The Confederated Tribes of the Colville Reservation have seen a $10 million economic turnaround in a year since reorganizing their business operations and cutting expenses, including jobs.
When Joe Pakootas, a Colville tribal member, was brought in to head up the tribal business enterprises in January of last year, the Colville Tribal Enterprise Corp. (CTEC) was “close to bankruptcy,” he told Indian Country Today Media Network.
The CTEC was a mix of profitable and unprofitable businesses, with the unprofitable ones threatening to bring the profitable ones down at the Coulee Dam, Washington-based operation. A judgment against the mills, for instance, could make all the businesses liable, he said. So the tribe effected what might be called on Wall Street a “good bank/bad bank” reorganization.
The profitable businesses, about a dozen, were put into a new venture, the Colville Tribal Federal Corp. The bad businesses, two mills and a house boat operation, stayed in the CTEC.
The federal structure, enabled by section 17 of the Indian Reorganization Act of 1934, had “tax advantages and protections under the federal government,” Pakootas said. One was that the tribe was no longer subject to state taxes on operations outside the reservation boundaries.
“One of my main functions was to look at all our businesses and see where we could save money,” Pakootas said. “I really understood how the operations work” from his 16 years on the tribal council, including five as chairman.
The houseboat operation, which was losing about $250,000 a year, was shut down and some of its assets liquidated. The mills were continuing to lose money for the tribe even after they were shut in 2009 at the height of the recession, costing hundreds of millworkers and loggers their jobs.
“We cut right to the bone there,” Pakootas said of the mills, with about an additional 25 executive jobs being cut. The construction business was cut also, with workers being furloughed when there was no work for them.
In addition to “rightsizing” the operations through layoffs, “we started looking at generating revenues.” The tribe opened a new casino, its third, last year. It also started a convenience store in the far western part of the reservation, employing six people.
Convenience stores are a good investment since they are inexpensive to start and they yield gas and cigarette tax money to the tribe, Pakootas said.
The result of the reorganization/rightsizing? The CTEC-CTFC combo went from losing $8.1 million for the year ending September 30, 2009 and earning $2.3 million for the year ending September 30, 2010. That’s a turnaround of $10.4 million.
CTFC has hired about 100 people in the last 15 months, Pakootas said, but much remains to do on the 12 tribe, 9,400 people reservation, located to the north of Spokane, Washington. Unemployment currently is around 55 percent to 60 percent, and was hurt badly by the loss of hundreds of tribal jobs at the mills. CTEC/CFTC now employs about 500 people, down from more than 1000 before the firings, Pakootas said.
The CTFC is in negotiations to lease the mills, and it intends to have rehiring those tribal workers written into the lease. That would be a major boost to tribal employment, he said.
They are costing the tribe $3 million a year to keep in mothballs, Pakootas noted.
The company is also looking to expand its casino operations with a new, 65,000-square foot casino, which will replace another temporary location.
According to the tribe’s public relations consultant, Desautel Hege Communications, Spokane, CTFC “is the largest, most diverse Native American business in northeastern Washington.”
The firm noted that CTFC “was forced to get creative” when “faced with an uncertain future and unable to secure financing to remedy the situation.”
The tribe turned to Pakootas, who has a master’s degree in business, to revive the business enterprises in a change of direction. CTEC has had 25 chief executive officers since inception in 1984 (its yearly revenues have been as high as $120 million), and nearly all of them have been non-Native. Asked if his tactics didn’t suggest the kind of cost-cutting and revenue enhancing in dominant culture businesses, his answer was yes and no.
“Indian tribes aren’t capitalists. Our structure is not so much a capitalist structure. Everybody is sharing.”