Washington in brief
'Wait ’til next year’ on tax-exempt bonding bill
A bill to provide tribes with a broader authority to issue tax-exempt bonds, already sponsored by Sen. Gordon Smith, R-Ore., will be shelved until prospects look more favorable in the House of Representatives, said Tom Rodgers of Carlyle Consulting.
The authority to issue tax-exempt bonds for an array of purposes is enjoyed by state and local governments. Tribal governments have long sought the same authority. As tax law now stands, they can issue tax-exempt bonds only in support of “essential government functions” as defined by the Internal Revenue Service in ambiguous language.
The definition raises doubts among investors as to whether their investment in a tribal bond qualifies with the IRS as tax-exempt financing. Such doubts are known in capital markets as “risk,” and risk translates to a higher interest rate on the money invested in the purchase of a tribal bond. Without the better interest rates associated with tax-exempt bonds, debt service becomes prohibitive, especially for poorer tribes.
The sum of all this is to create barriers for tribes that want to access capital markets by issuing bonds to build infrastructure, community centers, economic development projects, housing, schools and health facilities, according to witnesses before a subcommittee of the Senate Finance Committee May 23.
Rodgers said support for a change in law to “level the playing field” for tribes has solid support in the Senate. But a bill passed in the Senate to that effect would face more uncertain prospects in the House, he added. If it passed the House, it would almost certainly pass in a different version than the Senate’s, or as an attachment to a larger bill with other differences. In any “conference committee” called to reconcile the different bills, Rodgers added, a tax-exempt bonding provision would be taking its chances.
“Conferences with the House on Native issues have not been productive.”
He said efforts to secure a broader tax-exempt bond issuing authority for tribes will proceed when the legislative lay of the landscape in the House changes for the better.
</b>CDFI award to spur development prospects</b>
DENVER – The Treasury Department announced on Aug. 24 that its Community Development Financial Institutions Fund will award $4.3 million through the Native American CDFI Assistance program.
Among the grant recipients is Native American Bancorporation, the holding company of Native American Bank, headquartered in Denver. NAB serves Native communities and is owned by 26 tribes, Alaska Native Corporations and tribal organizations.
The Native American CDFI Assistance program encourages the creation, and strengthens the sustainability, of community-based lending organizations – CDFIs – that serve primarily American Indians, Alaska Natives and Native Hawaiians. More information can be found at www.cdfifund.gov.