| Troy Swallow, an economic development consultant with the Wis. Dept. of Commerce, has been in a position to observe the economic development efforts of Wisconsin's American Indian Nations. Swallow, a soft-spoken and thoughtful person, is a former tribal chair of the Ho-Chunk Nation and currently sits on its Housing and Community Development Agency as one of two district II representatives. The economies of Wisconsin's reservations have changed dramatically since the late 1980s when bingo parlors and later casinos were built on most reservations. The impact of gaming has been uneven for the tribes, depending on their distance from Wisconsin's -- and Minnesota's and Illinois' -- urban centers. Nonetheless, the reservations do share some similar growth patterns. "The first tier in the state of Wisconsin is the Indian gaming," Swallow said during an interview with The Capital City Hues at Marketplace 2007. "That is normally a tribal run enterprise. In some of the more aggressive tribes around the nation, there is divestiture between business and government. But normally the profile in Indian Country is that isn't what happens. The tribal government runs and controls all of the opportunities that go along with the gaming." The second tier -- also operated by the tribal government -- is composed of secondary commercial efforts related to the casinos or initiatives to establish other profitable enterprises on the reservation. "There are the non-gaming enterprises such as the tribal supermarket and convenience stores and gas stations," Swallow said. "Tribes take on opportunities like opening up a construction company or something that is going to provide job opportunities within the tribal community." The third tier involves businesses owned privately by tribal members. "A lot of these businesses end up being development and construction," Swallow said. "There are a large number of opportunities that have been achieved over the years through these markets. There are a lot of people who have fully-functional commercial and residential construction companies on the one end and at the other end of the spectrum, it is the gentleman who does a subcontracting portion because he can do fencing, plumbing or other subcontracted services. Predominantly, those are the most effective, mainstay businesses within the tribes. You have a guy who does the roofing or the guy who does the driveways or cement. When you move away from there, you move strictly into the retail sector such as a restaurant or trading post type of thing or a coffee shop or Laundromat or car wash. Those are the type of things that normally you would see on a reservation if you see anything that is owned by tribal members." During the relative infancy of the tribal economic development efforts after gaming was introduced, the second tier businesses that the tribe created -- the gas stations and convenience stores -- were oftentimes unprofitable, and subsidized by the gaming revenues, as the tribe developed its business acumen and learned the right mix of products and services as well as management techniques to make them profitable. "Most of the tribes have a convenience store type of operation or a hotel and hospitality and convention center," Swallow said. "Those businesses are maturing in their own right because they have been running those as supplemental to the gaming that came in. They said 'Oh, we should have a gas station or convenience store.' They are starting to get some business savvy and acumen. The threshold has risen for the tribes because now they have good distribution channels and have a solid customer base and their own tribal members patronize the businesses. It works out good for them. It ends up being less than five percent of a tribe's revenue in general." As the tribes increase their net revenues from their gaming and other commercial enterprises, their investment strategy is still driven by a full-employment economic model for the reservation. "What should the tribe be doing in terms of opportunities," Swallow rhetorically asked. "More than likely, it's going to be one that includes jobs because there is a tendency to relate that as providing a communal or bettering the opportunity for tribal members in the community." Eventually, Swallow sees the tribes moving in the direction of separating the governmental and business functions of the tribes. According to Swallow, having all of the decision-making under one roof can lead to some poor decisions that will ultimately affect the viability of the businesses in the long run -- and the tribe's revenue stream. "What normally ends up being the case is where the business and the overhead of the business ends up being rolled into the overhead of the nation and the bureaucracy of the nation," Swallow observed. "That's where the advantage goes out the door because now they are fully-vested employees of the tribe and their interests veer away from the need for their employment and the relationship it has with the business sector. It needs to be focused on generating revenue and providing a profit and so forth. What will happen is that once that business is rolled into the nation and is a private enterprise, the job becomes more like a tribal job. Then the need for having that focused on performance and the bottom line and a business-driven organization, that kind of veers away from that and makes it a real big challenge for that type of employment which generates good revenue for the tribe. It's a little bit self-defeating, but it ends up being that the people who can create these opportunities start at the top with the tribal legislators who make the decisions and pursue the business opportunities normally they are being pressed to provide those opportunities. They couldn't open a hardware store in their community and not employ some tribal members. They just couldn't get away with doing that. It's a foot in the door and brings on employment opportunities for tribal members, but along with it comes some challenges." In Swallow's view, the tribes have reached the level of financial and business sophistication where they could begin to branch out into economic endeavors, which the tribes were reluctant to get into in the past. "I think a tribe could own a business that didn't have a majority of tribal members and the business could be successful and could generate revenues for them," Swallow said. "In years past, the way they set up the businesses and arranged them, it was a matter of the tribes probably getting a poor deal for having set up the business that way. In this day and age, tribal businesses have some maturity in their business processes and perform due diligence when they set up the businesses. Probably 15-20 years ago, if they didn't perform due diligence and have the relations set up, it probably would be real easy for an outsider to come in and walk away with the business." And eventually, Swallow feels that the tribes could eventually evolve into a type of venture capital source that would enhance the tribes' revenue streams and allow it to obtain more business acumen. "Today, the tribes can rightfully look at preferred investments with higher returns," Swallow said. "There's a risk there, but if you perform your due diligence on the investment and you situate yourself properly, you can protect yourself. If the business opportunity went away, you're still going to at least get your money back. They'll get a broader exposure to all of these different industries and hopefully different investments and maybe they can find an investment that is suitable for them. We were talking the other night about a hotel opportunity as a private placement. By being in a private placement with a hotel developer, each tribe could gain some experience in how to build hotels, understand the markets this hotel is being built in by this developer while they are in the process of being in this investment. While they are investing, perhaps they could learn a little about that industry. So there is opportunity there in each one of these investments." The tribes have evolved to the point where they can play a major role in Wisconsin's economic development future. Things are coming around full circle. |
| An interview with Troy Swallow Economics in Indian Country By Jonathan Gramling |
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| (Right) Troy Swallow is the former tribal chair for the Ho-Chunk Nation and is now an eceonomic development consultant with the Wis. Department of Commerce. |