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How Should Tribes Evaluate Economic Development Projects?

A column by Dave Staddon about economic development among American Indian tribes.
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Tribal economic development is a complex issue, but important to the future development of tribal economies. Tribes get a wide variety of projects pitched to them. And not all of them are potentially beneficial. It’s important to have somebody on staff that can do an evaluation of any proposed project. This would involve having as seasoned business professional on board as a staff consultant, an economic development director, or a similar position. But one person can’t know everything about everything, so it may be necessary to call in a consultant or a specialist in the specific industry/business in order to determine if the proposed project should make it past the initial stages. Accepting a referral for a consultant from the people/company making the pitch is not a good idea, for obvious reasons, hopefully. A challenge for many tribes is limited resources to engage in properly vetting a project, but the tribes who are most likely to be targeted have resources, usually from casino revenues.

First it’s important to evaluate the credibility of the company and individuals making the pitch. What’s their track record, who have they worked with in the past on what type of projects, how long have they been in business and what experience do they have in Indian Country? Investigate their background. This all sounds like common sense, right?

What is the tribe’s commitment? Most likely, the tribe is being asked to make a financial commitment to the project that will in some way benefits the person or company proposing the idea. Or else they would not be there with a proposal. That’s not necessarily a bad thing -- business is about profitability and both parties should benefit. So here’s where the “what’s in it for me?” factor enters the equation. How will the project benefit the tribe? And to what degree? A stock answer may be “job creation,” which is often used as a carrot. Unfortunately many tribes tend to focus on job creation as the primary benefit, whereas there is only one purpose of any business. And that is to turn a profit. Job creation should simply be a by-product of profitability and its sole purpose is to contribute to profitability through efficiencies. This question calls for an independent financial analysis.

Other issues are what are the social, cultural, legal and environmental impacts? Various business projects will have different impacts on the community and its members. We can look at three of those areas (social, cultural and environmental) as being closely related, especially in an Indian community. For example, what impact would mining have or any other type of extractive activity such as logging or the petroleum industry?

I’m not against these activities since it’s relatively easy for a tribe to profit from them, but they need to be handled very carefully. What impact would tourism have on the community? How about a light assembly plant or manufacturing? How about retail? Is the activity sustainable? Extractive economies are generally not sustainable in the long run, but other types of economic activities are. Somebody needs to analyze the risks and potential benefits of each of those activities. Once the project has the green light, legal counsel representing the tribe needs to evaluate the proposal and any agreements.

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How will the activity affect the tribe’s image? Since I’m in public relations, I always think of this. How would positive press or negative press contribute or detract? It’s important for any tribe to have the capacity to take advantage of any public relations opportunities related to the business project or any other project or program the tribe sponsors.

What does the project do for the local and regional economies? What are the direct, indirect and induced economic impacts? This will require an outside consultant to do an economic feasibility study.

What is the tribe’s role in the project? What would the tribal government continuing role be in relation to the project once it’s established? Does the project take advantage of the tribe’s unique legal status? This could be a drawback or a plus.

The other important challenge is to keep politics out of the business as much as possible. The desire to create jobs or to use the business to achieve political ends is often tempting to governments—and not just tribal governments. Many tribes successfully operate businesses outside of the casino industry. One way to do this is through a board of directors who oversees the business. This model has varying degrees of success depending on how much influence a tribal council exercises over the board.

The true purpose of any business is to create profits. Governments should create environments conducive to economic development and regulate the private sector for the protection of the public.

Dave Staddon is the public information director for the St. Regis Mohawk Tribe.