Oil prices boost
Navajo revenue projections

By Kathy Helms
Diné Bureau

WINDOW ROCK — High crude oil prices and a slight increase in production have contributed to a $14.2 million increase in revenue projections for the Navajo Nation for Fiscal Year 2009, according to Martin Ashley, assistant controller.

Ashley presented the initial FY 2009 general fund revenue projection Thursday to the Budget and Finance Committee. The projections are based primarily on information from the Navajo Minerals Department, Tax Commission and Land Administration.

Total gross revenue for FY 2009 is projected at $211.4 million, compared to total gross revenue of $197.2 million in FY2008.

“Minerals Department provides a majority of the projections that go into the revenues that come to the Navajo Nation. Those revenues are primarily from the oil and gas royalties and also the coal royalties. Another portion that they provide to us is the right-of-way revenue projections,” Ashley said.

“The coal revenue projection is lower than the previous year, primarily due to the shutdown of the Mohave Generating Station which resulted in closure of the Black Mesa Mine, and also to the annual bonus payment of $3.5 million from Peabody Western Coal Co., ending in calendar year 2007,” Ashley said.

The overall coal royalty is lower than the FY 2008 projection due to the lack of bonus payment from Peabody and to less production at the McKinley and Black Mesa mines. “The overall projection is about $4 less than Fiscal Year 2008,” he said.

The land revenue projection increased significantly, however, largely because of a tentative agreement being reached between the Navajo Nation and El Paso Natural Gas Co. and the anticipated annual right-of-way payment.

“For Fiscal Year 2009 there is $18 million of additional right-of-way revenue as a result of that amount coming in from El Paso Natural Gas,” Ashley said.

Ashley noted that the projection does not include 45 percent of investment income for the Permanent Fund. “The reason for not including it is there is still no spending plan as required in the establishment of the fund.

“As you recall, there have been several recommendations made to the Navajo Nation Council on providing a spending policy for the Permanent Fund, and so that has not been put in place.”

Starting with fiscal year 2006, 95 percent of the Permanent Fund income became available to be spent, but because there was no spending policy in place, that money remains intact.

Ashley said another 50 percent of investment income is to go to the Local Governance Trust Fund. The projection includes a 4 percent set-aside for the Veterans Trust Fund contribution, amounting to $8.4 million, and $1.5 million for the Historic Trust Asset Litigation.

Those two set-asides were established in FY 2008 and move forward from that point in time. The total amount of set-asides for FY 2009 are $50.752 million.

Regarding $9 million in projected investment income, Ashley said the Nation receives lump sum draw-downs from external grants, primarily the 638 programs.

“It’s those lump sum draw-downs we invest in short-term securities, and it roughly brings in about half of the investment income projection. Of the $9 million, it includes $4 million of projected investment income from lump sum draw-downs of grant funds.

“The reason why I put that in is that sometimes the programs themselves, primarily the 96-638 programs, they come in and want to start utilizing the income that’s generated from these lump sum draw-downs.

“As I understand, within the federal regs that authorize these lump sum draw-downs ... it’s up to the Navajo Nation central government, the Navajo Nation Council, to make these appropriations,” Ashley said.