Navajo President Orders New Options for Entrepreneurs

Source:ap.org Author:Felicia Fonseca Date:03/25/14 Click:

ALBUQUERQUE (AP) -- The Navajo Nation is making it easier for entrepreneurs to start a business on the vast reservation desperately in need of economic development.

Under tribal law, all businesses have been required to obtain a surety bond before being issued a lease that guarantees the tribe would still get a year's rent for the property should the business owner default on a loan.

But Navajo President Joe Shirley Jr. said most insurance and bonding companies refuse to issue such bonds, and he has ordered that alternative options be made available.

"This waiver will help our small business owners obtain their business site leases and, in turn, move to develop our economy and provide new jobs for our people," Shirley said.

The Tribal Council's Economic Development Committee had handled the waiver of such bonds in the past. That authority now has been delegated to the tribe's Division of Economic Development, partly because of the failure of the committee to act, said Allan Begay, executive director of the division.

Begay contends there should be a thriving economy on the reservation that includes both Navajo and non-Navajo entrepreneurs. Instead, about 70 percent of the money made on the reservation is spent in border towns.

Starting a business on the Navajo Nation can take years while entrepreneurs are led through a web of bureaucracy that includes state, federal and tribal laws.

"It's nice to say 'I'll eliminate the bonding requirement,' but you still have those regulations to contend with," said Donald Dodge, chairman of the Dine Development Corporation.

Under Shirley's order, the Economic Development Division can accept certificates of deposit, letters of credit or cash deposits in lieu of surety bonds. The amount secured still must be equal to a year's rent for the business site.

Those alternatives also can be waived if the lessee is in good standing with the tribe's Division of Finance for at least five years or is part of a Fortune 500 company, a nonprofit organization, or a state, federal or tribal agency, Shirley said.

The order remains in effect until the council's Economic Development Committee approves amendments to the tribe's Business Site Leasing Regulations Act.

Begay, who was at the committee's meeting Thursday, said there was talk about reconsidering the legislation that covers surety bonds but committee members didn't immediately take up the issue.

Committee Chairman Lawrence Platero and Vice-Chairwoman Katherine Benally declined to comment.

About 400 leases are held on the Navajo Nation by tribal and non-tribal members, Begay said. At any given time, 40 lease applications are being processed.

Begay said while it's reasonable to believe each application takes about a year and 40 new businesses are created, "that doesn't happen."

"The business site leasing is still very cumbersome, primarily because of the trust status of the land," he said.

In addition, Navajo courts have left wide open the issue of whether insurance and bonding companies can go after the holder of the bond if the owner defaults.

"It's not clear," said Jim Fitting, a former assistant attorney general for the Navajo Nation Department of Justice's Economic and Community Development Unit. "This was never decided by the Navajo courts. Because the issue was never decided, these companies that do bonds essentially stopped writing on Navajo."

Fitting estimates that about 80 percent of people seeking a business lease on the Navajo Nation cannot get a bond because they can't put up a year's rent.

Fitting said he believes Shirley's order is "absolutely essential to keep business from grinding to a halt on the nation."

"The downside is it doesn't look at the underlying problem of how businesses on the nation deal with the issue of credit and wealth building," he said.

If a business is fully capitalized, it wouldn't have any trouble putting one year's rent down in advance, he said.

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