Municipal governments have issued more than $82.5 billion in bonds through April 9 of this year, according to the latest data from Thomson Reuters. Of the 2,851 deals done to date, though, none have come from tribal governments.
Bond finance continues to be mainly a desert for tribes, despite incentives by the federal government to encourage this kind of funding for tribal governments.
Last year, just $29.7 million in municipal bonds were issued by tribes, out of a total of $377 billion. That works out to much less than one percent of the market. In 2011, no bonds were issued, according to Thomson Reuters.
For the past ten years, tribal governments did just $1.96 billion in bonds. More than a quarter of that volume came in 2007, at $577.6 million, according to Thomson Reuters.
Tribes haven’t just ignored this enormous source of financing, though. Often they can obtain easier and even cheaper money from commercial banks. And there have been conditions in bond finance that tribes have stumbled over. Perhaps the biggest is a sovereignty issue. While other governments are not limited in what they can finance, tribes have been limited to financing “government buildings.”
The federal government tried to make encourage tribes to use bonds during the recession with a $2 billion pilot program. However, only about 10% of the $2 billion funding authority was used.
There are successful bond stories in Indian country. The White Mountain Apache tribe used a $25 million bond to build 250 homes on its Fort Apache Arizona reservation during the beginning of the last decade.
The complexity of the project, however, which involved more than ten financial institutions, meant it was not easily replicable for other tribes.
The Reno-Sparks Indian Colony in Utah used bonds to finance a 65,000 square foot health facility.
The Southern Ute tribe in Colorado achieved a triple A rating on a $69 million tax-exempt bond issue in 2001, getting the highest investment bond rating due to its oil and gas reserves. Fitch Ratings recently reaffirmed the triple A rating of that and two other bonds since issued by the tribe.
Sen. Max Baucus of Montana held hearings last year to investigate how to level the playing field for tribal governments and bonds, proposing to eliminate the “government building” restriction. And tribes notched a victory when the balance of the $2 billion bonding authority was reauthorized last year