Tribe asks federal aid to float bond issue

INDIAN ISLAND — Facing extreme financial woes a decade after the land claims settlement, the Penobscot Nation has asked the federal government to guarantee a $6.5 million bond issue.

If island officials don’t find some solution to the nagging problem, they could end up turning control of the Penobscot government over to the Bureau of Indian Affairs, tribal Gov. James Sappier said.

Last month, Sappier wrote a letter to Edward Brown, assistant secretary for Indian Affairs in Washington, D.C., seeking the $6.5 million bond issue. If approved, Sappier said, the funds would, based on a 25-year issue, reduce the annual tribal debt service from nearly $900,000 to about $430,000.

It is debt service that has been eating away at the Nation’s attempts to overcome the poverty that has lingered here since it lost to poor investments most of its land claim money. The general fund, which two years ago held more than $3 million, now is down to about $200,000, according to some reports.

Currently, Sappier said, debt service accounts for more than 82 percent of the tribal debt, which also includes increasing costs of providing social services. Compounding the problems, he said, is that the tribe faces balloon payments on the debt service during the current and next fiscal years.

Sappier said in his letter to Brown that he is “very concerned that we will not be able to serve our reservation’s basic needs …. We desperately need your help.”

If approved, the bond issue would help the Nation balance its books, Sappier said. If not, the Nation’s cash reserves could be depleted by the end of March. And although Sappier said the Penobscots could then turn to other alternatives, such as cutting further on costs, it might be forced to turn operations over to the federal government. While the Penobscots would retain their sovereignty, they would operate with a different government structure, Sappier said.

Meanwhile, Sappier said that the Nation will continue to try to bring in cash while tapering government operations, which already has seen the elimination of some positions and reduction of pay and funds in others. Still, he said, the Penobscots face obstacles that, if removed, would greatly enhance their chances for success.

For example, he said, the state currently taxes the Nation 5 percent on gross revenues from the popular beano games. After costs, Sappier said, that often amounts to 25 percent of the net revenues, which can result in a loss for the Penobscots. Sappier said that in November, the Nation earned $2,000 from beano, but had to pay the state twice that amount.

“That’s an awful lot,” Sappier said. “That’s too much for us.”

Although Sappier said that he has not yet received a reply from the BIA, he did receive some encouragement from other BIA officials, who expressed favor that the Penobscots were attempting to solve their own problems.

“Something’s got to break,” he said.”We believe we can pull out of this.”