WASHINGTON – The Treasury Department has been eager to report that tribes have overwhelmingly taken advantage of bonding authority provisions granted under the stimulus act. But Native American financial experts said there have been some key flaws in the program.
In a ceremony held in New Mexico Sept. 15, Treasury Deputy Secretary Neal Wolin and New Mexico Gov. Bill Richardson announced that $1 billion in stimulus bonding authority had been processed to 58 tribes across the country.
The gentlemen explained that the Tribal Economic Development Bonds were intended to create jobs, complete projects, and bring much needed economic revitalization to Indian country.
“I understand as well as anyone the obstacles to creating jobs and modernizing the infrastructure on tribal lands,” Richardson said. “This bonding authority will help pay for important projects in New Mexico – which is a huge boost to our collective efforts to create jobs, particularly in rural areas of the state.”
In short, the bonds are tax incentives, granted for the purpose of building community infrastructure, like schools and roads.
For tribes, they exist as part of the Obama administration’s efforts in passing the American Recovery and Reinvestment Act, which authorized the Treasury to award $2 billion in tribal bond authority to tribal governments through two award rounds of $1 billion each. States and localities have long had access to similar provisions without the need for special legislation.
The first round of the tribal award process was completed Aug. 15. Treasury officials said every tribe that applied properly, by providing documents to the Internal Revenue Service, received an allocation. The next application deadline is Jan. 2.
Wolin said because of the bonds several tribal communities will have access to lower cost borrowing to build schools, hospitals, roads and other projects that will create jobs and bring economic recovery to Indian country.
Several Pueblo leaders were present at the ceremony, also eager to attest as to what they plan to do with their bond authority. According to the Treasury, three New Mexico pueblos received authority as part of this year’s award round.
Wolin said the tribal leaders seemed pleased with the program and the commitments they have received from President Barack Obama, when he was campaigning for the presidency and now.
The event, however, didn’t provide a complete perspective on the bond authority, said some Native financial experts who have raised questions about the program.
Bill Lomax, president of the Native American Finance Officers Association, said many tribal financial officers found this year’s competition to be “oversubscribed” – meaning that a lot of tribes were requesting bonding authority, and they were all granted on a pro-rata basis.
“It might not be the most effective system. Many tribes may have received an allocation, but they may not be nearly ready to conduct a shovel ready project.”
Lomax said the scenario could put some tribes at a disadvantage, since they may be ready to do more projects, but can’t access the bond authority because tribes less ready to develop have been granted the allocations.
Some tribal finance experts think the program would be better for all tribes if it were set up on a revolving basis with tiered windows of time built in for tribes to use the authority.
If the authority isn’t used in a specified amount of time, it could be competed out to other tribes that are ready to use it, Lomax said.
Tribal leaders have also requested that the program be permanent, especially since states and localities are able to access similar programs without the two-year competition limit being placed on tribal governments.
Wolin didn’t share similar concerns about the program; he’s pleased that so many tribal communities were able to access it this year.
“We look forward to another successful round. We’d like to have broader participation and interest.”
As to whether the program would continue after the intended two-year stimulus period, Wolin said it would be evaluated, but noted that this specific bonding authority was only intended to be made available for this period of economic recovery.