The advantages of locating a commercial building on Native American land

When looking for new sites, food processing facilities typically want to be in operation in 6-12 months. To reduce the time involved, companies often limit their search to sites with existing buildings that can be retrofitted, but may be less than ideal in the long-term.

Concentrating a site search only on conventional locations may lead companies to overlook the truly unique advantages offered by Native American reservations. Many federally-recognized tribes can offer unparalleled tax advantages, incentives, and project fast-tracking abilities that most states, counties and municipalities simply cannot. Any hesitancy may come from a lack of understanding of how reservations work. Still, not all tribes operate the same way or offer the same infrastructure.

If considering a Native American location for a supply-oriented food processing facility, one consideration is the availability of the commodities used in the manufacturing process. Locating near the type of crop or supply chain production used in manufacturing can significantly lower your procurement costs. In addition, in areas where there are other agricultural endeavors, there is often ready workforce availability and training resources already in place.

If your food processing business is demand-oriented, a location near consumers helps to mitigate the costs of transportation and distribution. In this case, you will want to look for reservations that are not too isolated and that have ready access to transportation corridors.

Ever-changing food industry trends can be a more determinant factor than even access to raw materials or consumers. This can mean securing a flexible site that can quickly adapt to changes in design to accommodate new regulation; new food safety issues; implementing automation; and achieving greater energy efficiency. Most Native American communities will not have an existing building to occupy. However, if the reservation has an in-house development and approval process to speed projects to market, even a build-to-suit facility can be completed in a short timeframe.

According to Billy Hickman, Vice President of Operations of Hickman’s Family Farms and a Santa Cruz Commerce Center tenant since 2003, this is what attracted their enterprise to the Ak-Chin Indian Community’s industrial park. “Their ability to craft a customized lease allowed us to amortize construction costs over the length of a long-term lease and have a facility built to our specifications in just 10 months,” said Hickman. “We’ve been able to expand two more times since our initial construction, too.”

Finding a tribe with the same industry or cultural focus can also lead to some creative synergy. “When we needed to find a solution for dealing with our chicken waste, we were able to create a reciprocal agreement with the tribe, ” said Hickman. “Now we provide it to Ak-Chin Farms as fertilizer for growing the crops we need to feed our flocks.”

Other areas of concern for food processors are water availability and utility costs. While Arizona tribes just like all cities and counties must be prudent in their water usage, some tribes have settled their water rights, which has guaranteed their allocation, while some have yet to do so. In addition, if a tribe owns its own utilities, costs can be significantly lower than off-reservation locations.

Given the location characteristics that are important for food manufacturing firms and what Native American reservations can offer, there is good reason not to limit your search to conventional choices. In any case, how fast you could potentially grow by expanding your location options is certainly food for thought.

10 things to ask before starting a business on tribal land

In order to assess whether or not your business or development project is a good fit for a tribal location, here are 10 key questions to ask the tribal representative:

  1. What cultural traditions and values are important to your tribe as it relates to economic development?

Most tribes will entertain projects that align with their customs and principles, and affords them the greatest opportunity for self-sufficiency. Reservations are not dumping grounds for projects that would not be approved in neighboring cities or counties. In addition, while some tribes may focus on developing entertainment venues, others will look for greater diversification. Ask what business enterprises would be compatible with their Community.

  1. How is your reservation property held in trust? Do you have allotted lands or does your reservation belong to the tribe as a whole?

Some tribes have allotted lands, which means you could have many owners who have to sign-off on a lease before development can proceed, which can add time and cost. On other tribal lands, the land is wholly owned by the tribe. However, even those with allotted lands can already have an agreement with individual owners that will allow the tribe to negotiate leasing opportunities on their behalf.

  1. What is your lease process? Who oversees leases and handles approvals?

In some cases, the first point of contact could be an economic development group, industrial park board or leasing manager; sometimes it is handled through a department like Planning or Education; and other times, the Council must be contacted directly. A few tribes have created an approval process that is similar to any municipality, taking a project submittal through legal, financing, planning & zoning and finally through the Tribal Council for final approval.

  1. How long does the process typically take?

On average, most tribes will say lessees should add at least 20% more time for consensus-building and approvals. Smaller tribes with solid government leadership can usually be more nimble and quick to respond.

  1. How long are your leases?

A maximum 99 year land lease is offered by some tribes while others do recurring 25-year term leases. Depending on the benefit to the local economy, customized lease terms can be negotiated.

  1. What is the BIA’s involvement in lease approvals?

Under the HEARTH act, tribes were given the ability to control their own leases as long as they applied and were approved by the Bureau of Indian Affairs (BIA). The Ak-Chin Indian Community, for example, was the first Arizona tribe to do so.

  1. What financing options are available for new construction or tenant improvements on existing buildings?

A tribe may have the financial ability to wrap capital costs and TIs into a long-term lease. This means you could put your initial capital into operations rather than tying it up in land purchases and development.

  1. What taxes and/or exemptions apply to my business on your Reservation?

There is no uniform tax code among tribes, but tribes have the ability to create their own tax policies and levy their own taxes on certain activities. Depending on the nature of your business, you may qualify for certain exemptions, so it’s best to consult your tax advisor and work with the tribe’s financing department.

  1. Do you own your own utilities? If so, what are their rates?

To make sure you are comparing apples to apples, be sure to ask for a utility analysis to compare rates with other area utilities. Though the base rate may look comparable, on-reservation utilities may not include certain taxes and adders, which can add up to substantial savings. This is true for Ak-Chin Energy Services, according to Beth Mundell, owner of Fyrestorm Cheer and a Santa Cruz Commerce Center tenant since 2013. “We LOVE Ak-Chin Energy Services for keeping our rates so low!” she said. “It really makes a big difference in our operating expense.”

  1. How are disputes handled?

Tribes can offer a limited waiver of sovereign immunity, so that disputes can be handled by arbitration rather than in a tribal court.

Understanding the right questions to ask is critical to any successful site selection process and given the right environment, a Native American location might be the best answer.

Tips for opening a business on Arizona’s Native American reservations

In Arizona, there are 22 federally recognized Native American tribes, communities, or nations, which encompass thousands of acres of land and ample opportunity for many private businesses to develop or locate on a reservation. Yet, many commercial developers, realtors and site selectors are unfamiliar with the process and potential benefits. Here are the basics:

Can I Buy Land on a Reservation for My Project?

Native lands cannot be bought and sold. They are owned by the federal government and held in trust for the different Native American tribes. Therefore, non-Native businesses that are looking to locate on a reservation must enter into a land lease or build-to-suit lease arrangement with the tribe.

Until recently, the Bureau of Indian Affairs (BIA) on behalf of the Secretary of Interior, had to approve all leases on reservations, but with the passing of the HEARTH Act in 2012, tribes were given the ability to control their own leases once a tribe applied and was approved.

Is Development Similar on All Reservations?

Each Native American tribe operates like its own country. Each has its own tribal government structure, sets its own tax policies, and has its own development process. On some reservations, for example, tribal members can possess individual parcels or allotted lands. What this means for business owners and developers is that if their project impacts any allotted lands, they have to get the individual owners to sign-off before a development project can proceed. The location itself may make it worth the wait, but it can add time and cost.

For instance, in the Salt River Pima Maricopa Indian Community (SRPMIC), much of the Community’s property fronting the Loop 101 is allotted land. It is not unusual to have 150 (and often more) individual owners that have to agree to the lease terms. Consequently, a typical timeframe to secure a lease at SRPMIC will take about 18-24 months. On other reservations like the Ak-Chin Indian Community, there are no allotted lands. All reservation property belongs to the Tribe as a whole and its use is governed by the Tribal Council, which means a developer can start and complete projects much faster. When Ak-Chin committed to building its $50 million multi-tainment center, for example, it was designed and built in 14 months.

Isn’t Ownership Preferable to Leasing?

While ownership might be preferable when the market is good and values are increasing, if the Great Recession of 2008 taught business owners anything, it is that real estate can tie up a lot of operating capital in a depreciating asset and it isn’t always easy to sell when you need quick access to funds. As Steve Jaffe, the Chief Investment Officer for BH Properties, a Los Angeles-based commercial real estate investment firm, said, “Many business owners have also come to see the ‘light’ that owning their own real estate is a drain on their ability to grow their business.”

Leasing on a reservation can have distinct advantages over ownership. First, you eliminate the large initial capital outlay for land purchase. Moreover, some tribes will roll your construction costs into a long-term lease so you can amortize your development costs over the duration of your lease. Instead of tying up a large portion of your operating capital that may or may not appreciate, you use your capital to get your company growing immediately.

Are there other advantages to locating on tribal lands?

Other benefits of tribal locations may include tribal employment incentives, tax exemptions, as well as savings on utilities and public safety, especially if these services are tribally-owned. Again, every tribe is unique, so ask about their tax policies. Your business may not only be qualified for tribal exemptions, but also State and federal incentives.

How do I allay the doubts of wary company executives?

The best way to dispel fears is to talk with current tenants about their experience. When Brent Scott, VP and General Manager of M&S Equipment, a 10-year tenant in Ak-Chin’s industrial park, Santa Cruz Commerce Center, was asked this question, he said, “We had never leased in our company’s history. We were a little nervous to do so. I can tell you honestly that Ak-Chin has been great to work with. They took the time and effort to listen to our concerns and wishes and structured a lease that works well for us and our style of business.”

It just goes to show with a little basic understanding, tribal locations can provide great opportunities for businesses.

Leasing vs Buying from a Native Perspective

Many commercial realtors and location specialists are unfamiliar with the benefits of locating a business on a Native American reservation. In particular, the advantage of a land lease as opposed to purchasing land is especially foreign territory. Read more

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In Native American culture, there is a concept called “Indian time.” Some people seem to think that this means all Native Americans run late, but what it really means is “It will be done when it is meant to be done.” And when it comes to economic development in the Ak-Chin Indian Community, “when it’s meant to be done,” defines what the concept of speed to market really is. Read more