Tribal Council approves short-term funding for Qualla Enterprises: Long-term plan still in process
Tribal Council has again delayed approving long-term funding for its cannabis enterprise but voted overwhelmingly Thursday, Nov. 2, to loan the company up to $3 million to cover expenses over the next month.
“I’m just trying to figure out what a shorter-term plan is to a longer-term issue, and I think that’s kind of where we’re at right now,” Principal Chief Michell Hicks told Tribal Council.
The Eastern Band of Cherokee Indians has had a business interest in the cannabis market since March 2022, when it authorized Kituwah LLC to distribute $14 million to Cherokee Medical LLC, the predecessor to the tribe’s current cannabis company, Qualla Enterprises LLC. To date, the tribe has invested $31 million in the business, but Qualla Enterprises has repeatedly told Tribal Council it needs more funding to be successful.
Last year, Council approved an additional $64 million but later upheld a veto from then-Principal Chief Richard Sneed. Sneed was concerned the appropriation could jeopardize the tribe’s casino business by running afoul of federal rules governing use of gambling proceeds. He called for a “full accounting” of the $31 million already provided before giving the enterprise more money.
One week into his new term as principal chief, Hicks introduced a resolution to fund the business, proposing $19 million that, unlike previous allocations, would be given as a loan to be repaid with interest. However, he immediately asked Tribal Council to table the measure so he could gather additional information to inform his approach.
Now, the LLC is running out of money to pay its employees and continues to lack a revenue stream. Though it’s stockpiled millions of dollars’ worth of cannabis at its farm on Coopers Creek, it has not yet worked out a plan to transport it for sale on the main Qualla Boundary without crossing state-controlled lands, where marijuana remains an illegal substance. Additionally, the company still needs to work out a plan for testing products before they are sold.
As of the Nov. 2 Tribal Council session, Hicks still had questions he wanted answers for before moving ahead with funding.
“We have several meetings this afternoon in regards to where are we around the transportation plan,” said Hicks. “We need to get an update on the audit, in addition to I think there are some contract provisions that executive and the Council want to dive into.”
He asked Council to keep the funding resolution tabled but to consider passing a separate resolution providing Qualla LLC with money to cover operating expenses for the next month.
“We’re at a point now to where the cash has basically been exhausted,” he said.
Tribal Council voted unanimously to table the resolution and approved the emergency resolution Hicks introduced later that day to provide the enterprise with stopgap funding.
That resolution approved up to $3 million in tribal levy from the general fund to be used for payroll, benefits, utilities and “payments to critical vendors for which Qualla LLC will lose services if those critical vendors are not paid.” The vendor payments would require approval from the Office of Budget and Finance.
The resolution also lists four requirements that Qualla Enterprises must meet by Tuesday, Dec. 5, by which time the stop-gap funding would have run out. Qualla Enterprises must provide the Office of the Attorney General with a final independent auditor’s report, a product transportation plan and a plan to perform product testing for retail sale. Additionally, it must complete “good faith negotiations” on the management agreement with vendor Sovereign Solutions Carolina with the goal of saving money and providing Qualla Enterprises with a better financial return.
Yellowhill Rep. David Wolfe introduced an amendment giving Tribal Council final approval on the renegotiated management agreement. The tribal government has supplied all the funding Qualla Enterprises has at this point, he said, and so it should get the final say.
“I agree, David, but I think that we need to start doing that with all the LLCs, not just picking and choosing just one board,” said Wolfetown Rep. Bo Crowe, listing Kituwah LLC and EBCI Holdings.
“I agree with it,” Wolfe replied. “If we’re going to be the bank, we need to make sure.”
“If we would have done this beforehand, we wouldn’t be in the situation with some of the outside gaming there,” said Crowe. “So I agree with what we’re starting to do now, but I wish we would have started it sooner.”
Attorney General Mike McConnell offered a word of caution against such a provision, saying that the point of setting up an LLC is to offer heightened independence for the enterprise. The “proper avenue” for Tribal Council to ensure the management agreement meets its standards, he said, is through exercising its influence on the Qualla LLC board, whose members Tribal Council appoints.
“If the board is not responsive, then you have authority to take people off the board, is what it amounts to,” McConnell said.
Tribal Council disagreed, with all members except Painttown Rep. Dike Sneed and Birdtown Rep. Jim Owle voting in favor of Wolfe’s amendment. Sneed was the only representative to vote against the final resolution approving stop-gap funding. Following the vote, Tribal Council held a closed-door work session to further discuss the cannabis enterprise.