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Loan guarantees for infrastructure construction are best to solve for Native American economic growth

National Congress of American Indians 8 (The oldest, largest and most representative American Indian and Alaska Native organization serving the interests of tribal governments and communities, December 17, Indian Country Economic Recovery Plan,

One of the most successful programs undertaken by the Bureau of Indian Affairs is the Guaranteed Loan Program for businesses. It has been successful because it provides an attractive incentive for banks to expand and underwrite loans in Indian country. The default rate is enviable, administrative costs are shifted to the banks and demand far outweighs the allocated funding. The loan guarantee program provides security for up to $80 million in loans between private banks and Indian tribes and tribal enterprises in FY 2008. Despite this guarantee authority, an additional $90 million in potential loans were not guaranteed because they exceeded the $80 million ceiling. We are requesting that the Guaranteed Loan Program receive an additional $90 million in leveraged loan backing through an additional $9 million in leveraged (10:1) funds to meet existing demand for business development. This funding could also be used to meet the demand for tribes to grow their economic base to fund government programs by authorizing tribal bonds to be eligible for funding. Department of Interior already had a program developed for meeting this important need. In addition, it is also important that Indian-owned companies participate in performing infrastructure construction. Tribally-owned construction companies have been denied access to surety bonding because of the perceived risk associated with sovereign immunity – even when waived for specific contracts. We recommend the Guaranteed Loan Fund be utilized to guarantee the performance bonds to ease the expense or outright denial of coverage needed to compete for and secure contracting opportunities. An additional set aside of $100 million should be guaranteed as part of the existing program for surety bonding. With a default rate around 39%, funds of $39 million would be leveraged to support the total funding of $100 million. xixExpansion of the successful loan program to include larger energy funds would ensure tribal participation as energy partners. Without capital, tribes will continue to occupy the lower levels of the value chain and not receive full value for their limited resources. We are requesting $100 million in leveraged (10:1) funds to provide a total of $1 billion in guaranteed loans for energy projects. This important funding will give tribes the opportunity to create wind energy, provide aggregates for road construction and develop existing domestic fossil fuels.

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