Concerned Navajos: 'NO' to $100 million gambling loan

Mortgaging the future

Message from concerned Navajos opposing $100 million loan, "What's the hurry?"

This Friday (October 12, 2007), a day after a special workshop on the issue, the Navajo Council will vote in special session on whether or not to adopt Tracking 0524-07, short titled, "A $100,000,000.00 Possible Loan Offer from JP Morgan Chase." This bill was tabled during the last special session, when delegates L. and T. Tsosie raised concerns about the bill's language; 38 of 33 delegates agreed to table the bill until a work session can be held tomorrow in Window Rock.
The council delegates were wise to question the merit of the bill for the following reasons:
1. "The nation will only pay for the amount of the loan drawn upon, not the full $100,000,000.00." This oft repeated administration statement is not entirely true. According to points drawn by JP Morgan Chase in their proposal titled, "$100,000,000.00 Reducing Revolving Credit Facility", under the "Unused Portion Commitment Fee, "The Borrower shall pay a commitment fee, quarterly in arrears, on the unused portion of the Credit Facility equal to twenty-five (25) basis points (0.25%)". This means since the loan total is $100M every year four quarterly payments equaling $1 million ($1M) annually will be paid on money we did not borrow or have yet borrowed. In the beginning the amount begins as $1M annually but, as its incentive, the more money we borrow the smaller this amount is. It encourages Navajo Nation to incur debt to be paid tomorrow to balance out the immediate amount paid out in fees today.
2. Why is the administration offering "cash, cash equivalents, and marketable securities" to collateralise the loan while the bank is demanding a "full faith and credit general obligation of the Nation." No exact marketable securities are named, which implies everything is on the table. The house has been put on the table with a $100M marker by the administration. This is peculiar since previous councils tried a collateralized economic development bond/ loan in the '88/'89 years, with a premier Japanese bank, using only the royalties from the Kayenta Mine as collateral. I believe Mr. Shirley served on that council. Everything down to the nails can be seized, a case could be argued, even trust funds viewed and interpreted as assets by courts, which brings us to the next point. (Section 2 d.)
3. "Limited Waivers of Sovereignty" This is a tricky idea to attach to any subject, especially finance. While the bill expresses commitment to Navajo Arbitration Act, it places the nation at the mercy of federal courts and possibly state courts if JP Morgan Chases chooses state regulated banks as a partner. When you've bet the entire nation's assets as collateral, do you really want to put our land as as means for the bank to foreclose on as default? (Section 1 l.)
4. Gaming Projects are classified as Capital Improvement Projects. While this may not sound like much it implies this loan can be spent on Capital Improvement Projects (CIP). It gives the administration a backdoor to funds for the laundry list of CIPs. It is obvious we have many needs on the nation but is allowing the administration access to as much of $100M as they want the proper method to funding these? There-in is the danger of pet projects being fast-tracked while those for opposing or uncooperative individuals from receiving any of the pork, or worse CIPs being offered for votes. All the costs would be paid for by interest owing generations of Dineh to come and the next administration's problem. (Section 2 b.)
5. There is no Navajo Council oversight after this bill is ratified. The President and Controller act as "Authorized Officers" of the Navajo Nation in all future "loan agreements, promissory notes, line of credit, pledge agreements, account control agreements, security agreements, guarantees, Interest Rate Agreements, syndication agreements, closing certificates and/or future modifications and waivers to such documents in connection with the Gaming Loan and the Enterprise Loan." There is no Navajo Council oversight from the Banking and Finance Committee or even Intergovernmental Relations. The president's signature is all that is needed to access $100M. (Section 2 h.)
6. The Navajo Council "hereby ratifies and approves ALL (my emphasis) actions previously taken by the President, Controller, and the Attorney General of Navajo Nation to obtain the Gaming Loan." That's just scary in the scope of immunity requested as for those named individuals to request it. (Section 2 i.)
7. "The Navajo Council hereby approves and states that any legislation, customs or other actions of the Navajo Council in conflict or inconsistent with the terms of this legislation...are waived to the extent of such conflict or inconsistency, and this legislation shall supersede the same." This is overtly broad and sweeping. Why customs, laws, or "other actions" of the council? (Section 2 k.)
8. To their credit, this bill has a low interest rate based on the London Interbank Offered Rate (LIBOR) based on a 1, 3, or 5 month rate. The LIBOR fluctuates between 5 and 6 usually (currently being 5.24 for the 3-month rate, a change from 5.7 last month). The bank adds another half-point and you get our interest rate. That perhaps was what Navajo Gaming Enterprise CEO Robert Winter was alluding to when he said this was the best agreement he has seen with $1 billion dollars worth of contracts in his experience.
There are severe problems with the legislation presented to be voted on Friday. One would wonder why the Navajo Council would want to give sole access of $100,000,000.00 of discretionary funds to the President and Controller to spend as see fit. The Navajo Council is supposed to have oversight over operations and control of the nation's pocketbook. The amount of money is too large to be given to the control of the executive branch without any oversight or accountability. A race would begin to see how much money could be spent before the term limited Shirley is handed his hat. The means to repay the loan amount would be the next administration who would be coming into office when the payments to the bank finally stop paying interest-only costs and begin to pay on the principal.
Call your delegate, ask them to vote NO, vote RED, on this issue. To reach them on the council floor tomorrow or Friday call 928.871.6000, ask for legislative services or the steno office. Ask for a note to be sent to your delegate on the council floor and tell them your concerns. There is no reason to rush into this loan offer when we haven't stepped feet out of "Indian Country" looking for banks to do business with.

Comment:
Several concerned citizen got together yesterday and here some reasons why we thought this was a bad loan.
The Navajo Nation is using Navajo Nation Assets as collateral to pay for the loan. Assets are our natural resources and even the Permanent Trust Fund. JP Morgan will give us permission to do what we like to do with our assets and thus replacing the B.I.A. If the Council approves this legislation, we will have a new daddy in town. What if the entire Navajo assets is worth over 100 billion dollars and we tied ourselves to $100 million and the Nation gaming fails. We lose all the assets for 100 million. That's CRAZY!
What's the hurry?
Vern Lee

From the wires:

ALBUQUERQUE (AP) - The Navajo Nation Council has tabled a measure that would help pay for casino development on the 27,000 square-mile reservation. The council met Friday in Window Rock, Arizona, in a special session to consider a $100 million line of credit secured earlier this year from JP Morgan Chase. The council’s approval is needed before the tribe can use any of the funds. Delegates voted 38-33 to table the measure until a work session is scheduled. The measure then could be brought up in a later session.