Law360 has published a new article with strategic guidance for improving the development of infrastructure in Native American communities. Better infrastructure is a critical need for Native American tribes aiming to strengthen their economies and serve their members, but attorneys working on these projects need to be alert regarding stiff challenges in financing, physical access, dispute resolution and other key areas to make sure deals don't fall apart.
While energy development and casino projects can generate much-needed cash for transportation, telecommunications, government services and other tribal infrastructure, they can't cover everything, and tribes and their attorneys may have to get creative to secure the funding they need both to get projects done and keep them going, experts say.
Here, Law360 provides six keys for tackling infrastructure in Indian Country.
Remember That One Size Doesn't Fit All
Tribes' infrastructure needs are as diverse as the tribes themselves, depending on the size of the tribe and its location, among other factors, according to Townsend Hyatt, leader of Orrick Herrington & Sutcliffe LLP's tribal finance group.
Smaller tribes will have less demand to meet, while tribes closer to metropolitan areas can often meet their infrastructure needs through a tie-in with local road networks or municipal water systems, he said.
"The real challenge comes from tribes that have a larger membership and are in more rural areas where they can't rely on neighboring governments to help pay for infrastructure," Hyatt said.
The part of the country a tribe's reservation lies in will also help determine what its infrastructure needs are, according to Holland & Knight LLP partner James T. Meggesto. While a tribe in the Southwest might be trying to pave more roads, a tribe in the Northwest may rely on waterways for surface transportation, he said.
With limited tribal and federal government funding available, roads and other infrastructure initiatives can benefit from having tribes identify their own needs, Meggesto said.
"It's why tribes have sought and achieved some level of recognition of their sovereign status and their ability to be the best ones to deliver transportation services on their own territories," he said.
Work With the Funds You've Got
The inability of tribes to tax properties held in trust by the federal government makes finding funds for infrastructure projects a big problem, according to W. Gregory Guedel, chair of Foster Pepper PLLC's Native American practice.
While a local nontribal government may rely on a combination of property taxes and sales taxes to build infrastructure projects, that system of financing isn't available for tribes, he said.
"They have a huge, huge disparity because of that legal status in accessing sources of capital," Guedel said.
With the lack of a well-established tax base to pledge for repayment of large borrowing, tribes have to look for other ways to attract outside investment, according to Hyatt.
Tribes can look for grants, federal appropriations or long-term debt to help finance infrastructure, but they're relative newcomers to the bond market compared to state and local governments, Hyatt said.
"With each year, I think tribes make further inroads into the tax-exempt bond markets, and my hope is one day it's more or less parity," Hyatt said. "We're a long way from that, but the day may come where we really don’t see that much difference."
Leverage the Feds
While infrastructure is an issue throughout the federal government, tribal infrastructure has historically been worse off, attorneys say.
As a result, however, tribes can often make a strong case for federal funding based on their need for better infrastructure, through exclusively Native American programs or in competition for funding with nontribal rural communities, according to Guedel.
Tribes can then take advantage of that federal support to appeal to outside investors, Guedel said. Even remotely located tribes that aren't typically on lenders' radar can access capital if they can show they're eligible for federal matching funds and loan guarantees, he said.
"The tribes that are leveraging those federal programs not only are moving forward with infrastructure development on these types of commercial projects, but are really saving their private capital, their own hard cash, for other things they want to do," Guedel said.
Build a Legal Framework Companies Can Rely On
Having an underlying legal base sophisticated enough to support a tribe's planning and contracting of projects is a must, Guedel said.
"Outside entities are looking for places and projects that have that legal infrastructure behind them, and a tribe that has a solid set of codes and procedures where everybody knows what the rules are," he said.
Physical infrastructure is important, but companies are quite willing to help build new roads out to an oil drilling site, for example, if they're confident that the tribe can handle the deal and tribal government won't interfere, he added.
The most successful tribal codes are as comprehensive and detailed as in other jurisdictions, but incorporate the tribe's traditions as well to ensure members' support for government projects, Guedel said.
"It's really a combination of what you might call Western legal expertise with the inherent tribal culture guiding that expertise, and making sure the codes reflect the values of the tribe," he said.
Link a Tribe's Needs To Its Moneymaker
Tribal casinos and energy projects have the power to attract outside investors — a lure tribes can use to help finance government services and other infrastructure projects on a tribe's reservation, Hyatt said.
"Quite often, a casino will be located on a piece of land where not only is the land undeveloped, but there's nothing there to support a project once developed," Hyatt said. "So you've got to put in sewer and water lines, roads and so forth, and when you do that, there's often an economy of scale so that while you're doing that, you can extend the road to service other areas of the reservation."
The Bakken oil boom in North Dakota shows the high price attached to trying to catch up with infrastructure, Hyatt said.
The Three Affiliated Tribes are reportedly facing as much as a $500 million tab to fix roads on the Fort Berthold Reservation that have been worn down by oil-related traffic.
"Suddenly there's this explosive boom with the Bakken oil reserve, and there's not the housing, the water, the roads, the police — there's just all kinds of stuff that can't keep up with the huge influx of people coming to work there and the growth of the industry in such a short period of time," Hyatt said.
And infrastructure that's less obviously tied in with a particular project, such as telecommunications support, shouldn't be overlooked by tribes, as it's essential for businesses working on reservations, attorneys say.
"We view infrastructure issues as being closely related to the ability to have telecommunications and high-speed Internet, and reliable phone and communications infrastructure," Meggesto said. "Every day the world seems to get more technological, and there are lots of opportunities for tribes and tribal contractors that are going to need that sort of infrastructure."
Know Your Forum If Things Go Wrong
One way to get a project started on the right foot is to make sure parties know what to expect in dispute resolution if things don't go well, attorneys say.
"Whether it's financial investors or construction companies that would build roads, the number-one fear nontribal, outside potential partners have about working with tribes is that if there's a dispute, tribal sovereignty and tribal courts will prevent them from getting a fair hearing or decision," Guedel said.
But that worry is "mostly based on ignorance," he added, noting that many tribal courts in his home region of the Pacific Northwest are actually superior to nontribal courts.
Dispelling the perception that tribal courts may be biased against outside companies requires transparency on key issues, including making sure parties know in what circumstances a tribal court has authority and the limitations on a tribe's contractual sovereign immunity waiver.
"Lawyers have an absolutely crucial role in bringing mutual understanding," Guedel said.
--Editing by Katherine Rautenberg and Philip Shea.