Ed. note: This is cross-posted from Treasury Notes
To promote economic growth in tribal communities, Treasury and the Internal Revenue Service published new guidance today on allocating Tribal Economic Development Bonds (TEDBs). The TEDB program was established under the American Reinvestment and Recovery Act (ARRA), and provides Tribes with the authority to issue tax-exempt debt for a wider range of activities to spur job creation and promote economic growth in Indian country. Providing Tribes with the ability to issue tax-exempt debt for a broader scope of activities similar to that available to States and local governments lowers Tribes’ borrowing costs, making it easier to engage in new economic development projects.
Under the new guidance, Tribes can receive TEDB allocations for projects which are in the final stages of going to the market to receive financing. Once a Tribe receives an allocation, it will have six months to move to final debt issuance. If a Tribe is unable to issue within that time frame the allocation will be returned to Treasury and available for redistributions. Treasury currently has about $1.8 billion remaining in TEDB authority. To help ensure an equitable distribution, no single allocation can exceed 20 percent of the remaining amount, meaning that the current maximum single allocation is approximately $360 million. When there is less than $500 million in TEDBs authority remaining, the maximum allocation will be $100 million.
These new guidelines were developed with significant Tribal input, consistent with President Obama’s Memorandum on Tribal Consultation. Tribes provided valuable information regarding ways to improve the allocation process. Treasury expects that the new application process for TEDBs will be an improvement from the previous system and will help Tribes break new ground as they continue to develop their local economies and communities. The TEDB program is currently the only mechanism for Tribes to issue tax-exempt debt for these types of projects. Treasury recommended that Congress make these changes permanent and grant Tribes this authority to use lower-cost tax-exempt bond financing on a permanent basis.
Aaron Klein is the Deputy Assistant Secretary for Policy Coordination in the Office of Economic Policy.