    [Senate Hearing 108-673]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 108-673

         NATIVE AMERICAN CAPITAL FORMATION AND ECONOMIC DEVELOPMENT ACT

    =======================================================================

                                    HEARING

                                   BEFORE THE

                          COMMITTEE ON INDIAN AFFAIRS
                              UNITED STATES SENATE

                          ONE HUNDRED EIGHTH CONGRESS

                                 SECOND SESSION

                                       ON

                                     S. 519

       TO ESTABLISH A NATIVE AMERICAN-OWNED FINANCIAL ENTITY TO PROVIDE
    FINANCIAL SERVICES TO INDIAN TRIBES, NATIVE AMERICAN ORGANIZATIONS, AND
                                NATIVE AMERICANS

                                   __________

                                 JULY 21, 2004
                                 WASHINGTON, DC

                        U.S. GOVERNMENT PRINTING OFFICE
    95-160                      WASHINGTON : 2004
    ____________________________________________________________________________
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                          COMMITTEE ON INDIAN AFFAIRS

                  BEN NIGHTHORSE CAMPBELL, Colorado, Chairman

                    DANIEL K. INOUYE, Hawaii, Vice Chairman

    JOHN McCAIN, Arizona,                KENT CONRAD, North Dakota
    PETE V. DOMENICI, New Mexico         HARRY REID, Nevada
    CRAIG THOMAS, Wyoming                DANIEL K. AKAKA, Hawaii
    ORRIN G. HATCH, Utah                 BYRON L. DORGAN, North Dakota
    JAMES M. INHOFE, Oklahoma            TIM JOHNSON, South Dakota
    GORDON SMITH, Oregon                 MARIA CANTWELL, Washington
    LISA MURKOWSKI, Alaska

             Paul Moorehead, Majority Staff Director/Chief Counsel

            Patricia M. Zell, Minority Staff Director/Chief Counsel

                                      (ii)

                                C O N T E N T S

                                  ----------
                                                                       Page
    S. 519, text of..................................................     2
    Statements:
        Anderson, David W., assistant secretary, Indian Affairs,
          Department of the Interior.................................    44
        Apoliona, Haunani, chair, Board of Trustees, Office of
          Hawaiian Affairs...........................................    61
        Brown, Mark F., chairman, Mohegan Indian Tribe...............    51
        Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado,
          chairman, Committee on Indian Affairs......................     1
        Carl, Chester, chairman, National American Indian Housing
          Council....................................................    58
        Kitka, Julie, president, Alaska Federation of Natives........    53
        Murkowski, Hon. Lisa, U.S. Senator from Alaska...............    44
        Spilde, Kate, Rancho Mirage, CA..............................    62

                                    Appendix

    Prepared statements:
        Anderson, David W. (with attachment).........................    73
        Apoliona, Haunani (with attachment)..........................    77
        Brown, Mark F................................................
        Carl, Chester (with attachment)..............................    85
        Kitka, Julie.................................................
        Liu, Michael, assistant secretary, Public and Indian Housing,
          Department of Housing and Urban Development................    75
        Spilde, Kate.................................................    95
    Additional material submitted for the record:
        Richards, Sr., Howard D., chairman, Southern Ute Indian
          Tribe, letter..............................................   102
        Stamps, Quanah Crossland, commissioner, Administration for
          Native Americans, letter with responses to questions.......   105

         NATIVE AMERICAN CAPITAL FORMATION AND ECONOMIC DEVELOPMENT ACT

                                  ----------

                            WEDNESDAY, JULY 21, 2004

                                           U.S. Senate,
                                   Committee on Indian Affairs,
                                                        Washington, DC.
        The committee met, pursuant to notice, at 10:27 a.m. in
    room 485, Russell Senate Building, Hon. Ben Nighthorse Campbell
    (chairman of the committee) presiding.
        Present: Senators Campbell, Domenici, Dorgan, Inouye,
    Johnson, and Murkowski.

            STATEMENT OF HON. BEN NIGHTHORSE CAMPBELL, U.S.
             SENATOR FROM COLORADO, CHAIRMAN, COMMITTEE ON
                             INDIAN AFFAIRS

        The Chairman. The committee hearing this morning is on
    legislation I introduced last year that would create the Native
    American Development Corporation and carry out a number of
    other functions.
        The committee held a hearing on this legislation in April
    2003. Yesterday, the committee held a forum of tribal leaders,
    bankers and Indian development experts to discuss the generic
    question of whether a tribally owned development corporation is
    worthwhile to pursue. I believe it is very important and
    worthwhile and necessary if Indian country and the U.S.
    Government are serious about raising the standard of living in
    Native America.
        [Text of S. 519 follows:

        The Chairman. Senator, did you have an opening statement
    for this?
        Senator Domenici. Mr. Chairman, I was going to ask, is the
    Secretary coming to the meeting this afternoon?
        The Chairman. Yes; apparently he is.
        Senator Domenici. Thank you.
        The Chairman. You bet.
        Senator Murkowski, did you have an opening statement?
        Senator Murkowski. Yes, Mr. Chairman.

       STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR FROM ALASKA

        Senator Murkowski. I do want to just make a few brief
    comments. I appreciate the hearing this morning, as well as the
    forum yesterday afternoon on the problem of economic
    development in our Indian communities.
        It was several months ago, actually it was more than that,
    but Julie Kitka who is the president of the Alaska Federation
    of Natives, approached me about bringing the World Bank and the
    International Development Banks to Alaska to see what our
    Alaska Native community can learn from them about how to bring
    the good jobs to remote places.
        I have to tell you that there were a lot of skeptics, a lot
    of people questioned what we could actually get from this.
    Julie is going to be here this morning to tell us about what
    happened at that conference, but I have to tell you it was a
    standing room only crowd in one of Anchorage's largest
    facilities. I do not want to steal her thunder, but I will tell
    you that the skeptics were silenced. The conference was the
    right thing to do at the right time.
        Mr. Chairman, I think we know all too well that when we
    lack economic opportunities in our villages, what we see is
    despair, is lack of hope. It fuels self-destructive behaviors
    such as alcohol, drug abuse, domestic violence, suicide. It
    truly puts our Native people in peril. It is through economic
    opportunities that we can break this cycle.
        So I am pleased that we will be able to hear this morning
    some of the outcome of that conference.
        I do understand, Mr. Chairman, there is probably still a
    fair amount of work to be done on S. 519 before it is ready for
    consideration by the full committee, but I appreciate your
    efforts, as I am sure do all of the people of our Native
    communities throughout the country.
        The Chairman. Thank you. We will now take the first panel
    of one. That will be Dave Anderson, assistant secretary, Indian
    Affairs, Department of the Interior. Thanks for appearing,
    Dave, and thanks for also going to Montana and meeting with the
    Montana-Wyoming tribal leaders and giving a terrific speech to
    the young graduates of our Indian school in Lame Deer, MT.

    STATEMENT OF DAVID W. ANDERSON, ASSISTANT SECRETARY FOR INDIAN
                  AFFAIRS, DEPARTMENT OF THE INTERIOR

        Mr. Anderson. Thank you. I enjoyed being there.
        Good morning, Mr. Chairman, Mr. Vice Chairman, and members
    of the committee. I am David Anderson, assistant secretary for
    Indian Affairs.
        I want to thank you for the opportunity to present the
    views of the Department of the Interior on S. 519, the Native
    American Capital Formation and Economic Development Act of
    2003. We understand that the committee will be significantly
    amending S. 519. Therefore, our comments do not specifically
    speak to the provisions, but rather address the concepts of the
    bill.
        The Department supports exploring creative approaches to
    economic development in Indian country, and, specifically, we
    are encouraged that this bill is being put together. I think
    all of us understand that economic development on tribal
    reservations poses many challenges. When I first came to the
    Department, I think most of my meetings, initially, were just
    day after day, many different tribes coming to my office. Every
    one of them had just a slew of unmet needs or needs that they
    were facing within Indian Country. One of the things that
    really stuck out very clearly to me was the need for
    significant economic development. I really believe that this
    bill addresses this need, so I am very encouraged by it.
        Because the access to capital in Indian country is
    extremely limited. This shortage of capital represents one of
    the primary barriers to comprehensive and lasting economic
    development. In addition, there are few opportunities to
    generate capital on Indian reservations. Studies show that
    unemployment on or near Indian reservations commonly exceeds 50
    percent and, in some areas, that figure jumps to over 90
    percent. Unemployment in Indian country has placed more than
    500,000 people who live on or near Indian reservations at or
    below the poverty level.
        These obstacles are further compounded by the rural
    location of most Indian reservations. As a result of these
    factors, Indian country accounts for many of the poorest areas
    in the United States. I find that objectionable, that America's
    first people would be on the bottom rung of all social and
    economic problems that we face throughout Indian country.
        Although poverty and joblessness pose great obstacles to
    economic development and remote reservation settings, economic
    development is not impossible. Increasingly, tribes continue to
    overcome these obstacles and create growth in reservation
    economies. Over the last few months, I have had an opportunity
    to be able to travel throughout the United States and to visit
    some of these tribes. We do have shining examples of tribes
    that have succeeded in rural locations. Yesterday, I attended
    the forum that you sponsored. I was very encouraged to be in
    the midst of some tribal leaders, Philip Martin, the Oneidas,
    and the Chickasaws, that have really succeeded economically.
        It proves, and I really believe, that as Indian people that
    we can stand up and we can be counted in the ranks of people
    who succeed in economic development ventures.
        Within the Bureau of Indian Affairs [BIA], we are working
    with tribes to continue to discover creative and long-term
    solutions to building sustainable tribal economies. Through the
    recent reorganization of the BIA, the offices of Indian gaming
    management, self-governance and self-determination were
    elevated to the assistant secretary's office under the newly
    created deputy assistant secretary for Policy and Economic
    Development. By elevating these and other economic development
    programs, the BIA will emphasize expanding reservation and
    tribal community business opportunities and Indian employment.
    With the creation of the new deputy assistant secretary, the
    BIA hopes to maximize efficiency in assisting tribal economic
    development.
        One of my goals is something that I see that was severely
    missing within the Department. As I said when I first came on
    board, we had an Office of Indian Education. We have a law
    enforcement department. We work with the trees and the fish.
    But one of the things that we have been missing is really a
    credible program that helps develop the economic development
    policies, and helps coordinate other economic development
    opportunities with other departments within the BIA. That is an
    initiative I am making a priority within the BIA.
        Another challenge the BIA is working to address is the
    issue raised by many investors and private lenders regarding
    the tribal legal infrastructure, and inadequate or nonexistent
    legal and business codes. To address this issue, the BIA
    included in its fiscal year 2005 budget request for $1 million
    to help tribes develop tribal ordinances and commercial
    business codes. We view this as a positive first step to help
    encourage more capital investment on tribal lands.
        The Department also encourages the use of self-governance
    programs as a method of encouraging tribal economic
    development. Through self-governance programs, the tribes
    control administration of Federal programs to ensure the
    programs meet the needs of individual tribes. For the tribes
    that choose to engage in self-governance or self-determination
    compacts and contracts, this direct control creates tailor-made
    programs that lead to the creation of viable and stable
    economies and tribal self-sufficiency. We will work to continue
    with tribes to expand self-governance and self-determination as
    a way to find creative solutions to economic development.
        Currently, the BIA independently administers a program that
    is addressing some of the financing needs in Indian country.
    Since 1974, the BIA has successfully administered an Indian
    Guaranty, Insured and Interest Subsidy Program. The mission of
    this program is to stimulate an increase in Indian
    entrepreneurship and employment through the establishment,
    acquisition or expansion of Indian-owned economic enterprises.
    The program guarantees loans up to $20 million from the private
    sector to promote economic development of tribes, individual
    Indians and Alaska Natives. The guaranteed and insured loan
    portfolio currently totals $271 million.
        With the enactment of the fiscal year 2005 budget request,
    the program expects to leverage private sector financing of 65
    new businesses and create 1,300 jobs on or near Indian
    reservations. The guaranteed and insured loan program has
    achieved a success rate of 93 percent in the number of
    businesses, without default for all loans funded since fiscal
    year 1992. From 1992 to the present, 719 loans have been
    guaranteed and a total of only 51 loans have defaulted.
        While the BIA loan program is successful and takes steps
    toward addressing the needs in Indian country, it does not
    fulfill every financing need. There is a gap between the small-
    scale financing that the BIA can provide and funding required
    for economic development projects. This is where I believe this
    financing package we are looking at is really needed. Because I
    really believe that as Indian people, we need to start thinking
    bigger. We need to be dreaming bigger dreams for economic
    development. I find it frustrating sometimes when I am in
    budget meetings and here we are with the brain trust of Indian
    country and we are arguing over millions of dollars, when we
    should be discussing billions.
        I believe that within the black community that they have a
    goal of getting knowledgeable and qualified black people on the
    boards of directors of major corporations throughout America.
    As Indian people, we have yet to reach that level. This is why
    this bill is so important because we need to be able to access
    larger amounts of money. We need to be able to access capital
    markets. I believe this is a very important step toward that.
        I just wanted to quickly comment, I keep pushing this idea
    out there that I believe, as Indian people, if we are going to
    be economically self-sufficient, that we also become a nation
    of homeowners. I think being able to access Indian people's
    financing through home ownership helps build strong
    communities, and we start learning the basic fundamentals of
    investing. One of the things that I am working on is developing
    leadership academies within the BIA, turning BIA schools into
    leadership academies. As part of that concept, I want to start
    teaching our students investing 101, how to save and invest
    money.
        When we start discussing concepts like the creation of
    capital markets or being able to access capital markets through
    the investment community, that we are going to be knowledgeable
    in order to do that. So that the investing community, the
    raising of investments for creating entrepreneurial economies,
    that it will not be a foreign concept. Maybe we will not see
    the fruits of this within this generation, but we are starting
    to address it, thinking long term. Hopefully, my ideas with
    leadership academies and creating investing 101 courses within
    our school system will help begin to address a larger need that
    we have throughout Indian country.
        We welcome the opportunity to further work with this
    committee regarding this bill. We are also willing to
    participate in further discussions regarding other innovative
    approaches to enhance economic development in Indian country. I
    feel that some of my background in economic development would
    be very well suited for this.
        So I look forward to this bill and I look forward to
    working with this committee.
        Thank you.
        [Prepared statement of Mr. Anderson appears in appendix.]
        The Chairman. Thank you. I appreciate that.
        You mentioned you have traveled extensively through Indian
    country since your appointment, so I know you have probably
    seen some really successful models and some common hurdles that
    Indian country faces in its quest for economic development.
    Could you mention a couple of hurdles you have come across?
        Mr. Anderson. I think one of the hurdles that I personally
    experienced is that while it is great to be able to create a
    program of this nature, I think as Indian people, though, we
    need to start stepping up. For example, we have never taught
    success 101 in our schools. When I was chief executive officer
    for my tribe, the Lac Courte Oreilles, we had a number of
    businesses. We had a forest products company. We had a grocery
    store. We had an auto center. We had a print shop. We had WOJB-
    FM radio station.
        For the most part, we were bleeding money like water going
    through a sieve. Part of the problem that I recognized was if
    we are going to be successful in business, we have to have, as
    part of our mental framework, the understanding of success,
    achievement and accomplishment. Because when you are faced with
    communities, as I have mentioned earlier, where we have high
    unemployment or high suicide rates, high dropout rates, high
    substance abuse, the basic fundamental thinking of being
    successful, is almost a foreign concept.
        I think nationwide, throughout Indian country, we need to
    start cultivating the mental health of our Indian people in the
    areas of being successful in business.
        We need Indian people that get up in the morning at 5 a.m.
    that are cheerful and enthusiastic and passionate about being
    successful. Sometimes when I am addressing these issues, it is
    not just building another building, filling it full of
    inventory, and hanging your sign out. We need to start
    cultivating Indian people that think successfully, that are out
    there being solution-conscious, not problem-conscious. When we
    start doing that, I believe that a lot of our economic
    development problems will be solved.
        Again, I have seen tribes that have cultivated that
    mentality and they are flourishing. We have successes as well
    as areas that need improvement.
        The Chairman. We have successes in my view, but they have
    been uphill battles a lot of times because when you talk about
    initiating the attitude of success, we are dealing with a
    people who have been told for 100 years they cannot be
    successful. You just cannot turn that around overnight. I think
    many Indian tribes are recognizing that and working very hard
    to promote that among their youngsters.
        You probably have also seen some models that have been
    successful. Would you like to mention if you see any common
    thing in there that other tribes can use? I recognize there are
    some in rural areas that do not have access to markets, for
    instance, or others who do not have the same educational
    background in their framework. But there must be something that
    is emerging that could be used as a model for other tribes.
        Mr. Anderson. I believe that what you are suggesting is
    something that we are working on. We want to create a blue
    ribbon panel, and I would be happy to work with this committee
    in the formation of that, working with tribes like the Oneidas,
    who have turned back BIA moneys and are now economically self-
    sufficient. Philip Martin with the Mississippi Choctaws has
    done an incredible job with their economic development and
    their business ventures. I think in every case that you see is
    that they have been able to successfully separate the business
    engine of the tribe from the political arena of the tribe. I
    think that is important.
        I also believe that the tribes that are flourishing are the
    ones that have been able to stabilize their tribal governments
    and create a sense of security where if you sign a contract
    with the tribe that an outside investing group or an outside
    business knows that they will be able to succeed without some
    sense of insecurity because a particular political group is in
    power. I think being able to create a foundation for security
    through knowing that if you do business with an Indian tribe,
    that you are not going to be affected by the political changing
    structure of the tribe.
        The Chairman. You are perfectly right. Anybody that has
    visited the old carpet factory at Crow or the electronics
    factory of the Navajos recognizes why some investors are
    reluctant to work with tribes when they know that there is an
    unstable government.
        I have some further questions I would like to put in
    writing to you, but I think we will probably move along and ask
    Senator Inouye if he has questions.
        Senator Inouye. I am always encouraged to listen to the
    testimony of Secretary Anderson. But Mr. Secretary, I would
    have to be leaving because we just received a conference report
    from the House on the defense appropriations, and we will try
    to finish that up tomorrow. So I have been called to sign a few
    papers and make decisions. So if you will excuse me, I would
    like to submit questions in writing to you, sir.
        And to all the other witnesses, Mr. Chairman, may I have
    permission to submit my questions?
        The Chairman. Yes; the other committee members may also do
    the same.
        Senator Inouye. I am especially saddened that I will not be
    here to personally listen to the testimony of Haunani Apoliona,
    the president and CEO of the Office of Hawaiian Affairs. I will
    read your testimony.
        The Chairman. She has probably talked to you on a good
    number of times, face-to-face, I would imagine, Senator. You
    know part of her testimony already by heart, I would guess.
        Senator Murkowski, did you have questions of Secretary
    Anderson?
        Senator Murkowski. Just one very quick question. I
    appreciate your focus on the culture of success and how we
    build that. I also appreciate the chairman's concern that it is
    difficult to do that in the short term. It is something that
    has to be built. And of course, it needs to be built from our
    young people on up. It needs to be part of their makeup. Have
    you given any thought to how we can instill that culture of
    success within our schools for our young native people? How do
    we urge them to set high expectations for themselves and
    others?
        Mr. Anderson. I am glad you brought that up. By the way, I
    am planning on being in Alaska the second or third week in
    August to fulfill my promise to you of getting up there and
    visiting Alaska.
        Senator Murkowski. We look forward to having you.
        Mr. Anderson. I am glad you brought that up because I
    really believe that if we are going to be successful in
    economic development as Indian people, it has to start with our
    young people. We need to start cultivating the attitude of
    success.
        One of my initiatives are these leadership academies.
    Because Bureau schools have always been almost secondary
    schools of choice. One of the things that we are working on, in
    fact this week we are convening a group of principals from the
    BIA schools and we are starting the process of looking at
    identifying key schools that we can use as prototypes to turn
    into leadership academies.
        What we are looking at doing is challenging the human mind,
    the human body and the human spirit. I really believe that
    people who say that we need to dummy-down the standards of our
    children, that they cannot compete like other students, are
    performing a disservice. I believe that is very bad thinking.
        One of the things that I saw on CNN just a short while ago
    was a feature that they did on an Asian school in Chinatown in
    New York. If you were any well-to-do black person, you tried to
    get your student in that school. If you were any well-to-do
    Jewish person, you tried to get your student in that school.
    The reason is they had the highest math scores, the highest
    economic scores and the highest science scores.
        Now, I am a believer that Indian children are not born into
    this world with any less brain cells than these Asian students.
    So what is the difference? It is parent expectations and
    teacher expectations. One of my goals is to start, within our
    school system, the framework for creating a success mentality,
    that, as Indian people, we can achieve. It does not matter
    where you have been. It does not matter what you have been
    through. In this great country that we live in, if you have
    dreams and if you are a young person, and you never, ever give
    up and you are willing to work hard, that you can achieve your
    dreams.
        In our leadership academies, we want parents to be able to
    sign contracts with the teachers and the students that they
    will support those students getting homework. We want our
    teachers to start carrying cell phones, that if these students
    have any questions, that they can ask a teacher or a tutor. We
    want to go so far that the only way you can graduate is if you
    are accepted into college or a vo-tech school.
        We look at creating a mentoring opportunity with local
    businesses. We look at challenging the students with the ropes
    challenge courses, with rock climbing, winter camping, but not
    just sports. We look at including a health and nutrition aspect
    as part of the school. Just 2 weeks ago, I addressed 1,500
    students at the United National Indian Tribal Youth
    Organization. One of the fortunate things was a lot of the
    students were like this. I want to encourage throughout this
    whole discussion that this is something that we start
    addressing.
        It is the success philosophy of what it takes. Because I
    think throughout all of this, I have always heard that we have
    to create the infrastructure. We have to create access to
    capital formation. But fundamental before any of that, we need
    to have the success and the willingness and the thinking to
    want to achieve.
        This is something that I have made a priority.
    Understanding that, you know, I never realized this, but being
    head of all our school system, we have the ability to create a
    whole different model for our school systems. I want to see
    success philosophies in every one of our schools, in our
    cafeterias, in our gymnasiums.
        These are just some of the ideas that I have had for
    revamping what people consider the Bureau schools and to
    turning them into leadership academies that are graduating
    young people who will want to be successful in the arenas of
    business.
        Senator Murkowski. I like your ideas. We do not have the
    Bureau schools in Alaska. Our native students are educated in
    the public school system there. So I would encourage you to
    work with us to bring this idea of the leadership academies to
    Alaska to see how we might be able to partner with you or
    benefit from the ideas that you are implementing in the lower-
    48.
        Mr. Anderson. Thank you.
        Senator Murkowski. Thank you.
        The Chairman. Thank you, Mr. Anderson. Some other committee
    members will probably submit some of the questions in writing.
    Thank you for your appearance.
        Mr. Anderson. Thank you.
        The Chairman. Our next panel will be Mark Brown, chairman
    of the Mohegan Indian Tribe; Julie Kitka, president of the
    Alaska Federation of Natives in Anchorage; Chester Carl,
    chairman of the National American Indian Housing Council;
    Haunani Apoliona, chair of the Board of Trustees of the Office
    of Hawaiian Affairs; and Kate Spilde from Rancho Mirage, CA.
        If you folks would take your seats at the table there.
    Squeeze in and move the microphone around if we have not quite
    enough microphones.
        We will proceed in the order that I mentioned your names.
    So Mark, nice to see you again. Why don't you go ahead and
    proceed.

       STATEMENT OF MARK F. BROWN, CHAIRMAN, MOHEGAN INDIAN TRIBE

        Mr. Brown. Thank you, Chairman Campbell.
        Chairman Campbell, members of the committee, I am Mark F.
    Brown, chairman of the Mohegan Tribe. I am here to speak about
    the importance of self-determination and self-reliance.
        In Mohegan, we learn first-hand about true self-
    determination and how very closely bound it is to tribal
    economic development, economic development that would benefit
    greatly by the concepts introduced in this bill. The two
    concepts, first, removing legal and practical obstacles to
    public and private investments in Indian country; and second,
    identifying investment opportunities and matching available
    capital resources with need.
        Far too many times, the U.S. Government in trying to draft
    something for Indian country drafts something that is all-
    inclusive. But we are all sovereign nations. We have different
    ways we approach things, and this is not a one-fits-all type of
    situation.
        Clearly, true self-determination comes from the inside out,
    and the concepts within this bill will take care of that.
        The Mohegan experience is a good example of a tribe who
    could have benefitted from easy access to early capital. A
    little more than a decade ago, the U.S. Government finally told
    us what we knew our whole life, that we truly were a tribe.
    From that point, we have moved forward. We found a business
    partner with a proven record of destination resort success and
    we entered the field of gaming. Many capital institutions were
    not too comfortable dealing with a Native American tribe, so we
    had to educate our prospective lenders on reliable, predictable
    tribal laws and tribal government. We had to prove we were
    about serious regulation. We hired a former head of the DEA,
    assistant to the FBI, and then myself as a former police
    officer. I am very critical about how we are about integrity.
        With all these things in place, in 1995 the tribe went out
    for financing to do a $300-million facility. We were the first
    tribe to go to Wall Street. When we went there, we were able to
    secure the financing we needed at an effective rate of 18
    percent. It is not cheap money, but at that point in time it
    was the only way we could get to the point we needed to be at
    today. We had one of the most successful casinos nine miles to
    our east, and we had to compete, so we had to do what we had to
    do at that time.
        A few years later, we decided to be totally self-determined
    and break our ties with our managing partners. We decided to
    move forward with an expansion phase. This required us to once
    again go back to Wall Street. At that time, we were able to go
    by ourselves with no one else and secure a rate of
    approximately 8.3 percent.
        More recently, we had a bond issuing, and that came in a
    6.38-percent. This is rarely the case in any financing, let
    alone in Indian country, but it can be done.
        Now that our expansion is fully operational, Mohegan Sun is
    where we believe it should be on the market. We are looking to
    bring our expertise that we have gained to other areas and
    other tribes. This effort will help diversify our assets. It
    will also be improving the lives of other first Americans.
        Nearly 2 years ago, I had an opportunity to meet with a
    man, a father, a career soldier I had admired for many years.
    That man told me that he and others in Washington wanted to see
    if IGRA truly would help all tribes. His words were, prove to
    me IGRA works; reach out and help other tribes. That man was
    Senator John McCain. I took that to heart and we have a focus
    and a goal.
        We found our first relationship with the Menominee Tribe of
    Wisconsin, a proud people who want only the best for their own
    8,000 members. We now look for the same things that people
    looked for in us. We are looking at secure, stable government.
    We are looking for good community ties with the outlying area.
    And we are also looking to see what the available capital will
    be. This bill can probably help that aspect to come to
    fruition.
        Like any other corporation, we as Mohegan look at the
    bottomline. But unlike a corporation, we are also a tribe. We
    Mohegan have adopted a buy-American philosophy. Whenever
    possible, that is Native American. We are encouraging any
    future partners to do the same. We buy our lobsters from tribes
    in Maine, our buffalo from tribes in the Midwest, and our
    natural gas from tribes in the Southwest. Although these tribes
    are not in gaming, they are working to provide for their people
    through self-determined economic development, which again would
    clearly benefit with S. 519.
        S. 519 is a sound bill. We pledge to work with you and your
    colleagues to support enactment of as much of it as can be
    accomplished. We believe time is long overdue, and once again
    thank you for your time. I will entertain any questions.
        [Prepared statement of Mr. Brown appears in appendix.]
        The Chairman. Thank you.
        We will now go to Julie Kitka. Welcome, Julie.

       STATEMENT OF JULIE KITKA, PRESIDENT, ALASKA FEDERATION OF
                                NATIVES

        Ms. Kitka. Thank you, Mr. Chairman.
        It is an honor for me to testify this morning. I appreciate
    the invitation. I will try to be condensed in our testimony,
    but I have a lot of information that I want to share with the
    committee, so you, Mr. Chairman, please feel free to cut me off
    if I go on too long.
        First of all, before I respond to Senator Murkowski's
    comments on reporting on the recent leadership forum that we
    had on building knowledge-based economies, I first wanted to
    inform you, Mr. Chairman and the committee, of why we are doing
    what we are doing, and then I will get into sharing some of the
    exciting things that we are involved with.
        First off, we have just completed a 30-year trend analysis
    on a whole lot of major indicators for our population. We are
    working with the University of Alaska Institute of Social and
    Economic Research, and we would be glad to provide the 30-year
    trend analysis to the committee so that you can see both the
    progress that has been made, as well as some of the challenges
    that are still facing us.
        Basically in a nutshell, the 30-year trend analysis shows
    major signs of improved living conditions for our people.
    Mortality is down. Total death rate is down. Life expectancy is
    up. But when we look at the economic aspects of our people,
    this is what we see, that native income has increased every
    decade since 1960, even after taking into account inflation. In
    the year 2000, real per capita incomes were four-times higher
    than it was in the 1960's. But the growth rate in the 1990's
    was only about 7 percent.
        The second point is, native income remains far below that
    of non-natives. In 2000, native per capita was less than one-
    half of non-natives in our State.
        The third point, one-half of our native families have
    income below $30,000 a year. With our larger native families,
    that means these incomes are supporting even more and more
    people.
        The fourth point is incomes are low in remote areas,
    especially in the very remote areas which are populated by at
    least 60 percent of Alaska Natives.
        The fifth point, our most remote areas are also the places
    of the highest living costs. Fuel costs, food costs, clothing
    costs, if you name any cost, it is the highest in some of the
    areas that have the lowest income.
        The sixth point is Alaska Natives, we see much progress in
    the last 30 years on poverty indicators. Thirty years ago, our
    poverty rates for our people were in the mid to low, 60 percent
    of our population was below the Federal poverty rate. We are
    now down to about 20 percent poverty rate, which is a huge
    improvement in the living conditions for our people in the last
    30 years. But the disparity is still there as the improvements
    are, because our poverty rate is now 20 percent compared to 7
    percent of non-natives. Our people are three times more likely
    to live in poverty than non-natives in our State.
        We have also, another seventh finding is that families
    headed by women are most likely to be poor in our State, and
    basically 25 percent of all our native families in remote
    villages live below the poverty level. So that is the reason
    why we are putting a major emphasis on the economic arena, is
    these very hard statistics, both of the success that has been
    accomplished, and I think that the members of the Congress that
    have spent their entire public careers over this span of time
    in particular, our senators, Senator Stevens and others,
    Senator Inouye, you know, 30-plus years in the Congress, have
    much to be proud of when you look at these improved living
    conditions.
        So what we are looking at is how do we close the gap and
    the disparity? How do we make that next major inroad into these
    indicators that are not positive, and make progress for the
    next generation of people?
        I will put a caveat. One of the things that we have been
    following a lot of things that have been going on
    internationally. We feel very strongly in Alaska that we have
    much to be grateful to for living in the United States. When
    you look at one billion people in the world living below $1 a
    day in income, and two billion people living below $2 a day,
    you know, to say that you have these indicators with the
    amounts of incomes in our families on that, it truly is
    relative. We can do more with what we have, but we also need
    government to be more responsive and put in place policies that
    are more helpful to make that next inroad.
        We are very strongly supportive of the Government's policy
    on self-determination. We credit that as one of the major
    changes over the last 30 years which has helped us greatly,
    everything from Alaska Natives taking over the Indian Health
    Service, where we are running our hospitals and our regional
    hospitals and our clinics, and the whole system. Self-
    determination on every level has contributed to the improved
    living conditions. So members of Congress that have been
    involved for a long time should be very proud of their efforts.
        But we would like to focus on what we are looking at right
    now and what are some of the observations that we have which we
    think can make some great improvements. So I have given you the
    ``why'' of why we are focusing on that.
        We also believe that we stand on the shoulders of the
    people that have come before us. What I testify about or what
    we prepare in reports or testimony is not coming out of a
    vacuum. It is based on our own leadership in our state and many
    generations of leaders that have tried to improve things for
    our people. So I am just the next person in the long list of
    people to convey to you our desires and wishes and what we want
    to try to accomplish. So I do not want to make any more of our
    comments other than that.
        But basically, we feel very strongly that our people need a
    sense of hope. We need to bring a sense of urgency to the
    concerns that affect their daily lives, and not be lulled into
    false security because of some of the successes that we have
    had on many areas. So the urgency needs to continue and the
    Congress needs to help us enact policies that bring the sense
    of urgency to the ground at the village level.
        We need the recognize that we do not work in isolation,
    that we do have partnerships with the State. We do have
    partnerships with the private sector. We need to build those
    partnerships and we need to strengthen that. Government clearly
    has a role in opening up our opportunities for greater private
    sector expansion in our State, because we feel that with
    greater economic growth, that the private sector can be an
    engine for the Government polices that need to help set the
    infrastructure and the ground for them to expand.
        We also feel that expanding the private sector is essential
    in our state to overcome what has been characterized as
    distorted economies, economies which are primarily transfer
    economies of transfer payments and government spending. We need
    to open up greater opportunities for private sector involvement
    in economic growth because of the jobs that they create.
        You look at our population, we are about 20 percent of the
    State of Alaska. We are about 125,000 people. We are projected
    to double every 23 years. I think we have projected that in the
    year 2020, we will be up to about 165,000 in the State, quite a
    number out of State.
        We are also seeing some very disturbing trends. Our people
    are people of the land. Our people have lived in many parts of
    the State for nearly 10,000 years. You can see continuous
    occupancy in many of our communities for many, many thousands
    of years. But the disturbing trend is that we are seeing the
    migration from our villages and off the land into the regional
    hubs and into the cities, looking for job opportunities,
    looking for access to the health care for their families, and
    education.
        We have to, quite frankly, stem that trend. I am, for one,
    very encouraging of people to explore all options for their
    families and for their children, but to be having to relocate
    off the land and go to a city and urban life because of lack of
    economic opportunity, to me is a very big crime and it is
    something that we need to partnership with the Congress and the
    State to reverse that trend.
        We are seeing trends as high as 40 percent of our
    population moving off the land and into the cities. Again, you
    look at it, and it is primarily lack of economic opportunities,
    lack of the infrastructure that we need to increase the private
    sector. That is one of the reasons we are very interested in
    this bill is because we feel very strongly that we need another
    tool in our arsenal to deal with the problems our people face.
    That is an economic institution that has a broad scope to deal
    with social development, cultural development, educational
    development, economic development.
        We think a development entity, whether or not it is a
    development fund, a development bank, a development institution
    could have that broad scope. We do not need any more
    institutions which are silos that are just taking care of one
    sector of our population or just one aspect. We need the broad
    scope that can encompass education and economic development,
    that can encompass encouraging the private sector and analyze
    economic opportunities.
        We really appreciate the consideration of the economic
    diagnostic fund, the incubation fund, in addition to the
    technical assistance fund on that. Because we cannot expect our
    people in our communities to analyze economic opportunities and
    make good choices if they do not have the tools to analyze the
    opportunities in this global economy.
        We very much recognize it is a global economy. So many
    decisions that are made in the economic realm are outside of
    our state and are outside of our country. We need to recognize
    that. The Congress needs to give Native Americans the tools to
    compete globally and not just compete against each other or
    compete isolated in our own small areas.
        We are also re-thinking Federal spending that is coming
    into our state for our people, and re-thinking what can be done
    to improve the effectiveness of the Federal resources that are
    coming in. We have a number of recommendations that can be done
    on that. Basically, what we are looking at is trying to do more
    with what resources we have, to try to make it more effective.
    We are finding that in some areas what we need is Federal
    resources that will support the introduction of new ideas and
    champions for new initiatives, not flooding the area with lots
    of money, just the people that are interested and the
    leadership in the areas that are interested in going forward
    economically and socially and culturally, that they need the
    support to make the changes.
        We are very interested in systemic change. We are very
    interested in growing success. If we see a successful program
    or project which is effective in one village or effective in
    five villages, we ought to have policies in place that grow
    that to affect 25 villages and 100 villages. Success will breed
    success. We have a lot of shining stars of things that work in
    our state. The CDQ program is a prime example of a successful
    economic policy decision that Congress helped enact, which in a
    very short period of time created $40 million in new wealth. It
    is now up to about $500 million in new wealth for those coastal
    communities in vesting the local people with percentages of the
    fish resources, and letting them engage in the marketplace on
    that.
        So there are successful models out there. We need to just
    grow those ones.
        Okay, now to the leadership forum we had. I said I will try
    to keep my comments short on that because I am very
    enthusiastic about that.
        The Chairman. We have a vote in about 20 minutes, so we
    have to move along, Julie. I hate to rush you.
        Ms. Kitka. Okay. I will be very quick.
        Basically, it was a very significant conference that was
    held, with the help of our congressional delegation, Senator
    Murkowski, Senator Stevens and Congressman Young. We thank them
    very much.
        We hosted a conference with Harvard University, the Center
    for International Development, with the participation of the
    World Bank, the Asian Development Bank and the Inter-American
    Development Bank. We were very interested in sharing
    experiences in success, and we definitely found that there was
    common ground and areas to work together on building toward a
    knowledge-based economy.
        I really urge the committee to take a look at the whole
    area of knowledge-based economies as far as native economies,
    because we believe very strongly that that is a direction that
    we need to move forward in. Basically, the 30-second version of
    a knowledge-based economy is an economy that innovates within
    itself, and that is willing and able to accept innovation
    outside of the economy. I think if we can move in the direction
    of supporting native economies to be able to create innovation
    internally and use the mind and brainpower of our young people
    in particular, we will make those breakthroughs that we need to
    have.
        Lastly, like I said I could probably go on for a long time
    on this because we have a number of positive things that came
    out. I will bring to your attention the World Bank's
    development marketplace as a very innovative idea which we are
    going to be implementing in the state. It is again putting
    money behind innovative ideas and encouraging practical
    solutions to problems. We are very excited about that.
        But we would also like to urge the committee to work with
    us on successful initiatives that the United States has used
    abroad with the different multilateral institutions and the
    development banks, and what the Bush administration has done in
    the Millennium Challenge Account initiative, in which the
    Congress has recently formed the Millennium Challenge
    Corporation now headed up by Secretary Colin Powell.
        This new entity and its mission, which manages currently
    about $5 billion in assets, we believe that there is a role for
    a domestic version of this, and this might be something that
    could be considered as you are reworking this piece of
    legislation, to take a look at the strengths on that. But that
    recent initiative from the Bush Administration we believe has a
    very strong component that could be used domestically,
    especially with its emphasis on results-based management. I
    think a results-based management approach is something that we
    hear from OMB and everybody else that they want to see us move
    forward on Federal resources.
        There are some very innovative ways to do results-based
    management, and it is something we are very much interested in
    piloting in our state with some of the Federal resources that
    come up there, because we think that the results-based
    management will help us move from just building a health clinic
    and saying how we are satisfied that we built a health clinic,
    but being able to say now that we have a health clinic, we see
    these health indicators going down; or building a school and
    not only saying we built a school, but being able to say the
    education of our children is going up.
        So we commend those as examples of some new parameters and
    policies that I think will be fruitful for the coming year.
        With that, I will wrap up my testimony, and appreciate the
    invitation to testify.
        [Prepared statement of Ms. Kitka appears in appendix.]
        The Chairman. I could not get to your last Alaska
    Federation of Natives Conference. I am sorry I could not, but
    staff did go up, as you know, and came back with some fine
    reports about the event. They found it very educational and
    informative. Thanks for inviting us.
        We will now move to Chairman Carl.

     STATEMENT OF CHESTER CARL, CHAIRMAN, NATIONAL AMERICAN INDIAN
                            HOUSING COUNCIL

        Mr. Carl. Chairman Campbell, again it is an honor to come
    before you. I would first like to thank you for all your
    leadership these past few years. Certainly, being a member of
    the Navajo Nation, and at one time being nominated for the
    Indian Hall of Fame with you, was an honor again likewise. Of
    course, Vice Chairman Inouye, his strong support these years,
    and distinguished member Murkowski.
        On behalf of the National American Indian Housing Council,
    thank you for this opportunity to address you today.
        Across this country, thousands of native families are
    facing housing conditions similar to those of undeveloped
    countries. The problem is accelerated by the remoteness, the
    rural location of tribes, many of which have few economic
    opportunities. As the mainstream American economy progresses,
    development has not extended to native communities, in part
    because of the land jurisdiction, but for many other reasons as
    well.
        One of those is the Federal policies. So today, we find
    ourselves in a situation seeking ways to help tribes take
    advantage of the private market and develop their own economies
    without relying solely on Federal subsidy or gaming. I
    understand the committee's purpose and this hearing is to
    evaluate the creation of a tribally owned development
    corporation that could assist in developing tribal economies.
        I have learned much through my work with the Navajo Nation
    and my long career as an Indian businessman. As a businessman,
    the key to economic success is to utilize rules that are proven
    to work to build capital and to take advantage of them in ways
    that other successful businessmen do.
        Although tribes are unique and their structure and culture,
    I believe a solution to economic challenges can only come
    through sound investment and business practices that integrate
    tribal economies with the greater financial community. I
    believe that capital growth through a development corporation
    has the potential to stimulate tribal economies in ways that
    could lead to less reliance on the Federal Government.
        While some tribes have been successful in economic
    community development, this resourcefulness is often lacking on
    many American Indian reservations. It seems that over the
    course of hundreds of years of dealing with Indian tribes, the
    Federal Government has created unnaturally scarce resources of
    physical infrastructure, financing vehicles, and most
    important, land, all the things that make an economy function,
    and replacing those functioning economics with a system of
    Federal subsidy.
        Many people have unfairly criticized tribes for not being
    more successful in a market-based system, when the government
    has in fact isolated them from that system. We must look at
    some of the goals. Our first goal must be to continue to
    eliminate the policies that hinder economic growth on
    reservations in our Indian communities. For example, a tribal
    member goes to a lender to get a mortgage loan and is approved,
    pending title clearance of the land. Had the loan been on fee
    land, the tribal member could expect to receive a title status
    report in a matter of days. With trust or allotted land, it
    takes many months to obtain a title status report.
        While land title issues continue to be a major concern on
    reservations, they are not the only impediment to development.
    We are told that efforts are under way at BIA to address this
    situation, but the problem was not created overnight and will
    not be solved overnight.
        The House Financial Services Committee, in response to
    frustration voiced by tribes at a congressional field hearing,
    is working with the National American Indian Housing Council to
    develop legislation that would reinforce and more clearly
    define the ability for tribes to choose to process land titles
    in-house.
        The inability to create effectively a registration tracking
    system, one that would allow tribal members across the country
    to engage in trade and mortgage borrowing that most of the rest
    of us take for granted is an example of how an inadequate legal
    infrastructure hampers economic development in Indian country.
    Later on, I will propose an idea that I would like this
    committee to seriously consider.
        Lease recordation is only one of the challenges the tribes
    face. Many businesses which have considered operating on the
    reservation have not done so because of concerns with legal
    infrastructure. In some cases, the concerns are valid, and in
    others they are not. Regardless, any businessman that is going
    to invest on tribal land needs to know that they can get market
    rates back for their investment.
        It is in diversification that our economy thrives, and I
    can understand the value of having an Indian-owned bank that
    can create and maintain relationships in communities that
    facilitate interaction between potential consumers and the
    institution itself. Likewise, creating an Indian government-
    sponsored enterprise within this corporation to purchase loans
    from such a bank would step up mortgage activity. But it should
    not be to the exclusion of others.
        Institutions like Fannie Mae connect Wall Street with
    lenders and in doing so create a mechanism for investment
    capital to actually make loans more plentiful and affordable.
    We should find ways to connect the tremendous capital resources
    of this country and the global economy of Indian country. More
    important, all these large institutions need their feet put to
    the fire in working in Indian lands. For example, we have been
    working with Fannie Mae and Freddie Mac to establish a real
    definite goal on how many mortgages they can process in Indian
    country. To date, that has not happened.
        As an alternative solution, we partner with them and other
    agencies to come out with a goal of producing 100 mortgages on
    either new construction or rehab in Indian country.
        Programs with a single purpose could be seen as a
    contributing factor to the failure of many programs designed to
    assist tribes. Successful models such as Public Law 93-638
    provide assistance, but also provide flexibility in
    implementation.
        Community development through private investments are key
    for certain native-owned corporations and could allow tribes to
    purchase assets and businesses and support housing. We know
    that housing alone is not enough. Investment in housing is a
    tremendous stimulus for American communities, but only when the
    opportunities and legal infrastructure exists. Simple housing
    alone just provides a roof. Housing development with a
    manufactured housing plant, with a roofing business, with a
    title plant, a hardware store, or building supply store
    stimulates the local economy.
        Home equity is one of the greatest builders of personal
    wealth, and we must move from subsidized housing to home
    ownership to allow tribal members to grow personal wealth. For
    example, on Navajo, with our housing authority, we have
    developed a self-insurance program. We have been able to
    provide employment to seven people, but more importantly
    establish $13 million in reserve from savings by managing our
    own risk management program. We have developed a cabinet
    company that has been able to gross close to $1 million in
    sales a year, and continually for the last 6 years employs 30
    people.
        We have provided incomes through our mortgage program,
    which is 100 percent guaranteed, by taking the NAHASDA grant
    and putting that into construction financing and then taking
    the home and refinancing it and using the mortgage proceeds to
    provide additional income.
        We have developed a manufacturing plant which is in the
    process of being constructed, which will use fly ash to build
    building materials which will return back to the housing
    authority $28 million in 8 years.
        So these are some of the examples of what we have done
    within the Navajo housing authority. Additionally, we have
    developed a modular home construction plant where we use
    volunteer labor to produce a house for $35,000.
        So as to providing some of the recommendations that this
    committee has asked for, I believe there are some
    recommendations I would like to provide which may be very
    useful to this committee. While many in this room may not
    immediately agree with my opinions, I believe personally that
    for business purposes we need to really consider taking land
    out of reservation trust land and putting it into fee land,
    which would help tribes get mortgages or business leases
    executed.
        By doing so, you develop a market, even though the
    individual lot may have cost $40,000 to develop and put water
    and sewer and electrical connections to that land. But if the
    land is worth $5,000, that is the market. At least you know
    that would be the market. If it contains trust land under
    lease, then there is no such way of knowing what that asset
    would be worth. So you develop a market for that.
        One example is with the Flexcrete plant, we had to relocate
    off the reservation, but close to the reservation, simply
    because we would not be able to expect return on our investment
    in the property. So by purchasing land, we at least have a
    fallback to recoup our investment in case the business went
    under.
        We have other recommendations that I would like to offer.
    One of them is to as Secretary Anderson discussed, look at the
    human resource aspect. One of the problems I see in these
    businesses, is that as a number one challenge to economic
    progress, a lack of human resources, not just the monetary
    resources. There is a severe shortage of people in Indian
    country who have business sense.
        Most of our people operate under the welfare mentality. The
    committee and the Congress has done very well in providing
    self-determination provisions in a lot of the legislation.
    However, we have not promoted that same self-determination to
    Indian tribes, meaning that the Indian tribes themselves must
    also look at developing self-determination provisions in their
    own statutes and their own constitutions.
        There is, however, the trust responsibility, but it only
    provides for so much. In order for tribes to move forward, they
    need to also look at a self-determination provision.
        So looking again at the welfare mentality effectuated by
    Federal policies, we need to be able to provide in the
    legislation technical assistance that would allow internships
    similar to what Indian Health Services does with doctors and
    nurses, develop scholarships for our students to go into a
    business environment, even an internship with some of the large
    corporations, and bring that knowledge back to the reservation
    at a salary which is competitive and not necessarily based on
    the reservation pay scale.
        The other recommendation I would like to also provide: This
    committee is looking for an agency which this program can be
    placed under. Although we do have our issues with Housing and
    Urban Development, I believe that is one legislation that has
    been a prime example of success being flexible, driven by
    tribal leaders such as Chief Martin in negotiating rulemaking
    to get a lot of regulations changed, which makes it more
    tribally driven.
        I believe that the proper agency may be HUD, but with some
    minor twists. One of those may be to elevate the position of
    Deputy Assistant Secretary to the Assistant Secretary's
    position. Today, we find some of the policy decisions coming up
    from the Assistant Secretary that do not necessarily agree with
    Indian country, only because we do not have direct contact with
    the Assistant Secretary.
        Last, in closing, if we do not work to provide the
    opportunity, the drain of resources from Indian communities,
    not only the business investment, but the human investment, we
    will not be able to meet the needs of our people down the road.
    I commend this committee for taking the step to look at this
    legislation to allow opportunities for Indian people.
        I would again like to thank the members of this committee
    for continued support of tribes for Indian housing programs and
    all of the Indian tribes as well. I will be happy to answer any
    questions.
        Thank you very much.
        [Prepared statement of Mr. Carl appears in appendix.]
        The Chairman. Thank you. We will have some questions.
        Ms. Apoliona.

    STATEMENT OF HAUNANI APOLIONA, CHAIR, BOARD OF TRUSTEES, OFFICE
                          OF HAWAIIAN AFFAIRS

        Ms. Apoliona. Mr. Chair, my name is Haunani Apoliona and I
    am chairperson of the elected board of trustees of the Office
    of Hawaiian Affairs.
        I would just like to take a moment to acknowledge others
    who have traveled with me from Hawaii from the Office of
    Hawaiian Affairs: Trustee Stender, our administrator Clyde
    Namuo and Chip McClellan, manager of our economic development
    program. I would also like to acknowledge the presence of our
    Washington, DC bureau, chief, Office of Hawaiian Affairs,
    Martha Ross and two of her interns, Mana and Helen, who are
    here this morning.
        I would like to thank you for the opportunity to be present
    to provide our comments on S. 519. We have basically one
    suggested amendment, and that is in the findings sections of S.
    519 the Congress defines Native Americans as either a member of
    an Indian tribe or a Native Hawaiian. We ask that you consider
    amending the definition in section four to use the definition
    of Native Hawaiians that is found in S. 344, the Native
    Hawaiian Government Reorganization Act of 2004.
        We feel after reviewing S. 519 that it certainly will
    provide the opportunity for productive economic development
    policy and analysis that can and will result in improving the
    material standard of living of all Native Americans to include
    Native Hawaiians.
        Development of unique programs, bringing the resources from
    the Federal, State, and private sector together to create new
    or expand existing industries, business and economic
    development opportunities, establishing localized incubator and
    entrepreneurial training programs, and providing policies and
    institutional support to assure economic solvency for all
    Native Americans will be and should be the major goals of this
    program.
        In the interests of time, I will ask that my 3-page
    testimony be entered for the record. Once again, we want to
    commend you, Chairman Campbell, for developing such an
    important piece of legislation, and we do support continuing
    your efforts, as well as supporting our Native Hawaiian
    Government Reorganization Act of 2004.
        The proposal in S. 519 will certainly complement the
    economic self-determination for Native Hawaiians that we see in
    the near future horizon as we go forward. We want to thank you
    again for inviting Native Hawaiians to take a seat at this
    table among our indigenous people.
        Mahalo.
        [Prepared statement of Ms. Apoliona appears in appendix.]
        The Chairman. Thank you. Your complete testimony will be in
    the record.
        Ms. Spilde.

              STATEMENT OF KATE SPILDE, RANCHO MIRAGE, CA

        Ms. Spilde. Good morning, Mr. Chairman and distinguished
    members of the committee. My name is Katherine Spilde and I am
    currently a research fellow with the Kennedy School of
    Government at Harvard University. I am honored to be here today
    to participate in this discussion of the opportunities that
    could potentially be realized through the creation of a
    tribally owned development corporation. I will be very brief.
        I want to commend the committee for undertaking the very
    important task of addressing the needs for access to capital in
    Indian country. I am particularly excited about the committee's
    interest in creating a research component and economic data
    repository that will address our lack of knowledge about the
    economic needs and highlight the economic activities and best
    practices of native communities.
        While my written testimony provides more detailed
    information about my research on Indian gaming and its
    application to tribal economic development, I will limit my
    remarks today to my support for the committee's interest in and
    commitment to economic needs assessment and best practices in
    Indian country as it is expressed in the concept of a tribally
    owned development corporation.
        While we know a great deal about the obstacles to economic
    development in Indian country, including physical
    infrastructure deficits and the lack of human capital, among
    others, there is very little research that quantifies the
    economic needs of native communities. This lack of quantifiable
    data results in a lack of adequate representation to
    governmental agencies and ultimately a lack of sufficient funds
    to undertake meaningful development.
        Of course, one reason for the lack of economic data on
    native communities is the fact that there is no single agency
    charged with assessing and then addressing economic needs.
    Additionally, any economic figures that we do have access to,
    such as the NIGC's gross gaming revenue figure, are not well
    contextualized due to a lack of benchmarks. For example, just
    last week the NIGC revealed that the national 2003 gross gaming
    revenues for Indian gaming topped $16.7 billion. While this is
    an impressive figure, we cannot definitively state how
    sufficient or insufficient that revenue is with regard to
    meeting the needs even of those tribes with gaming, which of
    course represent only about one-third of all native
    communities.
        So even those agencies that do attempt a systematic needs
    assessment find that one of the challenges is the lack of
    meaningful benchmarks for comparisons between mainstream
    America and Indian country. So while I realize that the
    research component of this economic development corporation is
    a small part of the overall concept, I believe that its
    potential to contribute to our ability to make quantified
    statements about economic needs in Indian country is one of its
    most meaningful features.
        Regardless of which form a development corporation may
    take, I support the committee in its goal of creating a unified
    economic development strategy that includes research into
    economic needs and best practices of native communities among
    its key features.
        Thank you for the opportunity to present my ideas today.
        [Prepared statement of Ms. Spilde appears in appendix.]
        The Chairman. Thank you.
        That was our call to vote so we are going to stand in
    recess about 10 minutes while I run over there and back.
        [Recess.]
        The Chairman. The committee will be back in session. We
    will continue. I would like to ask a few questions. Did all of
    our witnesses come back, or did somebody have to leave? I guess
    maybe they are all here.
        Maybe just to start with Mark Brown. I was writing a few
    notes, you mentioned that you had gone to Wall Street, three
    different times, as I heard you say, and the first time you got
    some access to capital for 18 percent and the next time it was
    8 percent and the last time was 6 percent. Do you attribute
    that to a reduction in prime, them trusting you more, or what
    was it?
        Mr. Brown. It is the trust. I think one thing we have
    clearly seen is banks are hesitant to work with sovereign
    nations because they look at that as, what does that mean, are
    there controls, are there protections.
        What we have done besides the facility itself proving
    financially it can provide the needs of the leverage ratios, we
    also as a tribe have shown that the government structure is in
    such a way that it is secure and competent and it is going to
    move forward.
        The three questions I am asked every time, it has only been
    three times, I go to Wall Street, they want to know how long my
    term as chairman is, first, so they know that there is a
    stability in government there. They want to know are our rolls
    closed, looking at maybe some changing dynamics of the
    leadership. And third, what is your per capita plan, and is
    that stable. So with that, confidence that has built over the
    last few times we have been down there.
        Another key component is the personal contact. I am
    constantly, consistently meeting with the bankers and so they
    know who I am. So I represent the tribe. They get a comfort
    level with me as an individual, and it also helps put that same
    comfort level with the tribe. So I think it is important for
    tribal leaders to be involved in these issues.
        The Chairman. The last time I was up to visit you, it has
    been quite some time ago, the new hotel and conference center
    was not quite open. Has that been a success like your other
    endeavors with the Mohegan Tribe?
        Mr. Brown. Everything is complete, running, and it is nice
    to say ahead of budget, so we are happy with it. It is working
    very well.
        The Chairman. S. 519 I think is important to gaming tribes.
    Can you tell us why a concept like S. 519 is so important for
    your particular tribe? Does it give you any advantage you do
    not have now?
        Mr. Brown. What it will do for us, as we reach out into
    Indian country looking for it to help other tribes, maybe even
    doing gaming ventures or other businesses, it allows us to
    understand that there will be financial stability there,
    financial resources for those tribes when they move forward. We
    understand if we come to the table because of our track record,
    that will give some strength to their borrowing power. But S.
    519 will add that extra component so we can almost guarantee
    that as we try to move other projects forward, there will be
    resources.
        The Chairman. And so far have you invested capital with
    other tribes to develop facilities?
        Mr. Brown. We are currently working with the Menominee
    Tribe in Wisconsin, and that is working very well. We have also
    been approached by other tribes. As far as we are concerned, if
    we had that core competency, right now of course it is gaming,
    and tribes want to look to do that, it is nice to know that the
    Federal Government will also be assisting us in some way to get
    tribes to where they are going to be economically self-
    sufficient.
        The Chairman. I am a big supporter of gaming, as you know.
    I was here in 1988 when we wrote that bill. In fact in
    retrospect, I guess we could have done a couple of things
    differently, but I think it has been a tremendous success. But
    I have this feeling, I have to tell you, Mark, that with
    roughly 30 more on the drawing boards around the country, we
    are going to reach a saturation point at some time. All tribes
    are not going to be equally successful.
        I note with interest that some of the forward-thinking
    tribes are already starting to divest money into other things.
    I think that is really smart to do. Are the Mohegans also doing
    that?
        Mr. Brown. What we are doing, we are dividing two
    components. One will be gaming, which we would be doing and the
    tribe itself is looking at diversification also. I think that
    the gaming aspect, though, is also the residual effect or the
    ripple effect of the other products that we buy from Native
    American tribes. So we can actually help to assist in other
    ways through that venue, too.
        The Chairman. You made the observation in the past that
    tribes who exercise their sovereignty, I guess that means sort
    of selectively waive sovereignty, what did you mean by that?
    That word ``sovereignty'' around here, you know, ears perk up
    immediately with our tribal people.
        Mr. Brown. Absolutely. There are tribes, and I have met
    with tribes where they will not look to ever waive their
    sovereign immunity even on a limited basis to do business.
    Unfortunately, the mechanisms for conducting business have been
    in place. It is up to us to find the ways that we as Indian
    country can also participate.
        If a tribe would not consider waiving its sovereign
    immunity in a limited fashion, that can happen. The ability to
    waive sovereign immunity is in a sense utilizing it. You are
    using that tool, that ability. It is not giving it away. It is
    utilizing it for what it is needed.
        I think that is something that has to be looked at more
    often, knowing and understanding it.
        The Chairman. Waiving it would mean if you waived it, it
    basically would mean if you had an investor and they lost money
    through whatever reason, they would have an option to go to
    court to sue to recover that money.
        Mr. Brown. Absolutely.
        The Chairman. Julie, if I can move on to you, you have
    spoken often about the native cultures, how important they are
    to the native economies. Could you explain to the committee
    what role native cultures would play in the establishment of a
    tribally owned development corporation, traditional cultures?
        Ms. Kitka. Thank you, Mr. Chairman. That actually is an
    example of a success that came out of this recent leadership
    forum, out of both the Asian Development Bank and the Inter-
    American Development Bank, which is a concept of development
    with identity. They have found some of the best success that
    they have had with indigenous people is where they strengthen
    and enhance the culture. It gives the indigenous people an
    economic edge.
        One of the benefits we see of a development entity such as
    what is in the bill is having a broad scope of cultural,
    social, economic and educational development so that you can
    mesh different aspects on that to be more effective in the
    niche that you are working on.
        Also, to respond to one of the benefits that we see of
    this, we think it will provide what we describe as patient
    money. Many of the economic opportunities are not viable on
    commercial banks, and commercial banks will not go into them.
    But if you had the ability to provide patient money, 30- and
    40-year loans at zero percent interest with just a 1-percent
    fee such as the Asian Development Bank does in some of their
    areas that they need to stimulate economic growth, or you had
    some very, very attractive rates on that, you will see economic
    opportunities flourish in some areas that have been very
    stubborn to create that.
        The other benefit we see on this development identity is
    for the Congress to vest it with the full faith and credit of
    the United States. That is absolutely essential to this entity
    to have, and I know that the Congress and the government is
    very hesitant of doing that because it really makes it an
    extremely valuable tool, but I would certainly insist that any
    entity coming out that it have that ability because that is
    what is going to allow it to raise money on the markets and
    grow the amount of money of capital that it has.
        The Chairman. You talked about rural villages in your
    testimony. I can see how S. 519, just in my own mind, could
    help with some of the things that Mr. Carl mentioned, like a
    furniture factory or something of that nature. What would be
    the benefit to some of these real isolated communities that are
    in Alaska that might be 400 or 500 miles from the nearest
    metropolitan area, if I can even use that word in Alaska. I
    guess the biggest city is really Anchorage, and some of them
    are, my gosh, 1,000 miles from Anchorage.
        Ms. Kitka. We have had discussion of some of the benefits
    if there was a pilot of the development entity in Alaska. One
    of the first ideas that came out from one area was the idea of
    underwriting at zero percent interest a loan to start a second-
    hand clothing store where you could employ people to scout for
    second-hand clothes, but actually run that, but how that would
    translate in reducing the cost of living in villages where
    people are so cash-poor that the idea of flying out of their
    village into a regional hub, flying into Anchorage to buy
    school clothes for their children and Nike tennis shoes and all
    this stuff is cost prohibitive.
        So that does not sound like a very attractive idea
    investment thing, but if you translate in practical terms how
    that will impact people on the ground and how that will allow
    them to stretch their resources and give more options for a
    very cash-poor community on that, that to me is an attractive
    idea.
        Also the idea of being able to do micro-loans, the $500
    loans or the $1,500 or the $5,000 loans. That is a model that
    is not used widely in our state. I think that that, especially
    with our statistics on poverty, that most of them are headed by
    women, the micro-loan programs around the world, primarily
    actually a lot of them are geared toward women and they have
    very strong track records on paying the micro-loans back.
        The Chairman. In India particularly.
        I would think, too, correct me if I am wrong, but with a
    lot of the Native Alaskan villages, they are so isolated. In
    one respect, it is a little bit like the Navajo Reservation.
    Some of the people live a long way from anybody. Home crafts
    have become a form of economic survivability. Micro-loans, it
    would seem to me, would have a real advantage in that, where
    people need the materials to carve or to make rugs or do
    whatever, and then sell them either through a coop or through
    some intermediary so they can be taken to the city.
        Ms. Kitka. Yes; In fact, that one example that I used in my
    testimony, the development marketplace, our first theme on that
    in Alaska is going to be to support native artists in both the
    marketing of their art as well as transmission of the skills
    and the knowledge from one generation to the next.
        I did want to add one other component you might consider in
    your bill as you reformulate it. In our very limited knowledge
    of these big multinationals like the Asian Development Bank and
    the World Bank is we see that they are moving to position
    themselves not as just financial entities, but as entities that
    are considered knowledge management entities, so the technical
    assistance that they provide, the information that they have on
    successes and best practices is just as important as the
    finance that they have. I would recommend if there is a Native
    American development entity that it also position itself as a
    knowledge management entity and have that dual role.
        Like I said, I just notice from our limited observation. I
    guess the importance of that to me is sometimes it is not a
    matter of money, it is a matter of ideas. We need to encourage
    the sharing of ideas and things that give our people hope. For
    example, something that is going on in the Navajo Nation that
    we in Alaska will not know about, but just the sharing of best
    practices or information could be just the spark that takes off
    in some area that had we not shared the information.
        The Chairman. Chairman Carl, you stated there is a value in
    having a native-owned bank. Some people I think view this S.
    519 as we have gotten some feedback on it, as creating some
    competition for native-owned banks. As I understand it, one of
    the panels yesterday had some concerns that a tribal
    development entity might or might not have a big impact on
    native-owned banks. Do you have a feeling about that? It is
    really some kind of an enhancement mechanism, not a competitive
    mechanisms for native-owned banks.
        Mr. Carl. Right. Mr. Chairman, I appreciate that question.
    What we see is that competition breeds performance. In this
    case, if there is another native corporation, then that would
    provide competition to native-owned banks. But we also see if
    we develop a narrow policy to have tribes rely on native-owned
    corporations, native-owned banks, then it relieves the big
    financial institutions such as Fannie Mae and Freddie Mac not
    to perform separately on behalf of Indian country.
        So we see that as an issue. In looking at this in broad
    perspective, we need to be able to connect the native-owned
    corporation, native-owned banks with the bigger institution,
    again holding their feet in the fire to perform as well.
        The Chairman. In your testimony, you gave an example of how
    difficult it can be to put into place business rules and
    regulations because of cultural reasons, traditional reasons.
    That is certainly understandable. I can understand why they may
    not want to pass certain business laws that they have some
    concerns about it. Do you see these business laws such as the
    Uniform Commercial Code as necessary to encourage private
    sector capital development on reservations?
        Mr. Carl. One of the policies that has placed Indian
    country in the position it is today is the welfare mentality or
    dependency state. Congress with the help of tribal leaders has
    developed the self-determination act, which allows the
    recognition of the trust responsibility on behalf of the
    Federal Government, but at the same time you have to be able to
    incorporate self-sufficiency into your program to leverage
    financial institutions to meet the needs of people on the
    reservation.
        I believe that legislation has gone a long ways in
    recognizing that dependency is not enough to meet the needs of
    your people. So as a tribal leader, you have to go out and
    develop legislation which would promote getting away from that
    dependency. Part of those would be enactment of legislation
    that includes not only the mortgage code, but the Uniform
    Commercial Codes that will promote those types of activities.
        Just for an example, taking the trust lands out of trust
    and putting that into fee simple land. Right now, as an
    individual Indian member of my tribe, I am restricted to one
    homesite lease. That homesite lease really has no value other
    than the lease that is held. So in this case, if you were to
    promote capitalism, if I see another homesite lease that is fee
    simple, if I have the capacity to buy that fee simple, then I
    can buy it. I can develop that, or a business site at least. So
    you promote Donald Trump activity on the reservation where you
    really do not have any, other than having the casino tribes and
    other tribes promote economic activity. You develop the wealth
    of that individual Indian tribal member.
        The Chairman. Well, we probably will not have to promote
    Donald Trump. He is quite capable of doing it all by himself.
    [Laughter.]
        We have a delicate balance, of course, between trust
    responsibility and what I sometimes call forced dependency
    because traditional cultures did not want to be dependent on
    anybody, and here they find themselves dependent on the Federal
    Government.
        Sometimes we have this head-on collision when we talk about
    getting Indian people less dependent, sometimes they construe
    that to mean, oh, then is that going to let the government off
    the hook from trust responsibility? I do not think it should,
    but certainly 150 years of mistakes the Federal Government has
    made to literally make Indian people more and more dependent on
    grants from the feds has not worked.
        I was reminded yesterday by one of my staff, it is a little
    bit like the old days where they got issuance of a beef
    allowance and blankets and pots and pans or something of that
    nature. Well, they are still getting sort of an allowance, only
    now it is called commodities or it is called Federal grants or
    it is something, but it is still a form of dependency. Until we
    can allow tribes to develop their own resources and their own
    skills, that is always going to be in the background.
        It seems to me we have to make sure that we allow them to
    get more independent, but at the same time not let the Federal
    Government step back from its responsibilities under the
    treaties.
        In September 2000, we had a representative from Kayenta
    Township testify on the Indian Tribal Development Consolidation
    Act. That testimony was interesting. How is that Kayenta
    Township doing?
        Mr. Carl. Mr. Chairman, the Kayenta Township is the first
    creative idea outside the box of allowing the local government,
    in this case the chapter, to provide its own taxation, to
    provide its own zoning laws and provide its own leasing option.
    There have been many challenges to that, but I believe it has
    been very successful.
        Having to operate housing programs within that community, I
    have to operate under their jurisdiction of government. It is a
    new process, but it is also a form of self-sufficiency, being
    able to look at ways to develop resources to meet the needs of
    the community.
        So having street lights on the reservation is a commodity
    that is not necessarily found on the reservations, so if you
    drive on a reservation most of the time at night it is very
    dark. But in this case, they have been able, just for an
    example, been able to put street lights on some of their
    streets. I believe that model is successful.
        The Chairman. You also stated that taking land out of trust
    for business purposes may help tribes, not hurt them. Should we
    do that strictly for businesses, such as shopping centers,
    manufacturing and so on? Or should there be other reasons why
    we should take it out of trust?
        Mr. Carl. I believe it is still under control of the tribe
    as a sovereign government. We have done business deals with
    other outside entities, banks and so on through my housing
    authority. We always rely on jurisdiction of the tribal court.
    There are issues with licenses and stuff. We refer it to
    arbitration. But the reality is so long as you have tribal
    control, whether it be tribal court or some type of
    jurisdiction of the tribe, if you have that set up, why not
    look at a new way of doing business? Having land acquisition in
    the outside world, just for example in the Durango area, 5
    acres is worth now close to over $1 million. On the
    reservation, it is not worth anything.
        But even though it may cost some money to develop it, there
    is still a market, however you cannot trade that market freely.
    You still have to go back and terminate the lease, then you
    have to go back through the tribe, through the BIA again to get
    another lease approved. By the time you are done, you are 5
    months or 2 years down the road in getting that transaction. If
    you were to convert that into fee simple land, then you just
    transact in fee simple land that belongs to an individual
    within the tribal jurisdiction.
        I know it is a new idea, but I think it is an idea based on
    capitalism, based on whoever has the funds to create those type
    of transactions.
        The Chairman. Thank you.
        Ms. Apoliona, you stated that the Office of Hawaiian
    Affairs approved a 2000-07 strategic plan and the plan has a
    two-part economic initiative impacting 7 percent of the Native
    Hawaiian population, and the second goal was obtaining return
    on investment goals. What types of economic activities has the
    Office of Hawaiian Affairs been involved in in implementing
    that plan?
        Ms. Apoliona. We have and continue to administer a Native
    Hawaiian revolving loan fund serving and providing capital to
    Native Hawaiian first-time business owners and/or business
    owners who want to expand their businesses. In years past, we
    also have assisted in community-based economic development
    projects in the State of Hawaii. That has been primarily the
    extent of our service and support to Native Hawaiians who want
    to move forward in economic development.
        We currently are looking at a project on the island of Maui
    that has been longstanding for a marketplace. It is in the
    district of Hana and that has been looked at as an opportunity
    for the community because it is a highly visited spot on the
    island of Maui, and an opportunity for the community to
    establish storefront businesses that can serve the people
    traffic that comes as visitors to Hana.
        There is much more certainly that we can be involved in,
    and we see the opportunities that S. 519 may be able to provide
    to be very complementary to some of the future objectives.
        The Chairman. You are helping in housing. You mentioned the
    Native Hawaiians, some of them, have been priced out of
    conventional housing because the market is going up so fast.
    Would S. 519 offer some support for Native Hawaiians, to
    develop housing for Native Hawaiians?
        Ms. Apoliona. Yes; providing always additional resources so
    people can afford to stabilize their housing situation is key.
    Certainly with some of the thoughts and concepts in S. 519,
    that would help a lot.
        The Chairman. Thank you.
        We will probably have some further questions in writing.
    Senator Inouye may have and some of the other committee members
    may have also. But I certainly appreciate everybody appearing
    today. I am sorry to keep you when I had to run out.
        Julie reminded me of something, though. I was just musing
    on the way over when I voted and came back. As you probably
    know, Senator Inouye and I have worked for 18 years on the new
    Museum of the American Indian. That was one of my first bills
    and he took the lead on it here in the Senate when I was on the
    House side. September 21, that whole week is the opening, as
    you know.
        We had a meeting the other night with Rick West, who is the
    director, who told us they expect between 10,000 and 20,000
    Native Americans to be in Washington during that time, more
    than any time in the history of America, which is really
    something. There is going to be a procession from the
    Washington Monument to the building where we will do the
    ribbon-cutting. We are of course encouraging people to wear
    their native dress.
        But I got to thinking when I saw Julie that September might
    be pretty hot for a parka. [Laughter.]
        The Chairman. Native Alaskan people may have a particularly
    difficult time.
        Ms. Kitka. We have summer parkas. [Laughter.]
        The Chairman. You have summer parkas. Those of us who wear
    buckskins are worried about just even the buckskins, how hot it
    is going to be.
        Ms. Apoliona. Senator, the Native Hawaiians coming from
    Hawaii, we come really light, dress really light. And we will
    be there on the Mall as well.
        The Chairman. And you will be very comfortable, but those
    of our friends from further north may be a little bit
    uncomfortable, but it is going to be worth the trip and worth
    the day, so we are really looking forward to seeing everybody.
        Thank you for being here. This committee is adjourned.
        [Whereupon, at 12:10 p.m. the committee was adjourned, to
    reconvene at the call of the Chair.]

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                                A P P E N D I X

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                  Additional Material Submitted for the Record

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     Prepared Statement of David W. Anderson, Assistant Secretary, Indian
                      Affairs, Department of the Interior

        Good morning, Mr. Chairman and members of the committee. I am David
    Anderson, assistant secretary--Indian Affairs. Thank you for the
    opportunity to present the views of the Department of the Interior on
    S. 519, ``The Native American Capital Formation and Economic
    Development Act of 2003.'' We understand the committee will be
    significantly amending S. 519, therefore, our comments do not speak to
    provisions of S. 519, but rather address the concepts of the bill. The
    Department supports exploring creative approaches to economic
    development in Indian country.
        Economic development on tribal reservations poses many challenges.
    Access to capital in Indian country is extremely limited. This shortage
    of capital represents one of the primary barriers to comprehensive and
    lasting economic development. In addition, there are few opportunities
    to generate capital on Indian reservations. Studies show that
    unemployment on or near Indian reservations commonly exceeds 50 percent
    and in some areas that figure jumps to over 90 percent. Unemployment in
    Indian country has placed more than 500,000 people who live on or near
    Indian reservations at or below the poverty level. These obstacles are
    further compounded by the rural location of most Indian reservations.
    As a result of these factors, Indian country accounts for many of the
    poorest areas in the United States.
        Although poverty and joblessness pose great obstacles to economic
    development in remote reservation settings, economic development is not
    impossible. Increasingly, tribes continue to overcome these obstacles
    and create growth in reservation economies.
        The Bureau of Indian Affairs [BIA] is working with tribes to
    continue discovering creative and long-term solutions to building
    sustainable tribal economies. Through the recent reorganization of the
    BIA, the offices of Indian Gaming Management, Self-Governance, and
    Self-Determination were elevated to the Assistant Secretary's Office
    under the newly created Deputy Assistant Secretary, Policy and Economic
    Development. By elevating these and other economic programs, the BIA
    will emphasize expanding reservation and tribal community business
    opportunities and Indian employment. With the creation of the new
    Deputy Assistant Secretary, the BIA hopes to maximize efficiency in
    assisting tribal economic development.
        Another challenge the BIA is working to address is the issue raised
    by many investors and private lenders regarding tribal legal
    infrastructure; inadequate or non-existent legal and business codes. To
    address this issue, the BIA included in its 2005 budget request $1
    million to help tribes develop tribal ordinances and commercial
    business codes. We view this as a positive first step to help encourage
    more capital investment on tribal lands.
        The Department also encourages the use of self-governance programs
    as a method of encouraging tribal economic development. Through self-
    governance programs, the tribes control the administration of Federal
    programs to ensure the programs meet the needs of the individual tribe.
    For the tribes that choose to engage in self-governance or self-
    determination compacts and contracts, this direct control creates
    tailor-made programs that lead to the creation of viable and stable
    economies and tribal self-sufficiency. We will continue to work with
    tribes to expand self-governance and self-determination as a way to
    find creative solutions to economic development.
        Currently, the BIA independently administers a program that is
    addressing some of the financing needs of Indian country. Since 1974,
    the BIA has successfully administered an Indian Guaranty, Insured, and
    Interest Subsidy Program. The mission of the program is to ``stimulate
    and increase Indian entrepreneurship and employment through the
    establishment, acquisition or expansion of Indian-owned economic
    enterprises.'' The program guarantees loans up to $20 million dollars
    from the private sector to promote economic development of tribes,
    individual Indians and Alaska Natives. The guaranteed and insured loan
    portfolio currently totals $271 million. With enactment of the fiscal
    year 2005 Budget Request, the program expects to leverage private
    sector financing of 65 new businesses and create 1,300 jobs on or near
    Indian reservations. The guaranteed and insured loan program has
    achieved a success rate of 93 percent in the number of businesses
    without default for all loans funded since fiscal year 1992. From 1992
    to the present, 719 loans have been guaranteed, and of that total only
    51 loans have defaulted.
        While the BIA loan program is successful and takes steps toward
    addressing the need in Indian country, it does not fulfill every
    financing need. There is a gap between the small scale financing the
    BIA can provide and the funding required for other economic development
    projects.
        We would welcome the opportunity to further discuss our program.
    Additionally, we are willing to participate in further discussions
    regarding innovative approaches to enhance economic development in
    Indian country. Thank you for the opportunity to participate in the
    discussion today. I would be happy to answer any questions you may
    have.
                                     ______

                       U.S. Department of the Interior,
                               Office of the Secretary,
                                      Washington, DC, November 9, 2004.

    Hon. Ben Nighthorse Campbell,
    Chairman, Committee on Indian Affairs,
    U.S. Senate Washington, DC.

        Dear Mr. Chairman: I am pleased to provide the responses prepared
    by the Bureau of Indian Affairs to the questions submitted following
    the July 21, 2004, hearing on S. 519, the ``Native American Capital
    Formation and Economic Development Act of 2003.''
        Thank you for the opportunity to provide this material to the
    committee.

                Sincerely,
                                       Jane M. Lyder,
                                       Legislative Counsel,
                                       Office of Congressional and
                                           Legislative Affairs.

        Question 1. Where do you think the Tribal Development Corporation
    [TDC] should be housed? Do you see such a corporation as a new private
    entity or should it be public in nature, such as a new department or
    Federal agency?
        Answer. A Tribal Development Corporation, if created, should be
    well-managed and accountable for results. We expect that the proposed
    Tribal Development Corporation Study Group, created under the revised
    version of S. 519, will consider what sort of form would be most
    successful at ensuring these goals are met.
        Question 2. At the Forum on Establishing a Tribally Owned
    Development Corporation, you spoke about the need for project
    development as the key to reservation economic development. Should
    project development be the focus of the new tribal development
    corporation?
        Answer. Yes; project development, in the sense of locally
    controlled private entrepreneurial business, should be a focus of a
    Tribal Development Corporation.
        Question 3. In your testimony on S. 519, you note that Tribal Self-
    Governance has lead to the creation of stable and viable tribal
    economies. Do you believe that the development of a tribal development
    corporation would promote a similar stability? If so, how?
        Answer. If created, a Tribal Development Corporation would help
    promote stability. However, in order to promote stability and
    viability, the Tribal Development Corporation would need to advocate
    and support such basic economic development practices and institutional
    internal controls such as risk assessment and ensuring best business
    practices. A Tribal Development Corporation could also improve business
    strategies and relationships.
        Question 4. Would you comment specifically on the concepts
    contained in title VI of S. 519?
        Answer. Title VI of S. 519 provided for the authorization for
    appropriations. Title VI of the bill also provided a waiver of the
    matching funds requirements of the Riegle Community Development and
    Regulatory Improvement Act of 1994 (12 U.S.C. 4707(e)). This title has
    been struck from the amended version of the bill.
                                     ______

      Prepared Statement of Michael Liu, Assistant Secretary, Public and
          Indian Housing, Department of Housing and Urban Development

        Chairman Campbell, Vice Chairman Inouye, and members of the
    committee, I am pleased to submit this testimony for the record. I
    welcome the opportunity to share with you the Department of Housing and
    Urban Development's perspective on many of the concepts included in S.
    519, the Native American Capital Formation and Economic Development Act
    of 2003, which has been introduced by Chairman Campbell.
        My name is Michael Liu, and I am the assistant secretary for Public
    and Indian Housing [PIH]. PIH is responsible for the management,
    operation and oversight of HUD's Native American programs. These
    programs are available to 562 federally recognized, and a limited
    number of State-recognized Indian tribes. We serve these tribes
    directly, or through tribally designated housing entities [TDHEs], by
    providing grants and loan guarantees designed to support affordable
    housing, and community and economic development activities.
        In addition to those duties, my jurisdiction encompasses the public
    housing program, which aids the nation's 3,000-plus public housing
    agencies in providing housing and housing-related assistance to low-
    income families.
        I would like to express my appreciation for your continuing efforts
    to improve the housing conditions of those who need it most. As you
    have heard from previous testimony, much progress is being made and
    tribes are taking advantage of new opportunities to improve the housing
    conditions of the Native American families residing on Indian
    reservations, on trust or restricted Indian land, and in Alaska Native
    Villages. This momentum needs to be sustained as we continue to work
    together toward creating a better living environment throughout Indian
    country.
        At the outset, let me reaffirm the Department of Housing and Urban
    Development's support for the principle of government-to-government
    relations with Indian tribes and our commitment to honoring this
    fundamental precept in our work. Although the Administration has
    concerns with some of the provisions in S. 519 as introduced, we are
    pleased to have the opportunity--at the invitation or the chairman--to
    work closely with the committee to bolster the effort to build capital
    in the Native American community.''
        Capital in Native America tends to come from four primary sources:
    tribal financial resources, Federal guaranteed loans, grants and tax
    credits, debt capital, and equity investors. The latter is woefully
    inadequate for many reasons. Issues raised by investors and private
    lenders include: The legal status of tribal lands; inadequate or non-
    existent legal and business codes; insufficient understanding of issues
    related to tribal sovereignty and sovereign immunity; a lack of
    technical assistance resources; uncertainty related to leadership
    changes in tribal governments, and a lack of financial institutions and
    services on or in close proximity to Native American communities.
        HUD is committed to exploring new opportunities to surmount
    barriers to lending on tribal land and to facilitating access to
    alternative sources of capital, financial services and technical
    expertise. HUD's Office of Native American Programs [ONAP] is currently
    working with tribal governments, TDHEs, and lenders to increase private
    housing investments through the section 184 Indian Housing Loan
    Guarantee Fund Program, and the title VI Tribal Housing Activities Loan
    Guarantee Fund.
        Many tribes and TDHEs, as well as other tribally affiliated
    community and economic development organizations, use a project-by-
    project approach to housing and economic development. There is a great
    need to create a more comprehensive approach to the creation of
    sustainable economies. There are clear roles that tribal governments,
    Federal agencies and lending institutions can play in creating these
    economies.
        The promotion of capital development and economic growth for Native
    American communities, through involvement of the private sector is in
    harmony with our approach to meeting the needs of Indian country.
        The proposed provision of technical assistance to Indian tribes,
    financial institutions, and other organizations is an on-going part of
    our efforts to increase mortgage lending to Native American
    communities.
        We have learned of many of the barriers through the work of a
    number of Federal agencies inclusive of the USDA, BIA, the Community
    Development Financial Institutions Fund and, most recently, the six
    regional housing summits that HUD's Office of Native American Programs
    is sponsoring for its tribal, public and private sector partners.
        We recognize the need to increase the purchase of Native American
    mortgage loans by the secondary market. We are already working with
    several entities to increase participation; for example, the Federal
    Home Loan Bank system and Fannie Mae. The creation of a new Corporation
    raises several questions. The entity would be allowed to enter into
    contracts, which could lead to the Federal Government being implicitly
    responsible if the corporation was not able to fulfill its contractual
    duties. While several objectives envisioned in the bill are positive,
    they can be accomplished through existing Government programs.
        In summary, we encourage the development of new and innovate
    approaches to meeting the needs of Indian country that advance private
    sector participation with tribal nations. We agree with many of the
    findings as outlined in S. 519 and believe that much of the poor
    performance of Native American economies correlates to the absence of
    private capital and private financial institutions. We will continue to
    work in partnership with tribal governments, Native American
    organizations, the private sector, and other Government agencies to
    support private investment and leveraging in Indian country. And, Mr.
    Chairman, EIM is prepared to work with you to help overcome these
    barriers to accessing capital in Indian country.

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