Letter: Hopi Tribe should use ‘authority to tax’ in replacement of coal revenue
To the editor:
The imminent closure of the Navajo Generating Station and Peabody Western Coal Co. (PWCC) has sparked the Hopi Tribal Council to look into gaming (opening headline in the Gallup Independent, June 10, 2017) to replace coal revenues.
What does the Hopi Tribe mean? Is it the Hopi people, the Hopi Tribal Council, few members of Council, etc.?
Voting members of the Hopi Tribe turned down gaming twice by an overwhelming majority, and it is not likely to get support again. Even if the decision is made to go with gaming to replace coal royalty fees, investors will need to be found. They will most certainly investigate the Tribe’s financial situation before making a decision. The Tribe’s financial picture is bleak. Money is not available to cover a deficit in the 2017 general operating budget. The Tribe is three years delinquent in the audit of federal funds. This puts the Tribe at a high-risk position with the possibility that future federal funding could be withheld to support programs, such as Head Start and the Hopi courts.
Instead of counting on gaming to support the Hopi government, the Tribe should use what it has, which is the authority to tax.
Around 1992, the Hopi Constitution was amended, authorizing the council to enact a Tax Ordinance. As chairman, I proposed three types of taxes; severance, possessory and business activity tax. Later, a novel idea called water depletion tax was added. Taxing would be aimed at outside big business companies taking advantage of our natural resources. Hopi individuals and businesses will not be taxed.
A possessory tax is a way to collect revenues from PWCC for their exclusive ownership of coal under Black Mesa Mine (BMM), located on Hopi Partitioned Land (HPL). Coal mining on BMM was shut down on Jan. 1, 2006, but PWCC still possesses and wants to possess the coal for at least 20 more years, even if it is not mined. It is a big part of a business portfolio Peabody Energy used to get out of bankruptcy.
Possessory tax is based on current market value of coal. Last year the price of coal purchased from PWCC by Salt River Project (SRP) was $43 per ton.
In 2002, PWCC reported in their revised mine plan to incorporate BMM into Kayenta Mine that 60 million tons of economically mineable coal is stored under BMM.
Suppose the Hopi Tribal Council enacted a possessory tax ordinance to levy 8 percent tax rate (could be more or less) on the current value of coal, the Tribe would be collecting a substantial amount of revenue, much more money than from coal royalty fees. In my rough estimation, the amount would be around $20 million per year, subject to the market value. This will be in addition to coal royalty fees. Business activity tax can also be used on facilities located on HPL.
Instead of speculating on how to replace coal revenues, the council should use a tool it already has; the right to tax. Imagine having a truck in good condition, but the gas tank is empty. Money is needed to run the truck. The money in the form of a possessory tax is sitting in the bank, waiting to be used. It is like a hunter with a bow, but no arrows in the quiver.
If the Hopi Tribal Council enacts a tax ordinance before the end of the year, the Tribe can start collecting tax revenues, beginning Jan. 1, 2018, and this can go on until the PWCC lease ends in 2025. This is not hard to do. The Tribe can use the Navajo Nation’s tax code as a model. No expensive lawyers and consultants are necessary.
The possessory tax can also apply to Arizona Public Service Co. (APS) and other companies who possess right-of-ways through Hopi trust and private lands. It can be applied to the slurry pipeline, running through Hopi lands.