Diversification

How tribal economic development corporations

grow tribal businesses beyond gaming

By Thomas Zitt and Christopher Irwin

As tribes across the country work to leverage gaming resources into economic diversification projects, the importance of the economic development corporation cannot be overemphasized.

Although there are a variety of creative approaches to structuring economic development, there are common themes behind some of the most successful: persevering through early struggles and setbacks before finding the right balance between tribal oversight and corporate independence, and the right development strategy, one that takes advantage of inherent advantages or opportunities.

Native American economic development entities are typically governed by a board of directors appointed by the tribal council. Councils approve of overall strategic plans and levels of capitalization and dividend policies. However, day-to-day operations, including personnel matters and investment decisions, are most effective when left to the corporate board and staff. Quarterly reports keep the council informed.

Board member requirements are varied. In some cases, all board members must be tribal council members, while in others tribal council members and officials are not permitted to serve on the board. Frequently, tribes require a mixture of council persons, other tribal members and outside business or economic development professionals.

The two most popular corporate structures are tribally chartered corporations under Section 16, and federally chartered corporations under Section 17. The Section 17 structure has been recommended, due to the perception that it creates a more solid legal base, although that perception appears to be fading, as tribally chartered corporations have been very successful in attracting financing and accessing grants and government contracts. The disadvantage of incorporating as a Section 17 is that it can be a lengthy process to get approval from the Department of the Interior, and it is typically more expensive to establish with respect to legal fees.

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