, involves 22 Navajo Nation Chapter Houses (communities) and the Hopi and Ute tribes.

As of May 2003, Four Corners received more than $29 million in federal, state, local government, tribal government, and private funding for a broad range of development initiatives:

  • Agriculture. Formed community-based farm cooperative; improved irrigation canals; constructed outlet marketing center; created joint venture partnership with Lamb Western
  • Community Facilities. Constructed a community and recreation center; renovated a Chapter House building; constructed a learning center, park, and other facilities
  • Infrastructure. Constructed a water system; designed and developed 26 solid-waste transfer stations and closed 92 open dumps
  • Early Childhood Education. Constructed or renovated 11 Head Start facilities
  • Health Care. Developed a diabetes prevention program; renovated a building for fitness/nutrition center; renovated and expanded a medical clinic
  • Housing Improvements. Renovated or constructed 107 housing units for low-income tribal members
  • Tourism. Designed and developed a marina, a campground, and support facilities

Table 3.2.
Tribal EZ/EC Funding in 2003
  Amount ($)
Funding Source Four Corners Five Star
USDA EZ/EC 1,321,100 423,501
Other USDA 3,190,116 11,257,405
DHHS 110,000 2,472,572
HUD 975,000 1,792,000
Interior 7,118,200 405,000
DOT 183,333 0
EDA 0 137,676
EPA 1,227,477 350,000
FEMA   77,504
Education   2,500
State 7,681,950 3,008,586
Local/Regional 592,500 560,156
Private Sector 460,100 701,487
Non-profit 123,500 596,007
Tribal 6,063,036 5,685,834
Other 0 210,404
TOTAL 29,046,312 27,680,632
Sources: USDA-OCD Benchmark Management System.

The Colville Tribe joined with the Spokane Tribe and four counties in the state of Washington (Pend Oreille, Stevens, Okanogan, and Ferry) to form the Five Star Enterprise Community (Five Star). The Tri-county area includes the Spokane Reservation, located in Stevens County, and the Colville Indian Reservation, one of the largest reservations in the state. Okanogan and Ferry counties bisect the reservation near its center. Historically, this region has been a resource-based economy (logging, wood products, and agricultural fields). Jobs and revenues from these long-time economic pillars have diminished without being replaced by other industries. Diversification of the economy to move out of the "boom-bust" cycles of resource-based industries is a key component of the strategic plan. Today, these communities have gone beyond their boundaries to engage in economic partnerships that will invigorate the Tri-county region.

The Five Star Enterprise Community has received over $27 million in federal and state funding to achieve a broad range of development activities:

  • Housing. Constructed and rehabilitated affordable housing and a planned unit development.
  • Infrastructure. Developed clean drinking water, safe sewage disposal, solid waste, telecommunications, and transportation systems
  • Economic Development. Assessed project feasibility, funded a microenterprise incubator, and supported tourism, industry recruitment, small business development, and recreation facilities
  • Communication. Developed a networking partnership, and facilitated resource sharing
  • Education and Employment Services. Funded child care, adult education, transportation, small business assistance, telecommunications, services to teen parents, youth training, education and training assistance, volunteerism, higher-education opportunities
  • Health/Safety/Welfare. Constructed or rehabilitated community public service facilities including fire, police, health, and emergency buildings as well as community amenities (parks, buffer areas).

SBA 8(a) and HUBZone Programs. The SBA 8(a) and HUBZone programs have been important to some, but not all, tribes and Alaska Native corporations. The programs have provided important BD/ED stimulus for four of the tribes (Cheyenne River Sioux, Colville, Mississippi Choctaw, Three Affiliated) and one of the Alaska Native corporations (BBNC) in the study. The 8(a) and HUBZone programs permit and encourage all federal agencies to set aside procurements of goods and services for small businesses that participate in the programs. Generally, procurements with a value of $1 million or more are competed among three or more 8(a) firms; however, this requirement is waived, by statute, for firms owned and operated by tribes or Alaska Native corporations. By statute, every Indian reservation is located in a HUBZone, and almost every tribally owned company that participates in the 8(a) program also participates in the HUBZone program. The following are examples of tribal businesses that have used these programs to secure federal contracts, partner with larger companies, create jobs for tribal members, and generate revenues for business expansion and infrastructure improvements.

BBNC operates BEESC, an Alaska-based company that provides environmental, civil engineering, and construction services (average annual sales, $17 million); and CCI, Inc., an Alaska-based company that provides construction and environmental services to government and oil field clients with 50 employees (annual sales, over $5 million). BEESC has facilities in Anchorage, Alaska; Marysville, Washington; and San Antonio, Texas. CCI has facilities in Anchorage and Prudhoe Bay and in Seattle, Washington. While these firms are profitable for BBNC, they do not provide employment opportunities for shareholders who wish to continue to live in their Native villages, remote from BEESC and CCI facilities.

Colville Confederated Tribes owns Colville Tribal Enterprise Corporation (CTEC), which has a wholly owned subsidiary that provides complete construction services, including design/build, commercial and industrial, roads improvement, heavy construction, water, sewer, pipeline, communications, and base housing maintenance. CTEC has a workforce of 90 employees and average annual sales of over $14 million.

Mississippi Choctaw owns Applied Geo Technologies, Inc. (AGT), a digital mapping service. AGT was formed with the express purpose of bringing high-technology opportunities to the tribe, and it is the only tribal business that is authorized to pursue federal contract work. AGT provides digital mapping, aerial and satellite imagery production, geodetic and photogram metric engineering, digitizing, and conversion services to federal, state, and local governments and commercial businesses.

Three Affiliated Tribes owns Mandaree Enterprise Corporation (MEC), a full-service information technology and electronic manufacturing corporation. MEC was founded in 1990 by the Mandan, Hidatsa, and Arikara Nations of Three Affiliated Tribes, with the vision of providing the IT industry with product diversity and flexibility. MEC's annual sales exceed $4 million, and it employs about 200. Working with Northrop Grumman, MEC creates and repairs circuit boards for the U.S. Air Force, specifically in the F-14 Tomcat, B-2 Bomber, E-3 Sentry, OH-8D Warrior Helicopter, and BQM-74E Target programs.

The Cheyenne River Sioux tribe owns Lakota Technologies, Inc., which provides a broad range of IT services to federal agencies and other clients, including data processing and conversion, computer programming, computer facilities management, and call center/help desk and telephone services. The company has 70 employees and average annual sales in excess of $1 million.

Each of these tribal 8(a)/HUBZone companies employs tribal members, members of other tribes or Native villages, and non-Indians/non-Natives. The number and proportions of tribal members employed fluctuates over time and varies depending on factors such as the location of the business facilities (the greater the distance of the facilities from the reservation, the lower the proportion of tribal employees), and the nature of the work performed ("high tech" businesses tend to employ a lower proportion of tribal members than manufacturing or service sector firms primarily due to the relatively low levels of highly skilled and trained workers residing on reservations). The proportion of tribal members employed by these businesses at the time of the study ranged from highs at the reservation-based Lakota Technologies and MEC (about 60% of the workforce at each company were tribal members) to lows at facilities distant from the reservation  less than 5 percent of the employees at the BEESC facility in San Antonio Texas and the CCI facility in Seattle, Washington were members of Native villages in the Bristol Bay and Tanana Chiefs regions respectively.

Concern about the employment of large numbers or proportions of persons who are not tribal members by tribally-owned enterprises seemed to vary as a function of the levels of unemployment and poverty on the reservation, the nature of the work to be performed, the location of the business, and values related to work, profit, and the accumulation of wealth. Officials at the Mississippi Choctaw and Citizen Potawatomi tribes, which enjoy relatively low levels of unemployment, said that objection to the employment of non-tribal members is rare. The Choctaw take pride in being one of the largest employers in the state of Mississippi. On the other hand, officials at both the Alaska Native corporations, BBNC and Doyon, Ltd., said that their shareholders and Native village officials advocate the expansion of employment opportunities in the villages. At each study site, tribal officials said that work and productivity are central values. In some cases, work and productivity are valued in association with the ability to function independently, without the need to depend on welfare for survival. In other cases, work and productivity are valued in association with the ability to contribute to one's family, clan, and the tribe. Often, work and productivity were valued in both ways - in association with the ability to function independently and with the ability to contribute to family, clan, and tribe.

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