Overcoming Challenges to Business and Economic Development in Indian Country. Overcoming Legal, Administrative and Organizational Barriers

08/01/2004

Tribal officials said that they are committed to eliminating or minimizing legal, administrative, and political barriers that often dampen their BD/ED initiatives. Tribes are negotiating limited waivers to sovereignty on a deal-by-deal basis with non-tribal investors and businesses; insulating tribal businesses from undue political interference; and reducing administrative burdens, such as review and approval required for establishing or expanding businesses on the reservation.

Reducing Investor Risk with Limited Waiver of Tribal Sovereignty. While federal support of tribal sovereignty has been especially valuable to tribal BD/ED (see Chapter 3), tribal sovereignty can deter investment on a reservation. Investors seek to minimize risks and maximize returns, so the inability to sue or otherwise seek resolution of disputes with a tribe in state courts, or the requirement to use tribal courts, can kill and has killed business deals in Indian country. Aware of this problem, tribes and investors have sometimes entered into agreements that limit tribal sovereignty by stipulating that disputes can be brought to state courts or addressed in another fashion mutually agreeable to the tribe and the investor. Even so, because sovereignty is so valuable to tribes, and because they have fought so hard to maintain their sovereignty, they find it difficult to impose or accept such limits.

Minimizing Political Interference in BD/ED Planning and Operation. Managers of tribal businesses, and some tribal officials we interviewed, emphasized the importance of insulating BD/ED activities from direct control by tribal government. The managers said that elected tribal officials face circumstances that tend to interfere with efficient and profitable business practices. Several study informants cited the research of the Harvard Project on American Indian Economic Development as the inspiration or support of this view. In particular, the Harvard Project reported on the importance of institutionalizing successful tribal government activities so that they outlast the political term or influence of their initial proponents.(1)

There are several reasons to prohibit elected tribal officials, whether in the legislative or the executive branches, from direct involvement in the operation of a tribal business. The reasons most cited were tribal officials' lack of business experience and their vulnerability to political pressures. Study informants said that experience or expertise in business management is seldom a campaign issue or qualification for office in tribal elections. Consequently, tribal officials may lack experience or expertise needed for successful business planning and operation. Because unemployment is so high and jobs so scarce in much of Indian country, elected officials may be pressured by tribal members to create employment opportunities in tribal government or in tribally owned businesses. Conversely, changes in elective office may result in staff changes in tribal programs and businesses, with a resultant loss of "institutional memory" and continuity and concomitant constraints on business operations and development.

Because elected representatives can be easily replaced, by recall or through defeat in the next election, it can be difficult for them to decide in favor of investing the profits of tribally owned companies, or to make long-term commitments that sacrifice short-term profits or jobs. On the other hand, study informants generally acknowledged that tribally owned businesses are responsible ultimately to their stockholders or owners  tribal members  and that it is appropriate and necessary for elected tribal officials to exercise some control over tribally owned companies. Officials are challenged to strike a balance between exercising prudent oversight of tribal businesses without becoming engaged in their operations.

Tribes in the study developed several strategies to insulate BD/ED activities from direct control by elected officials. These strategies generally focused on the autonomy of the board of directors and officers of tribally owned businesses. The Colville tribe provides a good example of such a strategy. They established a tribally chartered corporation, CTEC, to be responsible for the bulk of BD/ED planning and operations. The tribal Business Committee (the tribe's legislative body) appoints the CTEC Board of Directors, and all shares of the corporation are controlled by the Business Committee, which, however, does not have the authority to make CTEC business or employment decisions. A development group consisting of members of the Business Committee, the tribal planner, and representatives of CTEC meet monthly to review business proposals in accordance with a priority list, several criteria, and a schedule established by the development group. Informants at Colville said that the establishment of CTEC greatly improved BD/ED planning and the management of tribally owned businesses.

Other tribes have adopted or are trying to adopt similar approaches to separating tribal government from day-to-day planning and operation of tribally owned businesses. At Three Affiliated Tribes, the office responsible for BD/ED - the Community Economic Development Services Office (CEDS)  is trying to stop entrepreneurs from seeking support directly from the Tribal Council. At the time of the interview, CEDS was reviewing a proposal for the development of an ethanol plant on the reservation. In the past, the applicant would have gone directly to the Tribal Council for approval of the proposed plant. Now, CEDS will review the proposal and make recommendations to the council. The Mississippi Choctaw Tribe's Business Enterprise Division falls under the executive branch of tribal government. However, each tribal enterprise has its own board of directors and chief operating officer, who manage daily operations. At Citizen Potawatomi, the Tribal Business Committee (the tribe's legislative branch) does participate actively in many aspects of BD/ED. Each tribal enterprise submits monthly statements to the Business Committee. However, most of the BD/ED planning is done by the Tribe's 477 program, and the Business Committee has little direct control in the operation of the various tribal enterprises.

While the circumstances of the two Alaska Native corporations in the study are different from those of the tribes, the corporations are also subject to pressures from stockholders and their respective Native villages  pressures that may be incompatible with good business practices. Native corporations have more constituent groups than most tribes or Native villages. A tribally owned company generally has two key groups of constituents: shareholders (tribal members) and the Tribal Council. A Native corporation's constituents include the Native villages and tribes of their shareholders, as well as the corresponding regional Alaska Native Association. For example, Bristol Bay's shareholders are members of 32 tribes and Native villages of the Bristol Bay region, and Doyon's are members of 34 tribes and Native villages in its region. While some shareholders in the regional Native corporations may advocate on a variety of issues (e.g., conservation of resources, environmental protection), payment of quarterly and/or annual dividends to shareholders tends to be among the most important concerns. Because of the high unemployment rates and low levels of annual income in some Native villages, corporate dividends are an important source of income to many shareholders. Informants suggested that some shareholders advocate payment of dividends whatever the corporation's performance. Informants said that the regional Native corporations try to counter such pressures with stockholder education campaigns explaining that capital losses can compromise the strength of the corporation and its value to future generations.

Streamlining Complicated Business Approval Processes. For some tribes, the approval process for establishing or expanding a business can be so complicated and lengthy that potential businesses are discouraged or prevented from establishing a presence on the reservation. Complications arise from land ownership and land use issues, as well as from trustee relationships with the federal government. Examples included here illustrate the difficulties and some of the ways that tribes have tried to facilitate BD/ED in spite of these barriers.

The business approval process is especially difficult at Navajo Nation. One of the biggest problems is that tribal members have grazing permits for much of the reservation land, including land surrounding towns like Window Rock, Chinle, and Tuba City. When a business selects a potential construction site, it must secure permission from the grazing permit holder. Tribal officials said that construction cannot proceed if the permit holders do not agree to give up their grazing rights to the proposed site. Navajo Nation has a right of eminent domain, but tribal officials are reluctant to use it for fear of alienating voters. Many of the grazing permit holders are tribal elders respected by tribal members, and sheep herding is a traditional Navajo activity of deep cultural significance. In 1950, the Tribal Council passed a resolution setting aside for business/economic development all land within 750 feet of the center of highways on the reservation. However, this resolution has not been enforced. Tribal officials said an example of the power of grazing permit holders is illustrated by an effort to withdraw 200 acres from grazing for development of a mall that would include Home Depot and Wal-Mart, retail stores that sell materials in demand on the reservation and that would create badly needed jobs. However, two grazing permit holders would not give up their rights, so the deal was scuttled.

In addition to approval by grazing permit holders, business permits at Navajo require approval by relevant tribal offices, the tribal attorney, and, finally, the president of Navajo Nation. Any question raised by a tribal reviewing office or official must be addressed by the applicant. After completion of the review process, which may take as long as a year, the business may have to secure approval by the BIA. The BIA, acting as trustee for the land and other tribal resources, may require that the potential business conduct an environmental impact study and/or archeological survey, either of which can cost as much as $10,000. Tribal officials said that the time and expense these review and approval processes require cause many business deals to founder. While this study was being conducted, Navajo tribal officials were trying to develop ways to expedite and facilitate business development that would be acceptable to the Tribal Council and to tribal members.

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