Cherokee pays off millions of debt
A massive load of debt left the shoulders of the Eastern Band of Cherokee Indians last week following enactment of legislation to pay off $96 million in loans accrued for the new Cherokee Indian Hospital and the tribe’s wastewater treatment plant.
“It’s a pretty exciting time,” said Principal Chief Patrick Lambert, who introduced the legislation. “It’s something that I always wanted to try to get accomplished on behalf of the tribe and I knew coming into office that would be one of my top priorities.”
On May 10, Lambert and Tribal Council Chairman Bill Taylor, of Wolfetown, signed the official papers to pay the $70 million left on the hospital loan and the $26 million remaining on the wastewater treatment plant loan.
“This is a very big day for the tribe,” Taylor said. “A very big day.”
Councilmembers had nothing but positive, hopeful comments to cap off the signing, but the road to a decision was anything but smooth. It came after months of discussion and disagreement and consensus.
“We had some pretty hard discussions on this from the beginning,” said Councilmember Travis Smith, of Birdtown.
Cherokee tribal members often talk about the debt and a desire to reduce it, but some councilmembers saw merit in keeping up the slower, steadier pace of debt payoff.
Ultimately, two of them — Vice Chairman Brandon Jones, of Snowbird, and Councilmember Anita Lossiah, of Yellowhill — stuck with their opposition to the resolution, voting against its passage.
“I’m totally for paying off the debt,” Jones said. “The reason I didn’t support it was because the budget stabilization fund was set up so that if we had lean times again we would have a fallback plan. I didn’t agree with using that money to pay off the debt.”
The resolution essentially wiped out the budget stabilization fund, transferring the $66 million in that account to the debt service sinking fund. Combined with $30 million from the debt service fund, that made the $96 million needed to pay off the debt.
“Now we don’t have any reserves for a rainy day,” Jones said.
However, a vote to increase the floor for the debt service sinking fund could help allay that concern. Council unanimously approved a resolution from Councilmember Tommye Saunooke, of Painttown, to increase the required minimum for the account from $25 million to $100 million. That money could, conceivably, be used in case of emergency.
There were also some questions about the wisdom of depleting the debt service sinking account itself. With a current interest rate of 7.2 percent, Jones said, the account earned enough interest to make the scheduled payments on the hospital and wastewater treatment plant without depleting the principal.
“If it was my personal money in the bank I wouldn’t have been doing that,” Jones said.
Lossiah made a similar observation, but both she and Jones acknowledged that, as interest rates are wont to change without warning, it’s not necessarily a bad plan to go ahead and pay the loan off, either.
“You will have more money in the end once these loans are paid off if you leave it in there and pay it on the payment plan,” she said, “but based on our work sessions we also have to incorporate the possibility of volatility on our investment.”
As far as the withdrawal from the debt sinking fund goes, Jones agreed, “it’s kind of a wash.”
And the overall impact of dissipating the tribe’s debt, all councilmembers agreed — even those who voted against the resolution — is nothing if not positive.
“I feel very secure that the tribe is in a very strong financial position right now,” Lossiah agreed. “We are all very fortunate to be here.”
And while you could make the argument that current interest rates make maintaining debt more lucrative than paying it off, Lambert said, at the end of the day the tribe is a government, not a business. Getting out of debt should be the goal.
“If I’m a private business owner, perhaps I could think that way, but we’re here to take the security and safety of our tribal members,” he said. “Getting us out of debt adds to that safety and security.”
That’s a sentiment shared by many tribal members, said Councilmember Alan “B” Ensley, of Yellowhill.
“Even though it might be prudent to take the revenue off the investment,” he said, “they (tribal members) still feel like if we can pay something off and put it in the tribe’s hands, that’s something we ought to do.”
“This was a good time to do it,” agreed Councilmember Teresa McCoy, of Big Cove. “It’s a great time to recover, and I’m just looking forward to us being debt-free and reaccumulating a lot of money.”
While the tribe has paid off two major loans, it’s not quite correct to say that it’s completely debt-free. There are still notes to pay on the Harrah’s Cherokee and Valley River casinos, around $600 million between the two.
But going forward, both Lambert and councilmembers said, the goal will be to pay for future projects out of pocket whenever possible, without taking loans.
“I think that’s what people would prefer, and that’s how I try to operate always, even in my personal life,” Lambert said.
There are plenty of projects on the horizon, which councilmembers alluded to again and again even as they praised the debt pay-off. There’s talk of building an adventure park that would cost $100 million or more, as well as an athletic training park for seniors, a senior center in Snowbird and retail development — among a list of others.
“There’s a lot of things that we’re working on,” Lambert said.
Lambert pointed to his track record over the last seven months as proof that his administration is one that can be trusted with such work.
“Just in the last six months alone, over $1.1 million was saved just in a reduction in the waste and reducing resources,” Lambert said.
Fuel use has been reduced by 45 percent and credit card charges by 63 percent, for starters. In a preliminary report on an audit of tribal spending during the previous administration, delivered in April, Lambert announced initial results showing thousands in ATM cash withdrawals, spending at clothing and lingerie stores and travel to luxury resorts.
“Paying down the debt I think is a natural fit,” Lambert said, in the overall effort to reduce waste.
“I think our tribe is very fortunate,” Ensley said. “We’ve been able to pay off our school system, now a hospital and a wastewater treatment plant that will take us 20 years down the road. We are a very fortunate group of people.”