Creative Mechanisms for Funding Economic Development
Unique and innovative sources and strategies of funding not only help but are at times fundamental for tribes and indigenous communities to pursue and accomplish large scale community economic development projects.
This session featured the presentation of two unique funding mechanisms for supporting community economic development in tribal and Native communities, including Section 105(l) leases and Treasury’s State Small Business Credit Initiative (SSCBI), as well as an introduction to some useful tools and resources the EDA offers for underserved communities.
Subject Matter Experts
Key Takeaways
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The program allows Tribal Nations and Tribal organizations to be compensated for carrying out Federal functions under a self-determination contract or self-governance compact. The program is underutilized, especially by small tribes.
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Native communities do not always share the communication style that federal programs use to communicate their funding opportunities which can create knowledge gaps.
Session Summary
Introduction to Funding in Indigenous Communities
Discussion about Funding in Indigenous Communities
Big Water Consulting’s Kevin Klingbeil began by introducing how tribal and indigenous communities have and can use innovative funding mechanisms to fund simple and complicated projects.
Since most grants are competitive and thus funds are limited, filling funding gaps with non-competitive sources is imperative for tribal and Native community economic development.
Stacking traditional and non-traditional capital requires special attention since not all funding sources can be used together.
Each Native community is unique in that some are located in rural, urban, or areas in-between that require funding tailored to their own community’s specific conditions.
Tribes have often been under-considered in state focused funding programs, but the emphasis on engaging and including Native stakeholders is increasing throughout the country.
105(l) Lease Program – How the Program Helps Native Communities
Cody Seaton walks through the 105(l) Lease Program
Click to access 105(l) Facility Lease Program Guidebook
In September’s monthly CoP session on Health and Human Services, Paula Poncho introduced the 105(l) program from the IHS side. This session, Cody Seaton, the Chief of the BIA’s Office of Tribal Leases, discussed the 105(l) program from a slightly different angle and highlighted how Tribal Nations can utilize this unique (and abundant) source of funding.
The 105(l) program funds the operation and maintenance of tribally owned facilities that host tribal activities and which tribal programs and services operate out of. This includes tribal governmental activities, day-to-day departmental activity, and community-specific tribal services.
The program grew from three leases in 2019 worth around $2 million in total to over 800 leases in 2024 totaling close to $200 million a year. The program is projected to expand to over a billion dollars within the next 5 years.
The program supports tribal self-determination - it gives tribes the ability to own, operate and maintain facilities themselves that the government would traditionally own and operate for these programs.
105(l) Facility Leases are not traditional leases in that they are facility cost agreements that compensate the Tribes for facility operational expenses associated with using the facility to administer (ISDEAA) contracted/compacted services, including paying for utilities and cleaning services.
Cody said there are very few mistakes or pitfalls that tribes and Native communities have made while applying for 105(l) lease program. However, this program is underutilized, especially by smaller tribes.
State/Tribal Small Business Credit Initiative
Jon Bittner walks through the SSBCI program.
Jon Bittner, Executive Director of the Alaska Small Business Development Center, showcased another innovative and growing source of funding hosted by States themselves.
The State Small Business Credit Initiative (SSBCI) exists in every state and every federally recognized tribe is eligible to apply for their own tribal allocation. This is one of the largest investments in tribal entities that the Department of the Treasury has ever made in Indian Country.
The purpose of the SSCBI program is to drive funding from traditional lenders, CDFIs, federal credit unions, equity investors, and others towards small businesses and nonprofits that they otherwise would not be able to invest in such as businesses owned and controlled by Socially and Economically Disadvantaged Individuals (SEDI) and Very Small Businesses (VSB).
As of October 2024, SSBI has given $77.1 million in loan amounts.
Loan guarantee programs give small businesses access to lending options by using SSBCI funds to reduce a lender's exposure to a loan. Collateral support programs give small businesses cash collateral that enables them to take out larger or additional loans.
Alaska SBDC is the only organization in the country to host both state and tribal SSBCI programs; between the two, it is projected that hundreds of millions in private-sector funding will be leveraged into Alaska’s small businesses over the next decade, including tribal small businesses.
If you're a business, start the process by finding and reaching out to a participating lender/equity investor. To find participating lenders, use the list from the SSBCI Capital Programs and Contacts.
Unique SSCBI and 105(l) Funding Examples
Capital stacking and New Markets Tax Credits as a funding tool.
Jon and Cody shared some projects they have seen funded with SSCBI funds and the 105(l) leases.
Jon shares that a small Native community in Alaska utilized Alaska SBDC funding to create a one-stop-shop for fueling a marine fleet on the coast of Alaska. As climate change moves crab and other shellfish north, the community is anticipating that commercial fleets will adjust where they refuel. This project is unique because while the refueling choice changes might not be seen for years or decades, SSCBI funds are able to be used for forward-looking projects.
Cody shares that a lot of tribes are replacing and combining multiple tribal facility buildings into large judicial centers that house a variety of departments and their resources under one roof. With this approach, the tribe only needs one large construction loan compared to multiple smaller ones.
How Communities Can Prepare to Pursue Funding
Discussion on Ways to prepare before starting application/funding process + promoting capital in Native communities
Cody advises Native Communities to look at funding agreements and find what facilities qualify. Work with the 105(l) lease program from the beginning, especially new construction projects, to ensure everything is in place.
Jon suggests identifying the businesses that are that are in your area, helping make them aware that these SSPCI funds are out there. Also know, there's a process to trying to access the funds, but there is a technical assistance component as well.
Rolling Out Capital for Native Communities
Jon was asked about best practices when rolling out capital out to tribal and Native communities.
Jon suggests creating funding notifications with increasingly direct and simple language. Native communities do not always share the communication style that federal programs use to communicate their funding opportunities, which can create knowledge gaps.
Programmatic fine tuning and simplification of SSCBI programs could make the funding more palatable for Native CDFIs which already face unique circumstances and restrictions.
P.S. Artificial Intelligence (AI) Use in ‘Indian Country’
Discussion on the 105(l) Lease Program and AI uses in ‘Indian Country’
Jon was asked about best practices when rolling out capital out to tribal and Native communities.
Jon highlights that AI is a massively revolutionary technological advancement for underserved and unserved tribal communities and tribal economic development generally.
Generative pretrained transformers (GPTs) - which is a fancy term for AI technology that can read and analyze text you show it - can help read and even write grant proposals and fill out financial sections, which is and will continue to help grant writing staff during their day-to-day work. These GPT tools have been seen to increase productivity up by 30%.
EDA Corner
EDA’s Tools and Resources for Underserved Communities
EDA is making ecosystem-building investments that identify and amplify best practices across systems, topics, and programs. EDA is also investing in tools and resources to enhance local capacity such as:
National Economic Resilience Data Explorer (NERDE)
The NERDE consolidates information and data on economic distress criteria, COVID-19 impacts to local economies, and the existence and emergence of industry clusters.
Economic Development Capacity Index (EDCI)
The EDCI uses publicly available data to assess critical elements that contribute to a county’s overall economic development capacity relative to the rest of the nation. The tool allows users to access county-level quantitative and qualitative scores by capacity area using 53 indicators
A toolkit that equips communities to navigate critical predevelopment activities
Other Tools and Resources: Distress Data
Excel file showing the most recent list of qualified persistent poverty counties.
U.S. Census Bureau product, developed in coordination with EDA, that displays county and tract level poverty data from the 5-yr ACS [2018-2022]. Information for this tool can be used to identify projects that meet the criteria for “Underserved Geography.”
NERDE – Distress Statistics Generator
This tool provides distress calculations by county and census tracts that may meet EDA’s distress criteria. You can search or click on a particular county or tract, or you can use the polygon tool to add multiple tracts/counties at once.
EDA is in the business of supporting capacity building efforts across the nation, but especially in the most distressed communities.
This toolkit is intended to inform regional economic development leaders to support inclusive growth and address the inequities deepened throughout the pandemic.
The Access, Process, and Outcome (APO) framework provides practitioners across the economic development enterprise a common understanding of the underlying drivers that can alter outcomes.
Equitable Lending Leaders: Fostering Inclusive Entrepreneurial Lending in Indigenous Communities
This current program seeks to improve the capacity of EDA-capitalized Revolving Loan Fund operators to deploy much-needed capital to Indigenous-owned small businesses immediately and over the long term.
Upcoming CoP Events:
Closing Thoughts
There are resources available, including the above subject matter experts (SME), who can help tribes and their programs get involved in large scale projects.
Questions, with answers from the Resource Group and fellow participants, will continue to be posted in the Knowledge Bank on the CoP website. If you have questions that you want answered, please ask in the LinkedIn group or share it with the administrators.