The municipal bond market is a vital component in the federal-state relationship, providing infrastructure to the nation through local decision-making and access to the capital markets. For Native American Tribes, bond financing is one of the tools in the economic toolbox available to tribal governments as indicia of their sovereignty. The reason for financing tribal projects with bonds is simple – it matches the payment of the cost of expensive, long-lived facilities with their useful lives. Bonds are a way for an American Indian tribe to acquire facilities it truly needs while allowing each generation that uses or benefits from the facility to share in its costs. In this way, the larger needs of the community may be met by sharing the costs over time.
While the terminology of bond financing is new to many in Indian Country and can be baffling, the concept is not. Bonds are simply loans to tribal or other governmental entities, but with longer repayment terms and, usually, lower interest rates than are available to most individuals or businesses. States, cities, other local government entities, or their agencies as well as Native American Tribal Governments and enterprises issue bonds to raise capital for building infrastructure. Projects which may require public financing include schools, affordable multifamily housing, recreational facilities, water treatment plants, hospitals, sewers, and parking facilities, to name a few examples. The means, security, and other terms of a bond transaction can be as complicated, or as simple, as needed to accomplish the tribe’s goals.
Bond financing may not suit the needs of every tribe, but it is important to note that this financing tool has a much broader application than tribal gaming facilities. In fact, the vast majority of bond financing is actually used for more traditional facilities, and our experience at Howell Linkous & Nettles has principally been the financing of traditional governmental facilities for tribal governments.
Combining innovative ideas while tailoring the transaction to the tribe’s specific culture and needs is a hallmark of our representation of Native American tribes in bond financing. For example, Howell Linkous & Nettles was the first firm to successfully structure an Indian tribal bond issue with the backing of an offshore insurance company which does not have the exposure – and related problems – of many of the monocline bond insurers. This structure provided credit enhancement to the tribal government without the financial risks associated with bond insurers and sub-prime mortgage market.
The bond attorneys at Howell Linkous & Nettles are recognised for their bond counsel experience across the South as well as in Indian Country. We are one of the few bond counsel firms located outside of New York or Los Angeles experienced in tribal bond financing. Bond counsel for your tribe must know three areas of law: federal income tax law; federal securities law; and the tribal law. As the tribe’s bond counsel, our bond attorneys will provide all of the legal services needed under tax and securities laws. We will work closely with the tribe’s general counsel in addressing the requirements of tribal law, because we realise that each Indian nation is unique. Thus, all of the component legal areas of bond law are addressed without imposing on the tribal culture the corporate culture of a large, multi-office, multi-state law firm.
Howell Linkous & Nettles does not adopt a standardised approach to bond financing; we realise that there is no “standard” tribe. Instead, a bond financing should be an exercise in self-determination by a tribe, where tribal culture, and not business culture, should control.