Officials taking another look at $120 million bond
By Bill Donovan
Special to the Times
WINDOW ROCK, Nov. 28, 2011
Albert Damon Jr., the tribe's director for economic development, has been meeting with the Budget and Finance Committee, which has expressed a lot of interest in the current proposal for a $120 million bond issue.
But the committee has also concerns about how the bonds would be repaid and whether the tribe has "shovel ready" projects if the money becomes available.
Damon said he has been working with his staff to get the committee hard numbers and to make sure the projects proposed would generate revenue for the tribe.
This has been one of the biggest reasons that other bond proposals have failed.
Eight years ago, then-President Joe Shirley Jr. proposed a $500 million bond issue to finance new jails and other infrastructure needed by the tribe. Only a portion of the money would have gone to create revenue-generating businesses.
This time, said Damon, the emphasis is on revenue-generating projects. For example, some of the money would be used to build 10 convenience stores throughout the reservation that would then be leased to private companies.
"We would get the lease payments and tax revenue from the stores," Damon said.
The Navajo Nation's efforts are being noticed in the world's financial markets.
Bloomberg, a top financial reporting institution, recently carried a long and positive story about the tribe's efforts, pointing out that the Navajo Nation currently carries an "A" rating from Standard and Poor's.
While not as good as the top "AAA" rating, it is one level above that enjoyed by the state of California, which has a large budget deficit.
Bloomberg indicated that the Permanent Trust Fund, which has been hovering around $1 billion for the past couple of years, is one of the reasons the Navajo Nation scored such a respectable credit rating.
Currently a 20-year tax-exempt bond of the type the Navajos are considering would require an A-rated issuer to pay an interest rate of about 4.76 percent.
The better the rating, the less the tribe has to pay in interest.
Bloomberg News examined a tentative project list submitted by Navajo officials in September and said it included not only the convenience stores, but also several fast food restaurants, two shopping centers, office and industrial complexes, a radio station, a $14 million tourist center and $23 million for seven hotels.
DED believes these projects would generate $3.2 million annually in rental income and taxes, and would directly or indirectly create more than 6,000 jobs.
That won't be enough to repay the bond so the tribe would have to commit revenue from other sources - somewhere in the neighborhood of 8 percent of its revenues, Damon says - to pay off the bonds. The tribe could also use interest from the Permanent Trust Fund for this purpose.
If this goes through, Bloomberg analysts say it would be the largest bond issue by a tribal government that is not tied to gaming.
One difference in a Navajo Nation bond issue would be that purchasers would have to agree to resolve any dispute in tribal court rather than through the state or federal court systems.
Financial experts interviewed by Bloomberg said this would be the first time such a requirement was included in a bond issue.