The Navajo Nation Council Naabik’iyati Committee is having a special meeting before the Navajo Nation Council calls its special meeting on Sept. 21, Wednesday, and both special meetings are to take action on two pieces of legislation: Legislation 0290-16 and Legislation 0285-16.
Legislation 0290-16 would create a Navajo Nation Permanent Trust Fund Five-Year Contingency Fund with an initial $2.9 million from the Permanent Trust Fund Earned Interest. According 0290-16, which is sponsored by Council Delegate Dwight Witherspoon, the contingency fund is to maintain a reserve of monies that the Council can appropriate based on a expenditure plan adopted by the Budget and Finance Committee, which means the Budget and Finance Committee creates the plan.
And remember folks, the Budget and Finanance Committee Chairperson and Council Delegate Seth Damon successfully sponsored, after a variety of numberous attempts, legislation for the restructuring of the Navao Gaming Enterprise loan, which allowed a loan of not more than $212 million at an annual interest rate of 5.93 percent for 15 years with an option to renew the loan for another 15 years.
And the loan package only required the approval of his Budget and Finance Committee, which include Budget and Finance Committee member and Council Delegate Leonard Tsosie, who is the chairperson of the $500 million Sihasin Fund.
In January, Damon unexpectedly withdrew his Council legislation for a reduction in the 8 percent interest rate loan to 3.5 percent for the Gaming Enterprise. If Damon had not withdrawn his Legislation 0005-16 from the Naabik’iyati Committee agenda, it would have continued to the Council.for final action.
But when Legislation 0005-16 went before the Budget and Finance Committee in January, the committee went behind closed doors for about two hours with the Council’s Chief Legislative Counsel, Levon Henry, and Attorney General Ethel Branch.
When the door opened, then B&F Committee member and Council Delegate Mel Begay attempted to have 0005-16 tabled but B&F Committee member and Council Delegate Lee Jack argued that even if the committee tabled it that 0005-16 would continue on to the Naabik’iyati Committee and finally to the Council.
B&F Committee member and Council Delegate Tuchoney Slim, Jr., who was serving as interim B&F Committee chairperson while Damon presented 0005-16 to committee, called for the vote.
The vote ono 0005-16 was 2-1, with Damon and Jack voting yes and Begay voting no.
According to a written public comment by acting Navajo Nation Controller Jim R. Parrish on 0005-16, which is posted electronically to 0005-16 on the Council website, he opposed the approval of 0005-16 by the Council because the proposed loan interest of 3.5 percent does not meet the basic fiduciary responsibilities required by the Navajo Nation ‘s Master Investment Policy.
Parrish stated, “The prudent ‘investor’ rules provides that ‘investment’ shall be made with judgment and care, under circumstances then prevailing, which person or prudence, discretion and intelligence exercise in the management of their own affairs, not for speculation but for investment, considering the probably safety of their capital, as well as the probable income to be derived.
“A fixed interest rate of 3.5 percent for 20 years does not meet the prudent investment rule,” he stated.
Parrish noted that tribal gaming credits with a credit profile similar to the tribal gaming enterprise would have limited access to the capital markets and if they were able to access capital markets, interest rates would be in the 10 to 15 percent range with a term of between five to seven years.
“Fixing the interest rate for a 20 year period at a below market rate exposes the Nation to substantial risk on the return to the porfolio if interest rates increase over time,” he stated. “The Nation completed its first ever limited public offering in November 2015 for almost $53 million. The true interest cost on the bond issue was 4.94 percdent with a 15 year term.
“It would not be prudent to loan money to an enterprise of the Nation on terms that are better than what the Nation can borrow at,” Parrish emphasized.
Parrish recalled that the gaming enterprise agreed to a series of loans and the subsequent renegotiations of the loan terms to defer the payment of principal and he consistent reduction of the interest rates, which have resulted in the failure of the gaming enterprise to meet its obligations to repay the loan to the Navajo Nation Permanent Trust Fund and other funds that have loaned the money since 2008.
He added that the “aggressive” reduction in loan payments to the Permanent Trust Fund and other funds over the past eight years have had the long term effect of reducing the funds available for other more profitable investments opportunities for the Investment Committee to consider and recommend for approval to the B&F Committee.
“The proposed terms of the loan modification are truly startling,” Parrish stated. “NNGE agreed not more than one year ago to refianance the ‘past due interest’ due as of Jan. 2, 2015, in the amount of $14,094,737.58 with ‘interest only payments’ at 8 percent per annum for the first 18 months and with principal payments to begin on July 1, 2016.
“Now with this proposed legislation, the NNGE wants to restructure the loan to lower the interest and principal payments once again,” he stated.
The Naabik’iyati Committee is scheduled to meet at 10 a.m. and the Council is scheduled to meet at 1 p.m.
LEGISLATION 0290-16: An Action Relating to Law and Order, Budget and Finance, Naabik’íyáti’ Committee, and Navajo Nation Council ; Establishing the Navajo Nation Permanent Fund Five-Year Contingency Fund for the Purpose of maintaining a Reserve of Monies Designated from the Permanent Fund Income Five-Year Expenditure Plan SPONSOR: Council Delegate Dwight Witherspoon
LEGISLATION 0285-16: An Action Relating to Law and Order, Budget and Finance, and Naabik’íyáti’ Committees and Navajo Nation Council; Approving a Budget Reallocation in the Total Amount of $417,737 within the Fire and Rescue Services Program, Business Unit Number 116012, to continue operations and waiver of budget reallocation limitation SPONSOR: Council Delegate Kee Allen Begay, Jr. and CO-SPONSOR: Law & Order Committee Vice Chairperson Raymond Smith, Jr.