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OST and the empowerment zone




Opportunity Zone illustration by Tim Peacock.

Opportunity Zone illustration by Tim Peacock.

PINE RIDGE — In recent years, three different types of economic development zones have been authorized by Congress targeted at otherwise underdeveloped and impoverished areas. All three have been implemented on the Pine Ridge Reservation. These zones are the Empowerment Zone, the Promise Zone and the Opportunity Zone.

Empowerment Zone

According to a 2011 NSNT article by Jesse Abernathy, the Oglala Sioux Tribe (OST) became the first tribal Empowerment Zone (EZ) in January, 1999. EZ was a program within the Clinton Administration’s ambitious Community Empowerment Agenda, and over ten years, $17 million was funneled into a variety of tribal programs and projects and personal loans, but the big question became, after the program was terminated in 2009, what economic development had actually achieved.

Abernathy reported: “It is unclear how many business and other economic entities have actually been created by the tribe through EZ program funding. Pine Ridge Reservation’s Lakota Funds, a community development financial institution and key EZ program partner, has loaned over $5.7 million to tribal members for the supposed creation of over 400 businesses and over 1,200 jobs on or near the reservation since its inception in the 1980s, according to information contained on the institution’s website.

“There is no proof to substantiate this claim. Jeffrey Whalen, a correspondent of Native Sun News, calls these claims ‘plain baloney.’”

OST’s initial EZ program was called the Oglala Oy- ate Woitancan Empowerment Zone. Oversight came from the OST Business and Economic Development Committee. Later, another program emerged, headed by Tally Plume, but neither group had anything substantive to crow about in progress reports.

“Based on its 2008 annual progress report,” Abernathy wrote, “Oglala Oyate Woitancan EZ, which is currently headed by OST member Daphne Richards- Cook, appears to still be in its infancy, or planning, stage – more than ten years after the program received its initial funding.”

Ultimately, no group was responsible for determining the proper use of EZ funds, not the USDA rural development division, not the OST, and not the EZ programs implemented by the OST. In terms of developing an economy, of altering the dysfunctional reservation economic paradigm, little seems to have been accomplished over the course of a decade.

The final result of the EZ program for the OST seems to be one of two realities, that the program was bungled by well-intentioned but incompetent tribal supervision, or that the program was set upon and ransacked by endemically corrupt tribal hogs at the Nanny State trough. OST enrolled member Elsie Meeks, was South Director of Rural Development for the USDA at the time, the federal agency which oversaw the distribution and implementation of EZ funds. According to then spokesman, Jay Fletcher, USDA rural development regularly reviewed EZ accountability reports. Meeks told NSNT, “It is up to the tribe as a whole to determine whether or not the Empowerment Zone program has been successful on the Pine Ridge Reservation. My belief is, it had to have had some impact.”

Given the program’s ambitious intent, and multimillion dollar funding, “had to have some impact” is a disturbing assessment of the program’s efficacy.

Promise Zone

In 2013 the Obama Administration created 20 Promise Zones (PZ) across the country. The idea was to assist impoverished areas in creating jobs, improving education, and reducing violent crime. An important and often underappreciated benefit was assistance in applying for grant monies. In 2014, the Thunder Valley Community Development Corporation, submitted an application on behalf of the entire tribe and won a PZ designation.

Grant money is a double edged sword. On the one hand, you don’t have to pay it back. On the other hand, when you don’t have to pay money back, you can become imprudent with how you spend it, since no matter what goes wrong, no agency will come collecting. Of all three zones, OST has been most successful with PZ funding. Thunder Valley seems to be the fulcrum for this success, exercising vision, accountability and competence, three things generally at variance with OST planning and procedure.

The PZ designation ends in 2025, but during that time the OST has a real opportunity to develop, expand and maintain tribal programs, reservation businesses, non-profits, schools and educate tribal leadership. Most importantly, they will have access to specialists in many areas, including grant writing, to help fund future OST programs and projects after the PZ designation runs its course.

Opportunity Zone

Being a real estate magnate before he became president, Trump had his reasons for wanting the 2017 Tax Cuts and Jobs Act. The Opportunity Zone (OZ) part of that act provides for real estate development in economically distressed areas, by giving investors, leery of the capital gains tax, a tax break incentive to invest.

Under the guidelines of the program, states may designate up to 25% of economically distressed areas as OZ. Obviously, these designations cannot only be arbitrary, but critically compromised by self-interest and exploitative intention. That being said, these are genuinely distressed areas, and just because the unscrupulous may have found a dependable vehicle to game the system, tangible good can still be accomplished by any tribe that understands how the OZ works, and is willing to be receptive and cooperative with potential investors in OZ enterprises.

This has been a problem for the OST in the past, mistakenly dismissing such investment because the investor might actually benefit handsomely from it. Ideally, any sound business venture should benefit all parties involved, and if one should benefit far more, the other partner benefitting less, must weigh their percentage against the prospect of no partnership, and 100% of nothing.

Make no mistake, unlike the two previous zones, the OZ is complicated. Not something based on grants or handouts. It is an opportunity a business savvy tribe must explore and comprehend, but the benefits are as real as with any grant program, perhaps more so, given this type of partnership forces oversight and accountability, and is likely to involve experienced partners who know how money works, and know how to make a profit for themselves and their partners.

First, what are capital gains? They are a profit, from the sale of assets like stocks, bonds, precious metals, and in President Trump’s case, real estate. The original purchase price of the asset is subtracted from the sale price of the asset, this is the profit, and it is called capital gains, and it is taxed. People earning profit don’t want this profit taxed, hence Trump’s desire for a program where he and his friends can get around that tax. But if the tribe can benefit from the OZ, that should not dissuade them from participation.

In the simplest terms, Qualified Opportunity Funds (QOF) areas have been designated in all 50 states. An investor reinvesting in QOF can defer tax payment on capital gains until the date the QOF is sold or exchanged or until December, 31, 2026, whichever is earliest. If you hold out for five years, you save 10% on the deferred capital gains tax, if you make it to seven, you save 15%, and if you make it to 2026, “…the investor is eligible for an increase in basis of the QOF investment to its fair market value on the date the QOF investment is sold or exchanged.” Translation, this greatly reduces the difference between purchase price and sale price.

Basically, investors are looking for partners and opportunities where they can defer capital gains tax payment, and this is the incentive for them to partner with tribes in joint business ventures. Pine Ridge has an OZ, which runs from just east of Pine Ridge village, west to the Fall River County line, and then up in a narrow corridor that crosses Highway 18. That’s the good news. The bad news is a Google search reveals zero hits on any OST involvement with their OZ. The same Google search yields zero hits for the Rosebud Sioux Tribe, despite the fact almost their entire reservation has been designated an OZ. A Google search on the Winnebago Tribe of Nebraska gets this hit: “Winnebago Tribe takes advantage of new ‘Opportunity Zone’ designation.”

Ho-chunk, Inc. realizes that the OZ designation spells potential profit, and they are moving on it. They were proactive enough to lobby the Nebraska governor to include them as an OZ, and they are the only tribal OZ in Nebraska. According to a Kevin Abourezk article on Indianz.com, Lucas LaRose, corporate counsel for Hochunk, Inc., said the establishment of the Winnebago Reservation as an Opportunity Zone could lead to significant economic benefits for the tribe.

“It’s a big deal,” he said. “We’re really excited the governor nominated the reservation for this.”

Sam Burrish, communications manager for Ho- Chunk Inc., said the reservation’s designation as an Opportunity Zone will add “another tool to our financial toolbox.”

“It increases our ability to get funding,” he said.

Pine Ridge has long needed a tribal corporation similar to Ho-Chunk, Inc., with the financial and operational independence, and business savvy to take advantage of economic opportunities, to form long term, good faith business partnerships and relationships that create ever more and better opportunities for tribal economic development. The OST Economic and Business Development Committee is the closest OST can come to Ho-Chunk, Inc., but if they seek the right financial advice, and hook up with the right investors, the Pine Ridge OZ could very well turn out to be the most beneficial of the three economic development zones. As it is now, the OST is doing little or nothing to establish the relationships Ho-Chunk, Inc., routinely seeks, expands, and profits greatly from.

(James Giago Davies can be reached at skindiesel@ msn.com)

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