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.

A Forward-Thinking Focus on Infrastructure Builds Tribes’ Economic Stability

Right now, infrastructure is a hot issue that is being discussed by city, county and even country leaders. That’s because government officials and policymakers know that sufficient infrastructure has always been a key factor in attracting and retaining business interests.

Tribal leaders are also concerned about infrastructure, but their focus is not just on obsolescence; it’s on having the basic infrastructure in the first place. The Energy Information Administration estimates that 14% of households on Native American reservations have no access to electricity, 10 times higher than the national average. In Arizona Native Nations like the Hopi and Navajo, 40% of the Reservations’ homes do not have running water. Moreover, according to the 2015 FCC Broadband Progress Report, 85% of rural tribal members lack access to 25 Mbps/3 Mbps broadband.

While cities, counties and states can rely on property and business owners to generate tax revenue for schools, roads, communications, water and electric systems, Native American reservations do not have this same revenue stream since the land on which they live is held in trust by the Federal Government, not owned by their residents. This means reservations must attract sustainable industry activities that will create the funds to build the basic physical and organizational structures and facilities necessary for the operation of their communities. Some of the Native American communities that embraced gaming have been able to start to provide some of the needed services and facilities in their communities, but the need is great and the cost is enormous. What’s more, no one can guarantee the future of gaming on reservations and for Native Nations that are remote or cannot square gambling enterprises with their culture, ways to build their infrastructure remain elusive.

Forward-thinking tribes are looking for ways to diversify their industries to ensure their self-sufficiency and some have been successful despite innate location challenges. For example, although the Mississippi Band of Choctaw Indians Reservation is scattered over 10 counties, this tribe has been able to put together a diversified portfolio of manufacturing, service, retail and tourism enterprises that has helped them reinvest more than $500 million in economic development projects in Mississippi. Likewise even though the Ak-Chin Indian Community does not sit on a major interstate, it has been able not only to expand its recreation attractions, but also to create a transportation hub for its industrial park, Santa Cruz Commerce Center, with the purchase and improvement of the former Phoenix Regional Airport, now renamed the Ak-Chin Regional Airport. Even before its most recent economic development activity, the Community’s economic impact was estimated at nearly $437 million in 2010.

Despite tribes’ drive to become self-sufficient, many non-Natives begrudge the assertion of tribal sovereignty, misconstruing that “reservations are just welfare states funded by the Federal Government.” Even the introduction of gaming is seen as a form of economic assistance provided via federal dispensation of “special rights” to Native Americans. According to a 2004 Harvard University Faculty Working Paper entitled, “Myths And Realities Of Tribal Sovereignty: The Law And Economics Of Indian Self-Rule” by Professor of International Political Economy Joseph P. Kalt, and Professor of Law Joseph William Singer, “When the U.S. took 98 percent of the land in the continental U.S. from Indian nations, it made certain promises in return. The payments made by the U.S. under its general trust obligation and in various government programs are making good on those promises. Indians and Indian tribes receiving such payments are not welfare recipients; they are the original owners of the land in the United States and the benefits provided by the Federal Government are properly understood as mortgage payments the U.S. is making in return for rights to use tribal land.” The fact remains that in 2016 nearly 1 in 3 Native Americans live below the federal poverty line.

Hand-in-hand with this misperception about tribal sovereignty is the myth that Native Americans do not pay taxes. This is not true. American Indians pay federal income taxes regardless if they work and live on a reservation; regardless if they live off-reservation and work on-reservation; or regardless if they work and live off-reservation. Only tribal members who live and work on reservations are exempt from state taxes (in the same way that California cannot tax residents who live and work in Arizona), but tribal governments pay FICA, unemployment and Social Security taxes on the earnings of their employees. They also pay property tax on any land not held in trust by the Federal Government. While tribal governments do not pay taxes on their revenues, they do make substantial payments in lieu of taxes under the hundreds of tax and gaming compacts.

Some tribes have started to impose their own tax policies on their reservations to shore up the short gap for infrastructure needs, but it is a delicate balance. “We want to keep our reservation attractive for new business interests,” said Ak-Chin Treasurer Brandon Peters. “That’s why our Industrial Park Board works with the Council and other departments to customize leases and make the process of locating here as easy as possible.”

In the final assessment, diversifying industry in order to build infrastructure in Native Nations is not just about building facilities. It is about building a Nation that is secure in its own self-determination.