Native American Tribes Do Not All Operate the Same with Economic Development

At a recent economic development meeting, I heard a site selector say that he had conducted a research project for an Arizona Native American tribe to compare its competitive advantages to off-reservation locations. Even though the research showed that the benefits of locating a business on the reservation — better lease rates, better utility rates, better tax benefits — far surpassed the off-reservation locations, the perception remained that the development and/or leasing process was “too much of a hassle.”

This misperception may come from yet another fallacy: that all Native American tribes operate the same way. The reality is every tribe has its own unique governmental structure, sets its own tax policies, and has its own development process. Depending on a tribe’s political environment, commitment to outside economic development, and the procedures and policies it has in place, this process can be no longer than any neighboring county’s or municipality’s, or it can be long and arduous. If you look at track records with other reservation projects or tenants, you can get a good idea of how your project may be handled on a specific reservation.

For example, the Ak-Chin Indian Community’s Industrial Park Board shows case studies which detail how long previous projects have taken in planning and design. Moreover, it details a step-by-step leasing and development process that conveys the various steps that must be taken for lease approval. Tribal nations that have put such processes in place can typically streamline responses and approvals more quickly than even some cities and counties.

The successful location of any business depends on due diligence and when proper research and planning have not been undertaken eventual conflicts between landlords and tenants can arise, whether Native or non-Native. Businesses without sound ownership or business plans that are underfunded and that do not invest in marketing will eventually fail, whether on or off-reservation. Just because a tribal community may have a casino does not mean they have money to invest in your business. For most tribes, tribal gaming simply gives them the ability to build houses, schools, roads and sewer and water systems; fund health care and education of their people; and develop a strong, diverse economic base for future generations. If your business does not pencil out as a sound business venture in an off-reservation location, a tribe does not have the extra funds to shore up a company’s deficits. Blaming a tribal location in such cases simply fans stereotypes, but doesn’t excuse a lessee’s lack of investment in his or her own success.

To ensure that you are choosing wisely, there are a number of resources that you can consult when you are considering a tribal location. For example, there are attorneys and financial advisors who specialize in tribal law and taxes. You can contact the IRS or your own tax consultant. You can also review TPR-95-11, an Arizona sales tax law that governs tribal taxes. If you are a small or start-up business, you can reach out to the Small Business Administration (SBA) or a business incubator like the Maricopa Center for Entrepreneurship in the City of Maricopa for help in developing accounting and management skills as well as business and marketing plans. In addition, there are organizations like the National Center for American Indian Enterprise Development, American Indian Chamber of Commerce of Arizona and the Center for American Indian Economic Development (CAIED), located at Northern Arizona University, that can provide information on opportunities in Indian Country.

For the most part, tribal communities welcome responsible economic development projects and tenants because we know this is our path to self-sufficiency. However, tribes also want to work with businesses who are willing to do their part to establish responsible company leadership that respects a tribe’s environmental concerns and cultural practices; understands a tribes’ sovereignty and economic self-sufficiency helps reduce any dependence on government assistance; and values tribes’ economic contributions to the overall health of the economy in the surrounding regions.

As American Indian people, we know that perception can be very hard to change even in the face of overwhelming evidence to the contrary. We also know that when we work together and each side is treated fairly, we can make mutual success a reality. And in my opinion, it doesn’t have to be that hard.

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.