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Navajos take different route to finance tribe’s first casino

By Felicia Fonseca
Albuquerque, New Mexico (AP)1-08

The Navajo Nation is shying away from using a $100 million line of credit to finance its first casino and instead is tapping a tribal trust fund to ensure the casino will be operating by midsummer.

Negotiations with JP Morgan Chase on the line of credit slowed after the institution requested that the tribe put up 125 percent collateral as a term of the loan agreement, said council Delegate LoRenzo Bates, who serves on the tribe’s Investment Committee.

“We’re not going to sign it, so we had to look for alternative funding sources,” he said.

Tribal officials during mid January turned to the Land Acquisition Trust Fund that was developed to consolidate the checkerboard of Indian and non-Indian land around the reservation. Officials plan to use $35 million from the $56 million fund, which they say is more than sufficient to build the tribe’s first casino in Church Rock near Gallup.

Navajo gaming chief Bob Winter, who has worked with numerous tribes on casino and resort development, had hailed the JP Morgan Chase deal as one of the best he’d ever seen. But when the loan turned from general obligation to collateral-based, Winter said he did not want the project delayed with talks over conditions the tribe would not agree to.

“The risk has really diminished, and the most important thing is that we’ll open up on or about the target date, which certainly will gain millions of dollars for the nation,” he said.

The Tribal Council approved the line of credit last October, but the final loan agreement had not been signed.

A group representing environmental activists, former tribal presidential candidates, a former Navajo interim leader and a man pushing for a tribal constitution filed a notice of intent to sue last month over the legality of the agreement.

Derrick Watchman of JP Morgan Chase Bank said the bank began evaluating other types of loans in the face of the lawsuit, which has not been filed.

“We have to have alternatives just in case it turns out in favor of those who file it,” Watchman said.

Winter said while talks with JP Morgan Chase haven’t completely dissolved, tribal Controller Mark Grant is seeking out other institutions to help repay the money used from the land acquisition fund and finance other casinos.

“Before we complete the construction, we will have conducted in-depth negotiations, perhaps completing the deal with JP Morgan Chase, perhaps not,” Winter said. “But there are other banking institutions that have expressed an interest in it.”

July 4 is the tentative opening date for the casino – the first of six that are expected to bring in $100 million annually in revenues.

Winter said an architect will be selected Jan. 25. Once that’s done, a construction budget will be drafted, and the tribe will go out to bid for a general contractor, he said.

Winter said there always was an idea that the Navajo Nation should invest in itself, and January's decision is part of that philosophy.

“This is the nation basically helping itself form an economic enterprise,” he said.

Bates said the Tribal Council’s Resources Committee, which oversees the land acquisition fund, has given its blessing for the Investment Committee to use the funds.

In this case, it’s better that the tribe “make money on our own money,” he said.

“If the nation can manage its future by investing its own money and making this initiative a reality in terms of a return, then that loosens up the thinking that the nation may not pay its bills,” he said.