Advice for Tribal Economic Development Directors

Your initial assessment of your community’s economic strengths and weaknesses will inform your tribal community planning (link TBD).

Employment

You can start by evaluating your community’s economy by obtaining baseline economic information regarding unemployment, underemployment, and labor participation rates.

If tribal members must travel outside their community for jobs or services, determine whether these jobs or services can also be established within the community.

Secured Transactions

You should determine whether your tribe has adopted a secured transactions code. If it has, you should see whether liens attached pursuant to the code are recorded in a state registry. Over time, you should become familiar with secured transactions codes and their role in increasing tribal members’ ability to use credit to purchase the equipment, furniture, and vehicles needed to start or sustain a business.

Encourage tribal leadership to adopt the Model Tribal Secured Transactions Act (MTSTA), if they have not already done so, and encourage them to enter into a joint powers agreement, memorandum of understanding, or compact with the state to register liens arising from the code. For the MTSTA to have an effect there must be a means to enforce it.

Financing

You should find out where tribal entrepreneurs and would-be entrepreneurs can obtain financing for their businesses.

Is there a Community Development Financial Institution or other sources of capital in the community? Are there nearby banks where tribal members can deposit their savings? Do these banks regularly lend to tribal members? If not, why not?

You should learn how tribal and Native-owned businesses can obtain financing.

Businesses should also be made aware of the Indian Loan Guarantee and Insurance Program (ILGP) and other federal sources of capital.

Grants

If possible, your tribe should employ someone who is responsible for tracking federal, state, and private grant opportunities and applying for those that align with the tribe’s long-term economic goals.

However, your tribe’s economic model shouldn’t depend upon obtaining grants. Your tribe’s economic development priorities may not align with the intended purpose of a grant.

Your tribe can reduce its dependence on outside funding by developing profit-making tribal businesses.

This is called an “enterprise strategy.”

Tribes can and should establish a diverse number of businesses.

You should consult with your tribe’s attorney about how these businesses should be structured to address state and federal tax requirements and regulations.

It’s wise to consider starting tribal businesses that offer services or products that tribal members would otherwise have to travel outside the community to obtain. You might also consider launching tribal businesses that leverage tribal tax and procurement opportunities.

The Role of Tribal Governments

Tribal businesses whose management is separated from tribal electoral politics have the best chance of success.

While the tribal government appoints the tribal business’s board of directors and approves its initial operating plan, it should then allow the business to make hiring and day-to-day operation decisions. Tribal businesses that become politicized create an uncertain environment for investment.

However, the tribal government still can: control, fund, and share in the profits of the business; select its board of directors; enact uniform rules to govern the business; require the business to provide regular financial reports to the tribe; choose an independent accounting firm to audit the business; and retain the option to revoke the business’s charter and fire its board members at will.

It’s important to recognize that economies are built one project at a time. The establish of one project may lead to the development of related businesses, and thus gradually create a network of enterprises that are interconnected.

Oftentimes, tribal leaders lack the expertise to know for certain whether a proposed economic development project, enterprise, business, or technology will succeed or become a costly failure.

To avoid investing in an opportunity with a high risk of failure, you should consider conducting a feasibility study with help of a “qualified” professional or consultant with no financial or personal stake in the outcome of the study. “Qualified” means that the professional or consultant has enough subject matter expertise about the proposed project, has academic or professional licenses or credentials relevant to the proposed project, and/or has experience conducting similar studies.

Outside promoters may often try to persuade you or tribal leaders to invest in economic development projects inside your community that may involve unproven technologies, pose a strong likelihood of failure, or are even intended to defraud tribes.

Some promoters offer credible opportunities, but even these claims should be thoroughly vetted.

One strategy that a tribe can adopt to protect their interests is to request that a promoter fund a feasibility study conducted by consultants chosen by the tribe before committing to a long-term investment in a proposed project.

Encourage Entrepreneurship

Tribes should always encourage entrepreneurship.

As a tribal economic development director, you can start by identifying roadblocks to private business start-ups.

For example, does the tribe lack an independent judicial system that can decide business disputes? Does it impose cumbersome and time-consuming permitting and business site leasing requirements? If so, tribal entrepreneurs might choose to open their businesses in nearby towns rather than in the community.

The tribe’s goal should be to establish an environment conducive to creating and sustaining independent businesses.

When there are many small local businesses in the community, tribal members have more opportunities to buy products and services close to home, and those dollars will circulate longer within the community.

Some tribes with the financial resources can make industrial parks and incubators (i.e., attractive business sites already ready with sanitation, water, electricity, and broadband service) available to entrepreneurs.

Tribal incubators usually consist of a single building with multiple, separate offices each occupied by separate, independent businesses. The theory behind incubators is that their tenants will assist and learn from each other and may even enter into collaborative commercial relationships.

There are also tribes that can provide low-interest financing for entrepreneurs who need seed money for their start-ups or expansions, or that employ staff to assist entrepreneurs in preparing business plans.

However, even a tribe with few resources can still take advantage of federal programs that aim to increase the business knowledge of emerging entrepreneurs. The Federal Deposit Insurance Corporation (FDIC) and the Small Business Administration (SBA)offer free, web-based training on how to start up and manage a small business.