Village and Urban Native Corporations
Questions of balance
The Barrow Replacement Hospital is scheduled for completion this fall. A joint venture between Ukpeagvik Iñupiat Corp. and Arctic Slope Regional Corp. employed many shareholders on the multi-year construction project.
PHOTO: Courtesy of UIC
A submarine fiber-optic cable provides broadband Internet service to Kodiak Island. A new hospital, triple the size of the old one, will serve Barrow and five surrounding villages. Crossing guards kept throngs of cruise ship tourists safe and secure on the jam-packed streets of downtown Juneau this summer.
These are all business services in Alaska made possible by Alaska Native village and urban corporations. These types of activities may be highly visible to the residents of a corporation’s home village—many of them shareholders. The Alaska Native Claims Settlement Act created more than 240 urban and village corporations. In the 40 years since, many shareholders have moved elsewhere in Alaska, the Lower 48 or even overseas.
Those far-flung shareholders might pay more attention to the profits their Alaska Native Corporations obtain by utilizing their favorable standing in seeking government contracts. The same three corporations that laid the fiber-optic cable, built the new hospital and supplied the crossing guards also provide cybersecurity, submarine maintenance and heavy-lift helicopter repairs to various departments of the United States government.
While these corporations are tasked to maximize profits for their shareholders, they are also under strong pressure to be a source of economic development and employment in the home villages. Balancing these priorities occupies the chief executive officers of some of Alaska’s top ANCs.
“It’s an ongoing conversation in almost every community at one point in time, as to whether the village corporation goes outside the village or even outside the region in order to provide revenue, because it can be very difficult to make much revenue at the local level,” says Charles Parker, CEO of Alaska Village Initiatives. AVI provides training and consulting services to small ANCs and collaborates with larger ones on lobbying and advocacy. “They have to find a way to balance it.”
Top of the World
The village and urban ANCs range greatly in size. Parker says the largest have a score or more subsidiaries, hundreds of millions of dollars in revenue, and very competent management. But the majority of the corporations are mid-sized and have much smaller revenues and staffing. The smallest corporations may have no professional management and receive their funds largely from revenue sharing and land-use permits.
A sizeable number of ANCs profit from special advantages granted them (along with Hawaiian Natives and some other Native tribes) when they bid for contracts in the Small Business Administration 8(a) Business Development contracting programs. ANCs, for instance, are eligible to receive sole-source government contracts regardless of the size of the contract, where other competitors may be limited to smaller contracts. ANCSA firms may own multiple 8(a) companies, while other firms may own only one. As 100 percent minority-owned, ANCs can attract partners wishing to increase the diversity of their workforce. They may qualify for special programs for disadvantaged firms.
This has made partnering with ANCs an attractive proposition for Lower 48 firms wanting a competitive edge. Increasingly, ANCs are electing to use the expertise they are gaining for their own start-ups. The ANCs often have both partnerships/joint ventures and start-ups in their roster of subsidiary companies.
Take Ukpeaġvik In~upiat Corp., one of the largest village corporations. Located in Barrow, UIC is involved in oil and gas support; shipping; construction; and scientific, professional and technical services. Although their 8(a) contracting work may range all the way to Helmand Province in Afghanistan, they are also putting a strong mark on their home region in the Arctic. They are working with a major oil company and two other ANCs to support shore-based facilities on the North Slope. In partnership with the regional ANC, Arctic Slope Regional Corp., UIC is putting in water and sewer lines in Barrow and several other villages. UIC operates barges that supply heavy equipment, construction materials and general cargo to villages all along the northern coast.
But what UIC President and CEO Anthony Edwardsen most wants to talk about is UIC’s joint venture with ASRC, constructing the Barrow Replacement Hospital. The new facility will be triple the size of the current hospital and serve the communities of Barrow, Nuiqsut, Kaktovik, Atqasuk, Wainwright and Point Lay. When the $85 million project is completed this fall, UIC will provide building maintenance, housekeeping and most other non-medical services.
“UIC is the largest landowner in Barrow,” Edwardsen says. “When it comes to new facilities, like the borough facilities, you’ve got to come to UIC and ask for use of the land. For example, the new hospital that’s coming on board? The Indian Health Service had to come to UIC and purchase the land.
“Since UIC was providing the land, we wanted some of the work to come to us,” he adds. “We use our land as leverage. And it has worked out very well for UIC.”
Edwardsen says he hopes the expertise gained partnering on large construction projects with other entities will position UIC well to work with other Native American firms and organizations in Arizona, North Dakota and Washington state.
“We’re not just focusing on Alaska,” says Edwardsen of the growth of the UIC commercial construction division. “We’re also focusing outside of Alaska where there is a lot of work.”
Spiraling Out Via Broadband
At Old Harbor Native Corp., located in that village on Kodiak Island, CEO Carl Marrs has brought the expertise he gained at the helm of Cook Inlet Regional Inc. to what he describes as a “medium-sized” ANC.
“Operating a village corporation is substantially different from operating a regional corporation, because it’s all personal,” Marrs says. “You see the needs that the village shareholders have more directly.”
Making business even more personal, Marrs went to school in Kodiak. “I’ve known a lot of the guys in Old Harbor for a long time,” he says. “I love this island and the people who live here.”
Although Old Harbor has a large number of enterprises elsewhere in Alaska and the Lower 48, Marrs says the instructions from his board have been to try and “stop the exodus of shareholders from our village.”
“Our focus has been: How do we create an economy in the village so that people who are living there can live there decently and those people who had to leave to find jobs can come home,” Marrs says. “We were able to put in a new boat harbor and a new dock. The ferry is now stopping in Old Harbor. We’re extending the runway to allow bigger planes with more freight, which will allow (fishermen) to fly fresh fish out. Then we’re looking at new hydro. All of which breaks down the cost of living in the village, and also tends to have people look at the village more favorably because you can then put in operations that are more economic.”
Marrs says cooperation between the city, the tribe and the corporation was a key factor in attaining such improvements.
Old Harbor Native Corp.’s logo depicts a spiral—a shape which well describes the company’s influence as it flows out from the traditional Alutiiq village. Firstly, Old Harbor’s Anchorage-to-Kenai-to-Homer-to-Kodiak fiber-optic link provides broadband service to 10 percent of Alaska’s people. The system provides real-time transmission to such vital sites as the Kodiak Coast Guard base, the Kodiak Rocket Launch Facilities and the Mid-Course Missile System. Improvements are under way in microwave transmission systems in Ouzinkie, Port Lions and Old Harbor, among other villages.
“If you have real-time capacity, you can create economies out of that also,” Marrs says.
Old Harbor also owns the Grande Denali Lodge and the Denali Bluffs Hotel—both in Denali National Park, among other commercial properties. Old Harbor’s 8(a) division, Three Saints Bay LLC, does business with the US government in Virginia, South Carolina, Texas and California. They have acquired or formed the following LLCs: Amee Bay, Barling Bay, Rolling Bay, SAGE Technologies and Shearwater Systems.
Goldbelt Inc. is the urban ANC in Juneau. Urban ANCs are similar in structure to village corporations, but revenue-sharing funds are paid directly to shareholders, instead of going first to the company. Goldbelt has 3,200 shareholders—10 times or more the number of shareholders in some village corporations. About a third of Goldbelt shareholders still live in Juneau.
A tour of Juneau would feature many of Goldbelt’s local holdings. The Mt. Roberts Tram takes tourists and others to a mountaintop complex of restaurants, hiking trails, gift shops and other amenities. The 105-room Goldbelt Hotel faces the waterfront, where Goldbelt also operates the Seadrome Marina—moorage for yachts and other vessels up to 300 feet. Goldbelt provides marine transportation to the workers of the Kensington Mine on the east side of Lynn Canal, about 45 air miles from Juneau.
Goldbelt receives a significant proportion of its revenue from more than a dozen subsidiaries making up the contracting side of the business, says CEO Bob Loiselle. Striking a balance between contracting with the government and offering services to the private sector is a balancing act that has to be continually adjusted.
“We’re fairly well diversified, but not as well as we would like to be,” Loiselle says. “It’s our goal to try and grow that government contracting business—but at the same time get more business going here in Alaska and elsewhere. We want to develop a more balanced portfolio so we are not so dependent on the vagaries of the federal government or who might be in office at the time.”
The 8(a) contracting advantages and the contracts they helped ANCs secure “have been a real springboard” for the Native firms. But for any one company, the 8(a) advantages run out in nine years (sooner in some cases)—a circumstance Loiselle refers to as the firm “graduating.”
“The goal is that after you graduate you continue on without the benefit of the 8(a) advantage,” Loiselle says. “We have a number of our companies that have already graduated from the program and are doing work outside of the federal government arena. Our goal is to make sure that after (the companies) graduate, they’re still viable.”
Loiselle says the key for ANCs is to couple any competitive advantages with a reputation for superior service.
“You have to be competitive on a cost basis, but you also have to have good past performance,” Loiselle says. “You want to be viewed as someone they want to keep around.”
While starting up a brand new business may be challenging, partnering with an existing firm can be dangerous, too. Alaska Village Initiatives’ Parker says a smaller ANC needs to be prepared—and competent—to carry out their own due diligence. He said his own village corporation, Sitnasuak of Nome, had a similar experience several years back.
“You essentially have a big brother you can learn from and the big brother benefits from gaining that competitive advantage, as well as marketing opportunities,” Parker says. “A lot of very successful growth has come from that, but there have been just as many or more (ANCs) that partnered with a company, and the company they partnered with made money but the Native corporation didn’t.”
UIC’s Edwardsen says he knows such situations occur—and how to steer clear of them.
“That’s why we are so successful in the government contracting,” Edwardsen says. “We’re very careful who we joint venture with.” R
Will Swagel is an author living in Sitka.
Posted: September 1, 2012