Navajo gaming: Where’s the money?

By Kathy Helms
Diné Bureau

WINDOW ROCK — Navajo Nation Controller Mark Grant, with the support of the Budget and Finance Committee, is putting together a request for proposals to present to Navajo Nation Council for a loan of up to $150 million to be used for gaming development and governmental buildings such as detention/judicial complexes.

Grant presented the proposed request for proposals during a Budget and Finance Committee meeting Thursday.
As originally written, the request for proposals would have been to solicit proposals from qualified banking institutions for $35 million to pay costs associated with the refinancing of an interim $35 million loan entered into by the Navajo Gaming Enterprise and the Navajo Nation to finance the Churchrock casino project .

“This request for proposals was prepared a few weeks ago and it mainly focused on the gaming enterprises, however it would be fairly easy to add capital improvement projects projects to it if the committee so desires,” Grant said.

Staff attorney Marcelino Gomez said that with the request for proposals focusing solely on gaming enterprises, the interest the Navajo Nation would pay to the bank would be subject to federal income tax.

“As a result, the interest rate would be a little bit higher than if we received a loan for governmental projects — non-commercial activities — where the interest we would pay to a bank would not be subject to federal income tax.”

By including governmental projects in the request for proposals “you get a little break in the interest rate when you finance items that are referred to as a central governmental function and non-commercial activities. That would be like for jails, police buildings, senior citizen centers, that type of activity,” Gomez said.

Martin Ashley, assistant controller, told the committee that Public Safety and Judiciary Committees are discussing building court and detention facilities in Tuba City and Crownpoint. He said they have enough money to build one, but would need about $30 million to complete both.

B&F Chairman LoRenzo Bates said that if the projects were combined into one loan, the Nation could get a better deal if it goes for a larger amount, as opposed to pursuing two separate loans.

“If we can get Judicial and Public Safety to agree on what they can contribute in hard dollars or in making payments, it helps us, rather than doing a small loan and Band-aiding it all the way through the process.”

During the debate, B&F’s Hoskie Kee said he didn’t want the Nation to tie its hands at setting aside $30 million for capital improvement projects. He said he would rather have more flexibility on setting a cap.

Grant said Kee had a point.

“It would be good to have some guidance from the committee on the split between taxable and tax-exempt bonds, because when we go out to the banks that’s one of the first questions they’re going to ask, is how much are you going to allocate to tax-exempt projects and how much are you going to allocate to taxable projects,” Grant said.

“The reason for that, as Mr. Gomez said, is the way they price the loans, it’s different. The capital improvement projects are going to be actually scheduled for 15 to 20 years, whereas the casino-type projects will be for seven years. So all of that will change the pricing and the amortization of the loans.”

Kee recommended that the numbers start with how much the Navajo Gaming Enterprise needs for the commercial establishments, “and then we can adjust it from their recommendations.”

Grant referred the question to Ray Etcitty, general counsel of the Gaming Enterprise.

“The total amount that the Enterprise essentially needs for all of the casinos is probably about $250 million. I would say that Twin Arrows is probably $100 million. The current loan borrowed for the structure at Churchrock is $35 million.

“If there is going to be another one built in the Farmington area, I would venture to say another $30 million to $35 million; and one within the Coalmine/Cameron area, another $35 million.

“If the Navajo Nation wants to pursue a resort type casino near Page, we’re talking about another $190 million, and if they want to do one in Tohajiilee near Albuquerque, about another $90 million to $110 million.

“If the Nation would be able to write that check before I leave, I would be glad to take it back,” he said, jokingly.

Kee said it sounded like they need to prioritize which of the casinos would be going up first. “I would venture to say Churchrock and Farmington area. That would be $70 million, so set aside $30 million for capital improvements.”

B&F’s Nelson Begaye told the committee, “If we’re really serious about casinos, I think we should put our money there and not play around. I just don’t like these piecemeals. If we’re serious about gaming, then let’s do it.”

Grant said that to change the request for proposals or the loan amount is not difficult, and recommended the committee consider a range of $100 million to $150 million with a 70/30 split. “That would allow us to get moving and to publish the request for proposals.” If it was decided to change the split from 70/30 to 50/50, it would not change the loan rate that much, he said.

After considerable debate, the committee determined that it would pursue a loan of $150 million, with 70 percent of that going for casino development and transaction costs and 30 percent for governmental buildings.