Michael Taylor: Nation-Owned Businesses: Quil Ceda Village
Taylor, Michael. "Nation-Owned Enterprises: Quil Ceda Village." Building and Sustaining Tribal Enterprises seminar. Native Nations Institute for Leadership, Management, and Policy, Udall Center for Studies in Public Policy, University of Arizona. Tucson, Arizona. March 29, 2007. Presentation.
"Well what the second part of the presentation before me emphasized was structure. How do you structure? How do you get away from politics, if you can? And you can't always get away from politics. But I would say that, I would argue in contesting part of what was said this morning, that dividing the business operations from the politics of the tribal council is perhaps not a panacea, but it's necessary if the tribes are going to succeed with their development. In all the years that I've worked on reservations -- and I worked in the tribal facility always, I've always worked directly for the tribe -- the struggle has been how to figure out ways to deal with this problem. We need to develop our resources; we need to pay attention to taking those resources that we have and maximizing [them] for the benefit of our people and creating institutions that last, both governmental and business. And so in struggling with this problem I think I -- along with the people that I've worked with, Indian people -- have figured out a couple of ways and I want to talk about two of them.
I know I was brought here to talk about Quil Ceda Village, which I will spend most of my time on, but on the Colville Reservation, which is just south of Osoyoos, in the early '80s the tribe was faced with this problem. They had a whole bunch of businesses; they were all being subsidized by timber revenues. And when the timber market went bust, all those businesses essentially couldn't operate because they were being supplemented by timber revenues. So we established a corporation called tribal governmental, which we called a tribal governmental corporation. If you want to study this model, there's a case now out from the -- I don't think anybody else in here is a lawyer -- but this case just came down from the Washington Supreme Court, a court which has never been favorable to Indians from its inception. When it was a territorial court, before there was a State of Washington, it still wasn't particularly interested in Indian issues, and has done its best to torpedo Indian rights wherever it could. But this organization that we established back in the early '80s was eventually sued in a way that we thought it would eventually be sued. And in this court, a very unfavorable court, the Washington State Supreme Court, we succeeded in getting a very favorable decision about this form of organization and I recommend the case to you. It's called Wright vs. Colville Tribal Enterprise Corporation [CTEC]. You can mention this to your lawyers; you can get it on [Lexis and Westlaw]. In that case, the Supreme Court of Washington talks about this corporate entity that was formed on the reservation at Colville. What it is and why it maintains the powers and immunities of an Indian tribe while being sort of a half step away. And that half step is important because the half step separates business from government. And I would argue that the reason that CTEC is still around after 24 years or however long it's been is that this separation took place.
Now there have been many wars here, internal wars, but the trick here is survival and profitability. And CTEC Corporation has, over the years, maintained that separation between the tribal elected officials -- there are 14 of them at Colville, a 14-member tribal council -- and the corporate body, the leadership that's brought in essentially, some tribal members, some not, to run the businesses of the corporation, which include gaming and timber, sawmill, grocery stores, there's a recreational houseboat development -- a whole bunch of things that this entity does. There's even a kind of a bank that operates, loaning money to people. And so this entity has survived, what I think as a lawyer is, a critical test where it got sued in the state courts and the case went up to the state supreme court and the state supreme court validated what we did. And if you look at that case, every fact and every law and every ordinance that both the majority opinion and the concurring opinion use as a basis for legitimizing what we did here was thought out, it was well thought out, even though we didn't have any models or at least we didn't have any models in Indian Country to do this.
Now as we say, over the years it's not a panacea. There are mistakes that have been made occasionally. Sometimes things that you plan don't work out. But we're still making money; it's got lots of employees. If I walk down the street in Omak, the town that I lived near all those years, I run into people who I can say as I'm greeting them and walking along, raised their families by working there and/or bought off... we sold off some businesses to tribal members who started them, managed them and then said, "˜Okay, I'm ready to do it myself, sell it to me.' And as I said this morning, the charter of this entity says that the corporate board has an obligation to provide support for tribal members who want to do it themselves. And that's especially true whether it's a sell-off of a business that's been operated by the corporation and a tribal member who managed it, worked it and operated it, built it can say, "˜Okay, I've gone to the bank, they'll provide me with the money to help me buyout this business and operate it myself.' I still have a house over here so I can go to Osooyoos and the guy who takes care of my well is one of the businesses we had, a well-drilling business and now he's got a big well-drilling business in that area because one of the things that area lacks is water. It's a desert. It's part of this desert. It goes all the way up into Canada, the great Sonoran Desert.
Well, let's talk about Quil Ceda Village. Quil Ceda Village is another example of separating, but this time it's dividing government responsibilities. Today I work on the Tulalip Reservation, which is, for you folks it's a relatively, many of you [in the] area down here, it's a relatively small reservation. It's 22,000 acres and it's roughly a triangle. Over here on this side of the reservation is water, Puget Sound. We're about 35 miles north of Seattle. Up here is Vancouver, this is Interstate 5; I-5 is the eastern boundary of the reservation. And down here, if you keep going, is what? Tijuana. So that's the geography of this place. [Laughter] Why's this funny? I grew up in California. Okay. So along this I-5 corridor -- if you've ever driven it -- when you get into populated areas it's an area for development, it's a good location in other words. It's a good real estate location. And when I came to work about 13-14 years ago at Tulalip -- leaving this beautiful God's country over there at Osoyoos and the Colville Reservation for the moldy, wet side -- this area along here, the reservation boundary was relatively undeveloped. There's a little area down here where the tribe had its original casino, right in here, that was developed, but otherwise along here it was just trees, a very pretty drive on Interstate 5 along here because it was undeveloped and there was trees. Tribal council had a notion about how to develop this area and after a few years and I was there they decided to develop a particular plot of land, which is about 2,000 acres and it's right here. And one of the things that they were going to do is it was a future plan, they were going to build a much larger and more accommodating casino facility up on this part of the land. At the time I got here, this area was, as I say it was undeveloped, in fact it was a big hole. There had been a lot of earth removed from this area to build freeway overpasses and that sort of thing. The tribe sort of sold the dirt from this area. So when we went over here it was just a big mud hole, enormous puddle because it rains a lot.
Well, so I'm going to talk about the governmental side of this situation. I'm not going to talk about the business side, that's different. In practice we have developed this area quite substantially. We have a Walmart©, a Home Depot©, a great big 110- or 120-store fancy outlet facility, the casino is built in here, there are gas stations, restaurants, but we still have a lot of land that we're looking for people to come in and build and we have a lot of folks that we're dealing with on all kinds of projects. So we have a list of various people. We're trying to essentially develop this into a destination resort and right now we're building a big hotel right next to the casino. So there's a lot of talk, a lot of argument back and forth on the business side as to what this area is going to be in terms of the services and the projects that are going to be produced here in this area. But there were some problems in doing this. I'm just going to talk about two of them. One was annexation and two was taxes.
Those of you who work around cities, especially small cities -- I assume it's this way every place -- if you've developed, if you have an undeveloped area and then suddenly it begins to develop, the cities nearby will look very closely at trying to get this area into the city boundaries because it's a very substantial source of tax revenue for them. So we have a city over here, Marysville, we have one down here, Everett and then a little bit north is Arlington. And these cities have engaged in litigation and utilities warfare grabbing, like amoebas they reach out and they grab areas where there is substantial commercial development. They like that. They don't like the grab housing developments because that's just a sink of money. You have to provide services and you don't get too much back. But if you've got a bunch of car dealerships, restaurants and grocery stores and all that kind of stuff, you want to grab it. And those things tend to, they have a symbiotic relationship and they tend to clump together. So people come into this area, they spend money, they create tax revenues and so cities want these areas and they have, under state law, the opportunity to go out and grab them through an elective process of various sorts.
And we knew that Marysville, Arlington and Everett have done this in a number of places. And we were concerned that if we were successful here -- we didn't know whether we would be -- but once Walmart agreed to come, and that's another story, but once Walmart agreed to come we thought, 'Hey, somebody, some city is going to want to annex onto the reservation.' Now, can they do that? Can they move their boundaries onto the reservation? Absolutely. There's a bunch of cases in federal courts where Indian tribes have tried to stop annexation onto the reservation, all lost, all lost. They never have been successful. And we didn't want one of these cities moving in and essentially taking over the government of our area that we were going to develop. So annexation was an issue. In addition, if we were successful, we were going to produce a lot of tax revenue in this area. And the tax revenue as we know now, we thought then and we know for sure now, it would dwarf what we can get from leases and other forms of development, it would dwarf it. So we wanted to have a shot at getting the tax revenue that's derived from this area. So here's what we did. And in your materials I provided the documents, the basic documents that we did.
I talked about Colville Tribal Enterprises Corporation a little bit because I essentially followed the same pattern or I talked my client into following the same pattern, my client being the tribal council, of establishing an entity. In the case of Colville Tribal Enterprise Corporation, it was a business corporation, something to produce surplus revenues and employ people. I did it in the '80s and when this problem came up I thought, 'Well, maybe we can move over onto the government side and essentially do the same thing.' And that's what we did. The tribal council passed an enabling act, which you have in your materials, allowing them to charter municipalities themselves and we hustled it over to the BIA [Bureau of Indian Affairs] and they said, "˜What's this?' They say that with everything. We said, "˜We're going to charter, we want to charter a municipality, and so here's the enabling act that allows how this is to be done.'
Well, we thought, if we have our own municipality here, we can at least defend ourselves on the annexation business. So that strategy...and it's basically worked. There have been no annexation, the cities around us have bought off on the fact that this is a municipality and they can't go there, they can't move onto the reservation and take this within their boundaries. And we've solidified that by making deals with them where they have agreed contractually not to do it. But that initial adoption of this entity as a municipality with its own village council. It's called the 'village council'; it's called Quil Ceda Village. It's got a big long legal name to differentiate it from cities in the State of Washington, but Quil Ceda Village is what we call it and it's the colloquial name, what people call it when they say, "˜Oh, we're going to Quil Ceda.' We now have an amphitheater over here so we're starting to bring all kinds of old rock acts and country stars and that sort of stuff here. And so now...we brought the Everett Symphony, nobody came but...I went. We have an amphitheater. So Quil Ceda, people know now, Quil Ceda, Quil Ceda, I'm going to Quil Ceda.
Anyway, we stopped the annexation. We're settled in our minds that they're not going to be able to do that and if we have an attempt to do it, we have a good case to defend it. The village council, they take care of business in here; they build the roads, they set the speed limits, they built their own sewage treatment plant. We've negotiated water transference through the City of Marysville's system because we don't have a water line. We're working on that, but we don't have a water line here. We have an agreement with many municipalities and the counties and that sort of thing for water. I won't go into that. We have to transfer that through Marysville's system to get it in here and that's what we're doing at this point. And that agreement protects us from the kinds of utility wars that these small cities get into when they fight over whose going to get this particular bid of commercial development. The next issue...we've defeated our annexation concerns and I guess one more thing about the annexation business. The leadership on the reservation, the people on the reservation and the people in Marysville especially, a century of bad blood; they went to school together, they fought each other, and so that's one of the reasons we were really concerned. Marysville is a very border town kind of atmosphere, discriminatory -- you know the story. That's changed pretty substantially now. In fact, the Marysville Tulalip Chamber of Commerce is now located in Quil Ceda Village. That's kind of amazing.
What about the taxes? We're not getting anywhere on taxes, but we have a very good case and we're putting it together. We have worked with the state revenue department, the governor, the legislature and they're just, they're getting a huge windfall here. Between $17 and $20 million a year in taxes are coming out of here and not very much of that is going into either the village council or the tribal council. The tribal council's office is over here on the water where it's pretty. In order to solidify, I think, solidify our position we used a provision of the tribal government tax status act. How many of you know the tribal government tax status act? Anybody in here familiar with it? No. Well, it's there. It was passed by Congress in 1982 and it's a smorgasbord of tax fixes that Congress thought they ought to do for Indian tribes. It makes Indian tribes more like states in terms of dealing with the internal revenue code. The tribal government tax status act has a provision in it that says that if you apply appropriately, if you create, if a tribe creates an entity that qualifies under the provisions under the tribal government tax status act, it can be given a federal designation as a political subdivision of an Indian tribe and then it has many of the federal governmental aspects of an Indian tribe. The tribal government tax status act, when you want to get on the list, and it's a very short list of entities that are designated as political subdivisions of an Indian tribe, you have to file with the Internal Revenue Service a petition for a tribal letter of opinion. [Question] There is a lawyer in the IRS in D.C. who has this responsibility to review your petition and then you have to have the Department of Interior write a letter supporting this petition. And then the two of them together will decide whether you qualify and if you do you get this letter back, which I supplied you in the materials, which says, "˜Because you qualify under certain provisions of the tribal government tax status act you're now a federally recognized political subdivision of an Indian tribe.' Well, that's part of our tax case. It will be part of our tax case, because what the state's doing in here with regard to our tax situation is causing us to lose some of the benefits that we're entitled to under the tribal government tax status act. So we have this letter and we're going to use it and, as I said, our accountant's telling us that the state and the county are getting between $17 and $20 million in taxes each year out of Quil Ceda Village and we're after that. And so we're drafting a federal lawsuit complaint.
One final comment: everything that we've done to create this entity, we've taken a bunch of cases which tribes lost, mainly from Arizona, Gila River and some other tribes who lost these tax cases. But in losing them the Ninth Circuit has laid out this prescription of what you can do to win. And so we've been following these unfortunate events in Arizona and we've tried to satisfy every one of those requirements that the Ninth Circuit has put on tribes in order to succeed in getting control of tax revenues that are derived from economic development here. And that's why, for example, every person who works for the Quil Ceda Village government is an Indian except me. My enrollment application has been pending for quite some time. Everybody from the accountants to the people who fill the potholes and paint the lines on the street, we try to employ...when we have to do a contract, like we got to get somebody to tow the cars out of the...lots of parking in the village because there's lots of activity. We've got...at this point, we're way too successful because there are two freeway accesses to this and they're backed up all the time trying to get into one or the other of the activities that's going on in here. So we've got a lot of employment, relative to what Indian tribes have, in the village. I think the village has maybe 60 employees or something like that. They're all Indian. They're not all Tulalip, but they're all Indians. We've got our police precinct down here because the rest of the reservation is benign compared to what goes on over here. So we've got a police precinct in this area that's just...there's tribal police cars that have Quil Ceda Village written on them so they know they're a Quil Ceda police car.
So that's on the government side. It's a government that's different from the tribal council. The tribal council of course controls it because what do they have? They have the enabling act that steers. One of the great things about this Colville Tribal Enterprise Corporation, other people have mentioned this, you have this tension all the time between the corporation and its employees and managers and that sort of thing and politicians. And the enabling act that sets up the ability of the tribal council to charter corporations like CTEC, which is a special kind of corporation, it's called a governmental corporation. It's not a for-profit corporation, it's not a not-for-profit corporation, it's a governmental corporation. And you'll see this in writing. But this enabling act allows the tribal council to steer, not crush, the corporation. So once the tribal council understood that, and we had a lot of close calls I'm telling you, they feel a lot better about the corporation doing things that they might be unhappy with because they know that they've got medium- to long-term control. In closing I'll give you one example of that.
When we created this corporation, we brought in a number of people; almost none of them were from the reservation. Some were tribal members who had succeeded in business somewhere else, California or somewhere. Some were not Indians who had specific experience in the businesses that we're in, like running supermarkets. So what happened here? These folks came in and saw how sloppy we were operating and they had suggestions and they had ideas about what to do. And so they started saying to themselves, 'Well, I'll take a consultant contract to help you organize your supermarkets better.' We had a guy who is a billionaire because he owns the only supermarket on one of the islands in Puget Sound and he agreed to be on our corporation, and that was great on our board because he knows a ton about how to operate a supermarket successfully. Well, he took a small contract, consultant contract to help us straighten out things at the supermarkets, which was great. And that's fine in the business community. In the business world of your corporate directory you can take a consultant contract with your corporation so long as you don't fleece the corporation. You can get paid the standard amount for doing that kind of work and that's fine. But that doesn't go on the rez. On the rez, people look at these guys coming in there and say, "˜Well, we give them all this authority and now they're taking money out of here and we don't like it.' So what's the reaction of the tribal council? Squash that corporation. What's Mike's [my] argument? Well, you don't have to do that tribal council, all you've got to do is amend the enabling act to say that people that are on the boards of these corporations can't work for them. "˜Oh, okay. So we don't have to wipe out our own economic development entity in order to squash this problem?' 'No, just amend the enabling act. Just add something to it to say that you can't do that under the tribal law.' "˜Oh, okay. Fine.'"