The meeting was called to order at 10:00 a.m. by Cochair Senator Jerry Thorne. Other members present were: Cochair Representative Max Black; Senator Claire Wetherell; Representative Carol Pietsch; Darrell Kerby, city council president of Bonners Ferry; Velma Bahe, chairperson of the Kootenai Tribe of Idaho; Ron Abraham, member of the Kootenai tribal council; Skip Smyser, a lawyer representing the Kootenai Tribe of Idaho; Skip O'Fallon, representing the mayor of Bonners Ferry; and Ron Smith, representing the Board of County Commissioners of Boundary County. Legislative Services staff attending were Mike McConnell and Pat Bischoff.

Others attending the meeting included: Amy Trice, a consultant tribal elder for the Kootenai Tribe of Idaho; Dianne David, secretary for the Kootenai Tribal Council; Dixie Abraham, treasurer for the Kootenai Tribal Council; Gary Morgan, a Bonners Ferry businessman; Jerry Jaeger, president of Hagadone Hospitality; Steve Garwood, finance representative for the Kootenai Tribe of Idaho; and Leroy Wilder, a tribal attorney.

Cochair Thorne opened the meeting by stating that the committee's challenge was to devise a solution that was amicable to the tribe and the community. Mr. Thorne stated that in their original discussions, the cochairs hoped this could be done in two meetings, with the first meeting in Coeur d'Alene and the second to be held in Bonners Ferry. At Mr. Thorne's request Mike McConnell read Senate Concurrent Resolution No. 119.

Darrell Kerby, city council president of Bonners Ferry, was invited to make an opening statement regarding the point of view of the greater Bonners Ferry community. He stated that the Kootenai Tribe of Idaho is attempting to call on a promise of Governors Andrus and Batt, who had expressed a desire to help the tribes become more economically self-sufficient. As a result, during the last two legislative sessions the tribe had introduced legislation to give the tribe the authority to purchase land within a certain distance of their current reservation property and to operate a business sales tax free at the location. The business community thought this would give the Kootenais an unfair business advantage and objected both years.

According to Mr. Kerby, the effect of the proposals would have been to allow the tribe to compete not only without having to pay income and property taxes, but while allowing the tribe to collect sales tax and retaining that tax amount to offset the business expenses. Mr. Kerby stated that the effect would have been to allow the tribe to profit while creating a new de facto reservation. Since the people who live in Bonners Ferry moved there or remain there with the desire to be governed by the state of Idaho and not the Kootenai Tribe, there is a great concern about giving the tribe such an advantage. Mr. Kerby stated that most people do not object to the tribe purchasing or operating as many businesses as it desires so long as it is subject to the same state rules and taxes as other businesses and is not part of another sovereign government.

Mr. Kerby said that since the legislature established this committee the Boundary County delegation has wanted to know what the governor has had in mind to assist the tribe. According to Mr. Kerby, the Boundary County delegation has not received anything back from Governor Batt.

Mr. Kerby explained further that the Kootenai Tribe already owns the Kootenai River Inn, which is located in Bonners Ferry on US Highway 95, on the south bank of the Kootenai River. The tribe has contracted with the Hagadone Corporation to manage the inn. Currently the inn operates free of state sales tax requirements. Mr. Kerby stated that the inn, along with tribal administrative positions and additional employment offered at the Kootenai Sturgeon Fish Hatchery, has the capability of offering employment to tribal members who desire it. However, Mr. Kerby did not know what the employment picture is with the Kootenais. He also did not know what income sources the tribe currently has or their expenses. He hoped that those attending the meeting will know the answers before they seek help from the state. Mr. Kerby said that this issue is very sensitive. The city of Bonners Ferry has been able to establish a tremendous amount of goodwill and friendship with the Kootenai Tribe, and from this goodwill has grown mutual respect and trust. It is imperative that this relationship not be destroyed. Mr. Kerby stated that the participants at the meeting need to craft a solution that benefits the state, the tribe, and the local community.

Ron Smith, representing the Board of County Commissioners of Boundary County, stated that when he was chairman of the board the board was approached by the tribe with a proposal to operate a grocery store. Initially, the board said it didn't sound like a bad idea. They were then visited by the owner of the local IGA store and his wife. They were very upset that the county commissioners would endorse something without knowing all the particulars. The commissioners then decided not to support the tribe's proposal.

Mr. Smith contacted Mr. Kerby and discussed scheduling a public meeting to see what the community's feelings were about the issue. They were presented with a petition signed by 938 people opposed to the tribe's originally planned store. At that public meeting several people orally commented on the proposal, including some members of the Kootenai Tribe who spoke opposing the tribe's proposal. The commissioners voted to oppose the plan because of the community opposition. The business community was afraid that the sales tax exemption would jeopardize their businesses. Further, at that time the tribe's proposed purchase could have encompassed existing businesses.

Mr. Smith stated that every time the plan came before the board of commissioners it was at the last minute and they never had all the information, and that made a lot of people skeptical and upset. There were many citizens writing and calling legislators. Another plan that was presented regarding a store was also opposed.

Mr. Smith stated that he requested from the Kootenai County assessor, about a week ago, a rough estimate of the present property value of the Kootenai River Inn. The assessor derived a figure of $3,000,000, which he equated to a loss to the county of $52,000 in property taxes. The county foresees a similar kind of loss of property and sales taxes if more property is purchased by the tribe.

Mr. Smith said that his involvement with this issue is mainly because of the community's feelings. He felt that as a county commissioner he had to oppose the plan and he still opposes it. The agenda for this meeting displays some other compromises and he is anxious to see what those are. The last he heard from the community is that they are adamantly opposed to a sales tax exemption for the tribe.

Skip O'Fallon stated that besides being manager of First Interstate Bank, he is also on the board of directors for the Chamber of Commerce and president of the Economic Development Advisory Council. As such, his involvement with the tribe's sales tax issue has been strictly from a business point of view. He has met with the business community regularly to discuss the proposals and aspirations of the tribe. The biggest concern that the business community has is the unfair advantage that would be given to the tribe based upon the sales tax exemptions. He said that as an example, grocery stores that have incomes in the range of 5 to 10 million dollars in annual gross sales have a net profit of 1.3 percent. If the tribe is given the advantage of a five percent sales tax exemption, plus the property tax exemption, the tribe will be able to undercut anyone and put anybody out of business.

Velma Bahe, chairperson of the Kootenai Tribe of Idaho, apologized for the quick move made in the previous months concerning the sales tax exemption. She stated that the tribe has had a chance to look at another option and are prepared with a presentation that the tribe hopes will ease some of the concerns of Bonners Ferry/Boundary County citizens. The tribe's dream is to be self-sufficient. Tribal members are hoping that after this meeting there will be an opportunity for them to move toward achieving their goal. They would appreciate help from the committee so long as it is not a handout and does not infringe on their sovereignty.

Ron Abraham, a member of the tribal council for many years, gave an historic summary of the Kootenai Tribe: For the last 10,000 years, the Kootenai Tribe survived and prospered by hunting, fishing and gathering within their aboriginal territory in northern Idaho, Montana, and Canada. They were self-sufficient and self-governing. It wasn't until non-Indians arrived that the Kootenais saw their way of life deteriorate. Since then they have had to adapt to a new way of life because the days of hunting, fishing and gathering are over. Now, the tribe is just surviving.

Mr. Abraham said that when the non-Indians came they brought destruction, took Kootenai land and language, and sometimes even took Kootenai children. While other tribes were signing treaties in the mid-1800's, the Kootenai's didn't since they had all they needed in their aboriginal territory. The federal government wanted them to move to the Flathead Indian Reservation in Montana in 1855, but they refused. Their chief at that time said they would probably starve if they moved to the reservation. In light of things that have happened since then, the chief was probably right.

Mr. Abraham stated that the Kootenais refused to sign the treaty of Hell Gate, but their land was taken from them by the forging of their leader's signature on the treaty. They were left landless but went back to their traditional ways of hunting, fishing and gathering. In 1887 the federal government realized that the Kootenais were not going to move to the Flathead Reservation in Montana and allotted land to the members of the Kootenai Tribe. About four thousand acres were allotted. No tribal lands were allotted, just individual allotments were created. The idea was to break up the Kootenai's communal way of life and make them farmers. They were told that they had to farm the land allotted to them. Since there was not proper equipment or training for farming, this program failed. The federal government told them that since they were not using the land for farming they would take some of it back.

Another problem, recounted Mr. Abraham, was "the line through the middle of their house," otherwise known as the boundary between the U.S. and Canada. Now some of the tribe were U.S. citizens, but those over the border were not considered Indians by the U.S. government. By being related and inter-married with the Canadian Kootenais, it meant that when an Idaho Kootenai died, the Canadian Kootenais had heirship rights. That created a problem with the allotments. An allotment could have between four and eighty owners. Those considered non-Indians who inherited land in Idaho were subject to taxes. Many did not understand the taxable or "non-trust" status of their land and eventually lost it. Some land was bought for a jug of wine and a couple of bucks. Of the original allotment of approximately four thousand acres, there is about two thousand left. Sixty percent of that two thousand acres is in non-trust status.

Mr. Abraham said that the purpose of the Bureau of Indian Affairs (BIA) was to administer the tribe's welfare in everyday functions. The federal government allocated funds to local agencies across the nation, from central offices to area offices, then to local agencies. The local agency for the Kootenais is the northern Idaho agency, located two hundred miles to the south. The local agency allocated money to tribes by a formula based on the tribe's population and land base size, after taking what they needed to run their offices. Because the Kootenais lived two hundred miles away, with a small population and no tribal land, they got ten cents on the dollar to run the tribe's affairs. That amounted to about five thousand dollars a year.

According to Mr. Abraham, a report issued by the BIA in the early 1970's said that the Kootenai Tribe of Idaho was hopeless, there was nothing they could do to help them. To compound all of the problems that they faced, alcoholism was rampant and out of control. In the early 1960's they were burying sometimes up to three people a month who had drunk themselves to death.

Mr. Abraham said that it was not until the 1970's that they started to realize the bad situation they were in, and that something had to be done. Due to neglect by the BIA, or as they put it "lack of services" (they called it that because the BIA's services consisted of two visits and six phone calls a year to see how the tribe was doing), the tribe decided to declare war on the U.S. government. The tribe wanted to wake up the system. It had been 150 years since the time when the tribe's self-governance was taken from them and they were left destitute. The war in the 1970's was the return of their self-governance and it is amazing what has been accomplished in the twenty years since then.

Next to address the committee was Amy Trice, a consultant tribal elder for the Kootenai Tribe of Idaho. She stated that she was told by an elder medicine man of a prophecy among the Kootenai Nation, which told the story of a leader who would be born to lead their nation to freedom and out of poverty. That day was in September 1974 when we declared war, and that gentleman had tears in his eyes when he came to me to shake my hand and tell me that he was happy this happened in his lifetime and that he could pass on into the next world with dignity, pride and peace. His last words to me were "Always keep a rock over your heart and think with your mind and remember to ask the great spirit for guidance in everything that you do. When in doubt ask, and he will give you a sign."

Amy recounted that an elder then came to her home and asked her to take over the Kootenai tribal council and lead them out of poverty. The housing that was built in the 1930's was no longer suitable for habitation. The elder tribal council members had a language barrier, they could not speak English, which did not mean that they were less intelligent. They still spoke their native language. It was the tribe's plan to build a nice motel, but they realized that they could not fit into society as the federal government had intended. It was at this time that the BIAs instituted the relocation program. The idea was to send Indians to nearby cities and train them to become blue collar workers. Amy was one of those sent to the city.

According to Amy, it was all up to her and a few young people to help a small nation take on a task that was to be heard from one corner of the world to the other. The young people, who were no more than sixteen or seventeen years old, were joined by six or seven elders. The majority of those people are gone today but their dreams still live. They held a general membership meeting to declare war on the Department of the Interior, the BIA and the U.S. for failing to abide by the federal government's declaration and for failing to act as the tribe's guardian. The war was declared on September 20, 1974. All the tribe demanded were tools to build new homes, a new highway, a tribal office, medical care and jobs. The government's response was that their tribe was too small -- only seventy-two members -- and out of that maybe only twenty people were in Amy's age group.

Amy stated that the tribe was told to send the young and old out of town. Some people left and others stayed. She thanks the American Indian Movement for the five bodyguards sent to be at her side day and night, so that someone would not just happen to find her body in some ravine on the pretext of a freak accident. The very first day of the war it took two hours for Congress to ratify a portion of land, 12.5 acres, into trust for the Kootenai Tribe of Idaho. From then on everything fell into place. The tribe was not asking for a handout. The land was theirs originally.

After that, recounted Amy, program funds started to arrive for the Kootenai Tribe and other small tribes in the U.S. The tribe kept the money in Boundary County and worked with the county to build the highway that goes to the tribal "mission." It was then that an agreement was made between the parties that the county would maintain the road to the mission with the BIA.

Dianne David, secretary for the Kootenai Tribal Council, provided a history of the Kootenai River Inn. The Kootenai River Inn started out as a dream in the 1960's. In the 1960's, the tribal elders realized that something positive had to happen if the tribe was going to survive. After many years of suffering, hardship and frustration, the tribe announced its intent to own a hotel in the fall of 1984. This produced an automatic negative response from the non-Indian community. They argued that Bonners Ferry could not and would not support the inn because it would attract attention from the wrong kinds of people who would engage in organized crime, prostitution and drugs. It was also feared that the tribe did not have the education or the expertise to succeed in such a business venture in an area that literally had no future. In 1985, Bonners Ferry already had six motels and there were only two days in which all of the rooms had been full.

Following a public hearing the Kootenai Tribe went forward and secured funding for the motel through a bank loan which was 90% guaranteed by the BIA. A management company was hired and they broke ground in the spring of 1986. Today, the Kootenai River Inn is the second largest employer in Bonners Ferry. With the number of business people frequenting the facility (some of whom opposed it in the beginning), the Kootenai River Inn benefits the Kootenai Tribe and other organizations.

Mr. Kerby offered a different perspective on the history of the inn. He stated that the project met with positive responses from the county and the city governments. The city of Bonners Ferry wrote letters of support for the inn to the congressional delegation and to the agencies that provided the funding for the construction of the resort. There were public meetings held during that period of time where members of the general public negatively commented and there were negative articles written in the newspaper. He still feels that the Kootenai River Inn and the Kootenai Tribe of Idaho and the city of Bonners Ferry work very well together in that project.

Dixie Abraham, treasurer for the Kootenai Tribal Council, stated that in December of 1970 the first Kootenai tribal office was opened in Bonners Ferry. There was an operating budget of $5,000, which was funded through the BIA. They used the $5,000 as seed money to seek additional funding from other agencies just to keep the office open. Through a grant from the Economic Development Administration they built their tribal headquarters in 1976. In 1993 the Kootenai Construction Company was established. Through successful negotiations with a local bank, the tribe was given a loan to build their medical clinic which opened in 1993.

Ms. Abraham stated that today the Kootenai Tribe of Idaho has a fully developed tribal government. They have a court system, a health clinic, a fisheries program and family services. They receive a limited amount of federal money to supplement these programs. The tribe recently negotiated a compact with the federal office of self-governance, which under federal law means they have reached the most advanced form of tribal self-governance. Currently the tribe employs twenty-nine people. They have a board of directors that oversees the operation of the Kootenai River Inn. Since 1947 the tribe has been governed by constitutional by-laws which they are in the process of amending. Ms. Abraham stated that these advances indicate that the tribe is becoming self-sufficient but that they need financial resources to keep operations growing. They know that federal funds will always decrease. They have done just about everything they can with federal aid.

Mr. Smith asked Ms. Abraham how many members there are in the Kootenai Tribe?

Ms. Abraham replied that there are 117 tribal members, seventy of which live in Boundary County.

The next person to address the committee was Velma Bahe, chairperson of the Kootenai Tribe of Idaho. She handed out a fire contract that they have with Boundary County, and a solicitor's opinion. She stated that the fire and law enforcement contracts indicate the tribe intends to work with the county and intends to take care of their share of property taxes in other forms. They are not required to do so, but they will to be a good neighbor, even in the face of controversy about the inn. In response to the opposition that they have had for their sales tax exemption, they have negotiated to increase their fire and law enforcement contract by $2,000.

Ms. Bahe stated that the tribe is too dependent on federal funding; that there is too much alcoholism and other scars. She recounted that members of her generation, age seven or earlier, were taken from their families and put into foster homes, boarding schools, or childrens homes and returned to the reservation at age eighteen. Many returned to find no parents. The children returned unskilled, having lost their cultural and spiritual identities, and their sense of self. They became frustrated with society.

Ms. Bahe said that because members of her generation never fit in with their own tribe, they were forced to live with the white society, many lacking the skills that are needed today. The emotional and psychological scars on the tribe and its members run very deep. It will take many years of special attention to heal many of their members. Their education is limited. Many of their people are not ready to function well in a white society. They live in a community that is imbued with racism. They have a long way to go to get back the self-esteem that was taken from them. They want to be self-sufficient. They want to create a tribal savings account that will be there for their next rainy day. They want to establish a permanent fund that will ensure their governmental and cultural survival regardless of what happens to federal funding. They want jobs and a healthy local economy, not just for their own tribal members, but for all citizens of Boundary County.

Ms. Bahe informed the committee that the tribe has identified six goals and objectives: 1) Planning for the day when it can no longer depend on federal funding to run its governmental programs, the tribe has imposed on itself a savings program, under which the tribe must deposit 40% of the net revenues from all tribal businesses in a permanent fund, which will be used to supplement tribal programs; 2) The next most important objective is to provide every member of the tribe the opportunity for an education suited to that member's abilities, needs and desires. The tribe will establish an education fund for each member that will be distributed only for costs associated with education, vocational training, or any other training that reasonably can contribute to making the tribe more self-sufficient; 3) The tribe hopes to generate sufficient income to purchase or maintain a comprehensive medical, dental and mental health program for all tribal members, including the highest quality alcohol rehabilitation services; 4) The tribe wants to establish a program to prevent a loss of any more tribal land. Often the tribal government has had to stand by and watch individual members lose their lands to mortgage debts, tax sales or other means. The tribe will assist these members in their time of need with low or no interest loans, and when necessary the tribe itself will acquire these lands; 5) If sufficient funds are available the tribe will establish a youth cultural program designed to help the young members of the tribe experience more of what the world offers. The program will include a youth exchange program and supervised travel to spiritual, cultural and educational places and events; 6) The tribe wants to be more civic minded. It hopes to be able to contribute generously to the enhancement of the public services available to all citizens in Boundary County and to the improvement of the quality of life in the area.

Jerry Jaeger, president of Hagadone Hospitality, which manages the Kootenai River Inn, was next to address the committee. He has worked with the Kootenai Tribe for about ten years. In 1984 or 1985 Chief Raymond Abraham and Rodney Clark came to see them to talk about a dream they had to develop a facility in Bonners Ferry to help future generations of the tribe. This was one area that Hagadone Hospitality entered without a profit motive. They entered with a motive of partnership, not equity partnership, because the tribe took all the risk. In the early years money was really short, and Hagadone was glad to defer some of their costs and make loans to the tribe to keep the inn going. The tribe is paying the loans back very faithfully. Hagadone entered this relationship with a high level of confidence and wanted to do the right thing. Hagadone Hospitality works for the tribe. The company was told to stay out of the political decision making of the tribe. The company's job is to run the inn with the tribe's leadership. The company sits in on some of the tribe's meetings and the tribe gives Hagadone direction as to how to operate the inn. The tribe's chairman or board has never said "let's try to squeeze out money from the inn." Mr. Jaeger said he knows that in their minds tribal leaders have said "we could use this money to help our kids but we need to make sure that the hotel is first class." He stated that about five years ago there was a real need for remodeling and he knows that the tribe needed the money for basic necessities, but they used it for remodeling.

Mr. Jaeger informed the committee that throughout every meeting that he has attended with the tribal leadership, they have always talked about generating funds to set-up a scholarship for the tribe's youth. He thinks that the future of the Kootenai Tribe of Idaho is going to be in education and scholarships.

Mr. Jaeger commented that the inn has always collected the equivalent of the Idaho sales tax and they have used it for their tribal needs. They have used it for scholarships and it helped to build a medical clinic. The tribe does collect the 2% Idaho travel committee tax.

He stated that some of the things that the inn has done for the community of Bonners Ferry just in the last twelve months, at the direction of the tribal chairman, are: 1) Set-up a program for the students of the Bonners Ferry school system where if they had perfect attendance and followed the rules of the school they received the reward of a lunch at the Kootenai River Inn; 2) They helped a little girl (who was not a tribal member) who was hit by an automobile by having an auction and donating money; 3) They have sponsored the DARE program; and 4) They have sponsored charitable bingo programs.

Mr. Jaeger stated that Hagadone's direction as a management company working for the tribe has been to get jobs for tribal members and they have been moderately successful, but it is one of the areas where they would like to be doing better. The tribe is running the inn as a business. They have always focused on taking care of their next generation, and they have always had the community of Bonners Ferry in mind. If it isn't possible to hire the tribal members they try to hire people from Bonners Ferry.

Mr. Smith asked Mr. Jaeger how many tribal jobs were there at the inn?

Mr. Jaeger replied that they employed about seventy people and twelve were tribal members. Mr. Smith stated that it seems the business is more of a break even thing with a low profit margin. Mr. Jaeger replied that in the beginning the inn did not make money. Hagadone Hospitality deferred fees and made some loans which the tribe is paying back very faithfully.

Mr. Smith asked if that money included the money from gaming or if it was only from the inn and food?

Mr. Jaeger replied that he was talking about the hotel in the past. The gaming is now starting to generate additional funds. The hotel brings in 250,000 people a year. That is a tremendous impact on this community. The inn is now making money but is still paying on the original operating costs.

Representative Pietsch asked Mr. Jaeger what percentage Hagadone Hospitality gets for managing the inn?

Mr. Jaeger replied that they get three percent of the sales from rooms, food and beverages. They get a check monthly from the tribal treasurer. For that amount Hagadone has a hotel manager there, they do all of the accounting, they manage the hotel and they are responsible for marketing and advertising. Until 1994 they did not cover their cost of managing the hotel. It wasn't until gaming started that they were able to cover their costs.

Cochair Thorne asked if the gaming also came under the management of Hagadone Hospitality?

Mr. Jaeger replied that it does, with the direction of the chairman and the board of the tribe. They have 181 pull-tab machines in the casino. They are attracting a lot of people into the Bonners Ferry area which is good for the economy. The Kootenai Tribe signed a compact with the state of Idaho, telling them what type of equipment they were going to use and it was videotaped. Other tribes in the state have decided to fight, and did not sign a compact.

Mr. Kerby asked if Hagadone Hospitality had a license to operate this casino?

Steve Garwood, finance representative for the Kootenai Tribe, replied that under the Indian Gaming Regulatory Act (IGRA) the license is granted from the tribe.

Mr. Kerby then asked who regulates this operation? Mr. Jaeger replied that the Kootenai Tribe has a gaming commission that oversees the operation.

Leroy Wilder, a tribal attorney, stated that the states have no regulatory authority in Indian country, including the Kootenai River Inn, with the exception of the agreements that the tribe has entered into under the good neighbor policy. The federal government has not granted the right to gamble to tribes under the IGRA. The fundamental principal of Indian law is that within Indian country the tribes can do what any sovereign nation can do within their territory unless the federal government has specifically taken that right away. What Congress did with the IGRA is take away rights from the tribe and said that the states were very concerned about the activities that were going on in terms of high stakes gambling in Indian country. The states pushed into place the scheme that now exists.

Bingo and pull-tab operations have been defined as class 2 gaming operations. They are regulated by the tribe pursuant to federal law and regulations issued by the National Indian Gaming Commission. The tribe submits its ordinance, its procedures for background checks, its procedures for licensing key employees, and a whole list of matters to the National Indian Gaming Commission who has the authority to and did indeed approve the scheme that is established. The tribe's position is that their's is a class 2 gaming establishment and the state's involvement is precluded by the principles of federal Indian law.

Mr. Wilder stated that Congress decided that if tribes wanted to have full blown casinos it would constitute class 3 gaming. Class 3 gaming would have to be operated pursuant to state law although the enforcement authority would still be federal. Congress set-up a compacting process where the tribe sits down with representatives of the state and decides what kind of class 3 gaming would take place. When the tribes expressed an interest in conducting class 3 games, the state legislature amended the Idaho Constitution to prohibit them, and then the gaming compacts were finally signed.

Mr. Wilder said that the class 3 compacts include a definition of a pull-tab machine as a class 3 machine. His understanding is that the U.S. attorney for the state of Idaho is challenging the gaming that is being engaged in Indian country in Idaho, including the Kootenai River Inn. It is clear that there is an effort being made in the state of Idaho to shut down that kind of gaming.

Mr. Smith asked if the classes of the gambling had anything to do with the winnings of the gambling?

Mr. Wilder replied that if a state allows gambling in any way, shape or form then the state cannot regulate the size of the pot limits in Indian country. If it is class 2, state's have no say so at all, if it is class 3, state's have a say so in the compacting process.

Representative Pietsch asked why, if we have this internal Kootenai tribal structure, Hagadone Hospitality continues to manage the gaming?

Mr. Wilder replied that concerning gaming management, many tribes were taken in with terrible management contracts and the IGRA does address that. The act allows that management companies can manage tribal gaming with up to a 30% take. They cannot take more than 30% unless they make a huge capital investment of their own money. The tribe made the decision to stay with Hagadone to coordinate it all, and he is fortunate to have the reputation in the Indian legal community of negotiating by far the most beneficial management contract for a tribe involved in gaming.

Mr. Jaeger stated that Hagadone Hospitality receives 8% from gaming. Up until last year Hagadone Hospitality lost about $10,000 a year out of their own pocket, in 1995 they could possibly have a $30,000 profit.

Mr. Smith asked if the tribes take would be 15%?

Mr. Wilder explained that tribes who get in bed with the aggressive investors have a 5 year management contract. The investor who put in 5 or 10 million dollars has to be paid back within 5 years. By the time the tribe pays back the multi-million dollar investment and pays 30% of the profits and the operating expenses, they might end up with 15% of the take. Because of its favorable contract with Hagadone Hospitality, the Kootenai Tribe is able to maintain 92% of its profits from gaming.

Skip Smyser, a lawyer representing the Kootenai Tribe of Idaho, stated that if the Kootenai Tribe were allowed to continue gaming as it is they could all go home and be very happy. But it is his view that it is the policy of the state of Idaho that gaming is going to cease. Gaming has had short-term benefits but the reason they are here today is to look at long-term benefits for the Kootenai Tribe.

Cochair Black asked Mr. Jaeger if he understood correctly that the Hagadone Hospitality fee was 8% of the sales or of the profit?

Mr. Jaeger replied that they get 8% after all of the pay-outs are made.

Mr. Wilder stated that he has been in the Indian legal business for twenty-three years, and from his own personal experience the Kootenai Tribe of Idaho's council is the most dedicated, thoughtful and progressive tribal council that he has had the honor of working with and he is very proud to be their representative.

Mr. Wilder commented that the Kootenai Tribe right now is enjoying some success. They have a significant amount of debt in terms of investing in the inn and gaming has been good, but that is not the issue. The issue is the future of the Kootenai Tribe and the fulfillment of the Kootenai Tribe's dream. The tribal council has never looked at, he as their legal advisor has never looked at, and he doesn't think anyone closely associated with the tribe has ever looked at, gaming as being the answer for long-term economic self-sufficiency. The anti-gaming sentiments are unrelenting and they will be successful. The Kootenai Tribe needs to be ready when gaming is gone and when, unfortunately, federal programs are gone.

Mr. Wilder stated that when this continent was first settled one of the fundamental problems for the colonists was Indians as a military problem. Indians held the key for peace on the frontier and much of the early activities of the federal government dealt with what to do with the Indian issue. Indians at that time held the balance of military power. The question very early on became: "What is the relationship between the states, the federal government and the Indian tribes?"

As Mr. Wilder explained, the state of Georgia attempted to wipe out the powers of government of the Cherokee nation and in a case called Wooster vs. Georgia, the Supreme Court held that Indian tribes are domestic dependent nations. Chief Justice Marshall said, and it is the cornerstone of federal Indian policy and law today, that Indian tribes are subject to the plenary authority of Congress and the states have no authority to regulate Indian affairs. All the rights that states have as a result of that opinion deal with the question of whether the federal government has granted the state authority to do certain things.

The difference with the process we are engaged in right now is that Idaho, through its policy statements and previous legislation, has given an opportunity to tribes to take advantage of a tax exemption. This is very rare in our country today, that a state has made a gesture that can help a tribe achieve economic self-sufficiency. What we are trying to focus on today is how we can turn that part of the state of Idaho's government and policy into a benefit for the Kootenai Tribe of Idaho.

Mr. Wilder continued by stating that after a time, Indians became a social problem for the federal government rather than a military problem. The federal government engaged in a policy of placing Indian tribes on reservations. To understand federal, state and tribal relations, the term reservation must be interpreted literally. All an Indian tribe has in terms of power of self-government it reserves to itself and grants everything else to the United States. The basic deal given to the Indians was give up your way of life, your land and water, and in exchange the federal government will take care of you. That policy sounded good but did not translate into benefits for the tribes.

The reservation policy at that time was really a concentration camp kind of policy and the Indians did not do well since they had their ways of life wrenched from them. In the late 1800's conditions in Indian country were deplorable. In order to accomplish what is hoped the Kootenai Tribe can accomplish the people involved need to understand that you can't just wrench a way of life away from people and expect them to survive.

The first time Congress really made an effort after the reservation policy to figure out a way to help Indians was with the allotment policy. The idea was to make Indians farmers, and if that could be accomplished there would not be anymore Indian problems. The thrust of federal Indian policies was to destroy the tribal society. The result was the number of Indians that became farmers could be counted on one hand. Indians lost about 90,000,000 acres of land that they had reserved for themselves through treaties, because reservations were divided up and individual allotments were given out. Those Indians that got free title to their land and failed to pay the taxes lost the land. It was an Indian homesteading policy and it did not work.

By the 1920's conditions in Indian country were worse then they had been previously. The federal government decided that it had to do something and what they decided was that Indians needed the right of self-government and the right to be self-sufficient.

In 1934 Congress passed the Indian Reorganization Act, which stopped the allotment policy and created the opportunity for tribes to form constitutional governments. It attempted to create economic opportunity by chartering federal corporations so that a tribal council could have its governmental hat on one minute and put on its corporate hat the next. Unfortunately, there wasn't much of an economic mainstream for Indians to get involved in. The Second World War started and Indian tribes are extremely proud of their service in the military. This policy of Indian self-determination through the Indian Reorganization Act and some economic development through the corporate charter just didn't have an opportunity to work.

When they came out of the period after the war in the 1950's, America wanted peace. It wanted to settle down and send its veterans to school. The goal of life in those days was to get a college education, get a good job, move to the suburbs, get a couple of cars in the garage and raise a family. Indians did not fit into that process very well. Things had not changed in Indian country. There had never been a policy yet that had done anything but make things worse. The Indian Reorganization Act was a start but it never got started.

In the 1950's Congress actually implemented a policy called termination. The idea was to just eliminate the Indian problem by saying there are no more Indian tribes. Unfortunately, when they started running into treaties that secured certain rights, they recognized that they would have to pay for those rights, and the termination policy was only implemented in bits and pieces. The relocation policy was one of the policies of the termination era. The policy was to make Indians something besides Indians.

The best president for Indians was Richard Nixon. He was determined to better the life of Indians. In July of 1970 President Nixon sent a message to Congress that started out by saying: "The first Americans -- the Indians -- are the most deprived and most isolated minority group in our nation. On virtually every scale of measurement -- employment, income, education, health -- the condition of the Indian people ranks at the bottom. This condition is the heritage of centuries of injustice. From the time of their first contact with European settlers, the American Indians have been oppressed and brutalized, deprived of their ancestral lands and denied the opportunity to control their own destiny. Even the federal programs which are intended to meet their needs have frequently proven to be ineffective and demeaning."

Much has resulted from that statement of policy. Congress passed the Indian Self-determination and Education Assistance Act, and the Kootenai Tribe of Idaho has taken advantage of that program. They have subsequently developed its governmental systems to the point where it is now engaged in the latest government permutation of that self-determination effort. The tribe is going to be able to take federal funds on a block grant basis and handle its own budget. There were some good things which came out of that program. There was an Indian Financing Act which was established and created the loan program that the Kootenai's took advantage of to fund the inn.

In 1983 President Reagan issued this statement: "In 1970, President Nixon announced a national policy of self-determination for Indian tribes. At the heart of the new policy was a commitment by the federal government to foster and encourage tribal self-government. That commitment was signed into law in 1975 as the Indian Self-determination and Education Assistance Act. The principle of self-government set forth in the Act was a good starting point. However, since 1975, there has been more rhetoric than action. Instead of fostering and encouraging self-government, federal policies have by and large inhibited the political and economic development of the tribes. Excessive regulation and self-perpetuating bureaucracy have stifled local decision-making, thwarted Indian control of Indian resources, and promoted dependency rather than self-sufficiency."

The federal policy that was established by President Nixon was the first in the history of federal tribal affairs that Indian tribes truly had some opportunity to take control of federal programs and to make progress with true self-determination. Mr. Wilder continued by stating that the Kootenai's do not want to be dependent on the federal government. They want to be self-sufficient and that is what they are trying to do. If what they face in the future is examined we can see how wise they are to take that position. Some tribes feel so strongly about gaming that they call it the return of the buffalo. It is the first time that tribes have in their hands resources to better the lives of tribal people. Everything that the Kootenais really want to do is not included in the federal funding that they receive. Perhaps gaming provides the Kootenai Tribe, for a short period of time, the opportunity to begin to do the things that they really need to do to start knitting their tribal fabric back together. However, according to Mr. Wilder, tribal gaming is never going to be the final answer for the Kootenai Tribe of Idaho.

Mr. Wilder stated that in terms of the expenditure of federal money, the funds expended for non-Indian benefits have increased, or in some cases have declined, less rapidly then the expenditures for Indians. We all know that the federal money will not be there, and if the tribe is realistic it knows that the gaming dollars are not going to be there. What the Kootenai Tribe sees is that they cannot rely on the federal policies, it cannot rely on gaming, and it needs to figure out some way to generate revenues that will keep it together as a separate, domestic, dependent, tribal sovereign nation.

Mr. O'Fallon asked if the tribe was aware when it made the choice to enter into gaming that the long-range probability was that gaming would evaporate in Idaho?

Mr. Wilder replied that yes they did know from the beginning.

Mr. O'Fallon asked why they invested much needed funds last year into remodeling specifically for the gaming units?

Mr. Wilder replied that they took a look at how much it was going to cost to make the capital investment, they took a look at what they thought the profits would be and for how long and the bottom line came out that it was a risk worth taking.

Mr. O'Fallon asked if it wouldn't have been more prudent to have invested in something that had a longer range benefit to the tribe?

Mr. Wilder replied that not in the judgement that was made based on the figures and the analysis that they did.

Mr. Garwood replied that when the committee comes up to Bonners Ferry and sees the room they will realize that the rooms are specifically designed as a multi-purpose facility so that even when gaming goes away those rooms will make great meeting rooms. When they did the expansion they considered the permanent use of those rooms.

Representative Pietsch asked that if gaming is on its way out then what are the long-term goals that they have not heard yet, other than to generate revenue to keep themselves going? What is it that they want to be doing fifty years from now?

Mr. Wilder replied that in terms of the proposal that the Kootenai Tribe has made he believes that what the tribe wants to do is to act as a government. It is a separate sovereign government and that right of self-governance is etched in the fabric of this country. It wants to be able to expand its reservation to an area that would be suitable for some sort of retail development, allow that retail development to be built and managed by someone, and then tax it like governments do.

Mr. Kerby stated that the only time recently that community relations were not excellent between the tribe, the city of Bonners Ferry, and the county governmental entities was in fact over the gaming issue in the original request for the city to sign documents in support of the construction of the Kootenai River Inn. There were public meetings held where the tribe publicly stated that there would not be gambling at these facilities. That was the one major issue that ultimately caused some friction among the relationships. The other issue that caused some friction is the one that we are meeting on today. Otherwise he feels that the tribe and the community have been exemplary in their relationships with each other. The tribe should be commended for its huge effort in the last twenty some years in working toward governmental self-sufficiency. The Bonners Ferry community applauds and is proud of the efforts of the Kootenai Tribe of Idaho and takes some pride in helping them participate in that process. Mr. Kerby would like to modify the agenda and get into what the proposal is and he is hoping that it is a proposal that they can accept here and now.

Mr. Smith asked if the community of Bonners Ferry and Boundary County will have an opportunity to speak on this issue?

Cochair Thorne replied that the whole purpose of coming to the point of where they are today is to get some background to what the tribe proposes. When they have made their proposal the representatives of Bonners Ferry and Boundary County will have an equal voice and equal votes in whatever they decide to do. They are not planning on doing that today. This meeting is to provide background to the proposal and give Mr. Smyser the opportunity to explain what the tribe would like to do, and then have a second meeting in Bonners Ferry. That meeting as far as he is concerned will be a public hearing, where people can come in and express their feelings about the proposal.

Mr. Smyser next addressed the committee. He explained how he got involved in this matter. Last fall he was contacted to represent the tribal council and go forward with the sales tax modification on their behalf. He then started working with the legislative council to try and fashion legislation that would allow what the legislature did in 1984 and again in 1988 for other tribes to apply to the Kootenai Tribe. A lot of the discussion that they had during the legislature was over a matter that was already decided by the Idaho legislature. It is that the Indian tribes of the state of Idaho have a sales tax exemption -- it is passed, it is law, that is the way it is.

Mr. Smyser explained that what the Kootenai Tribe is asking for is that it be able to have the same benefit that the legislature has already granted to the other tribes in the state. The reason it can't be taken advantage of is that this tribe, unlike their neighbors to the south that have vast land holdings, did not have viable commercial property in order to go forward with commercial development. They started looking at some other way of accomplishing their goals. Legislators could not just say (because of constitutional prohibitions): "We want to give a sales tax exemption to the Kootenai Tribe." That is prohibited by their constitution as a personal bill. So they tried to come up with language that would limit it to the Kootenai Tribe and that is how they decided on lands within ten miles of the reservation.

Mr. Smyser stated that by going through that process, Tim Brennen, on behalf of the Merchants Association and the Associated Retailers of Idaho, became very interested in this legislation. A number of memorandums were sent out to the Bonners Ferry community, phone calls were generated, and the controversy heated up. He then started to find out what were the legitimate concerns.

The opposition broke down into basically two different groups. There were those who had legitimate concerns and those whose conversations were racist in nature. There was nothing that could be done or said by the Kootenai Tribe that could earn their support. According to Mr. Smyser, Brennen feels this is a fair characterization of what is happening today. However, we do have individuals who will be able to go forward in a constructive and positive way so the tribe can attempt to reach their dream of self-sufficiency.

When Mr. Smyser was before the legislature, he discussed that there would be a reduction in the federal funding for tribes. They were trying to address that, and the Kootenai Tribe is more farsighted in this area then perhaps other Idaho tribes. The Kootenai Tribe does not particularly care for federal funding because of the strings attached.

Mr. Smyser stated that this committee was endorsed by everyone in the legislature. Leadership on both sides of the aisle was very supportive because what we are doing here is not a normal interim committee. This is a mediation. The Kootenai Indians are asking the people of Bonners Ferry to sit down at the table with them and try to fashion something that they can all live with. Something that will accomplish the goals in a way that will not be detrimental to anyone.

There are two different proposals that can be gleaned from the concerns already raised. There's a concern within the community that the Kootenai Tribe will buy one piece of land and then another, and another, until they own everything. The second concern is with one businessman having a 5% edge.

Mr. Smyser stated that the Kootenai Tribe has no intention of buying all of Bonners Ferry. They do not intend to displace business owners living there. What they have agreed to as a way to move this forward is that they will limit their sales tax exemption to one parcel of property. In addition to that they have agreed to put in the legislation that they will charge a tax the same as the state of Idaho charges, in the same manner that they currently do at the Kootenai River Inn, where it is incurred on every sale.

Mr. Smyser observed that listening to some of the comments today, the committee knows it is not going to be able to produce a piece of legislation that takes care of every concern. This is certainly going to be a benefit to the tribe and they are proposing to do it in a manner that would cause the least harm to any businessman. The former commissioner mentioned the $52,000 property tax loss because they have this 3.2 million dollar building that used to sit in a swamp next to the river. Mr. Smyser stated that you are not getting the property tax but you are getting an employer of over seventy individuals, and you do have someone who is your neighbor and is paying fire and police protection when they are not required to do so. The tribe is already trying to compensate for the losses in property tax. They are talking about long-term self-sufficiency, allowing additional money to come in to replace the federal money being cut.

The tribe is hoping that between this meeting and the next the representatives of Bonners Ferry and Boundary County will have something concrete for them to look at if the tribe's new proposal is not satisfactory. Mr. Smyser believes that they have addressed the two major concerns that were brought by the retailers association and the two concerns that he heard most often. The Kootenai Tribe is willing to put those limitations on the proposal in order to reach an agreement with the entire group.

Mr. Smith stated that there are a lot of people opposed to this proposal and he is concerned that those people will not have a say in the matter. He asked if the tax that the tribe will charge will be retained by the tribe and if one parcel meant that more than one business can be located on it?

Mr. Smyser replied that yes, the money would be retained by the tribe and one parcel could be more than one business.

Cochair Thorne stated that this bill was postponed a year so that the people of Bonners Ferry could have a voice in the matter. It was before the committee and could have gone to the floor. But they stopped the bill in order to keep the citizens of Bonners Ferry from coming down by the bus load when we felt that we should go there.

Mr. Kerby stated that he thinks that the proposal itself needs to be looked at genuinely for its merits and he doesn't think that they need to go back and forth on some of this rhetoric to try and paint different pictures. One of the concerns that rang his phone off the hook was the concern for the 5% off-the-top benefit that would off-set overhead and give that business an unfair advantage to any other business that would compete against it. They have answered that by having the tribe charge that 5%. Was that their intent?

Mr. Smyser replied that yes that was their intent. Whatever business was there would be taxed, it would be operated the same as the Kootenai River Inn. They take 5% and it goes to help the tribal government.

Mr. Kerby stated that when he attempted to explain previous proposals to the various community members they would come back to him and say: "That is great but what is to say that it wouldn't off-set revenue sources from some other location or from some other tribal program to go back into that business and subsidize its operation by 5%?" Whether they charge the 5% or not, as long as that 5% is there to help off-set the overhead of that business there will remain an unlevel playing field. The problem Mr. Kerby related in trying to sell that point is that there is no way the tribe can come back with some type of an audit tracking system to make certain that the 5% goes to the governmental operations of the tribe for these various wish list proposals, and doesn't somehow supplement that business activity. The core of the business community's concern is that somehow if the legislature wants to provide this tax incentive for the tribe it should be done in such a manner that it does not set an unfair playing field by its own action. They do not want to deny the tribe their revenue source for the operations of their governmental entities but they do want to deny that source from coming back inadvertently to subsidize that business. Maybe there needs to be and can be someway to track those funds so it will be certain they don't come back in to help subsidize that business.

Representative Pietsch asked the members of the tribe present if they have considered any other possibility besides going into retail sales. Have they looked at manufacturing, at education or recycling which do not involve a sales tax?

Mr. Smyser replied that they have looked at a number of alternatives and the reason this was chosen was that as a governmental entity in a retail enterprise it would enhance the money coming into the tribe. The current law has the sales tax exemption for the tribes and that is why the focus is certainly there.

Mr. Garwood stated that the tribe has looked at numerous ventures and it is surprising how many supposed business people come into the tribe and say -- Here is a great idea, can you do it? Usually they are looking for some kind of way to use the tribe's sovereignty as a means of getting around state legislation. Regarding sales tax, the tribe has a ten year history of collecting the sales taxes and never once has the tribe transferred money back to the business. If you take the bill put forward by Congress for the seven year balance of the budget, the tribes are looking at, best-case scenario, a 2-3% reduction of federal revenues each year. Tribal ordinance requires the money from the sales tax exemption be used for health, education and welfare of tribal members.

Mr. Kerby stated that what is currently happening in their community is that there is a two-person investment team that has purchased the current grocery store in Bonners Ferry, has put together the financing, purchased the property and is proceeding with the construction of a several million dollar grocery/drug store facility. Since their community is only 8,300 people and there is a huge grocery store currently under construction there certainly will be a need, if the tribe develops one of similar size, for that store to be super competitive.

Mr. Wilder stated that the tribe obviously is not going to choose somebody to develop and manage a retail business that will fail because it can't compete, or to try and replace a business that is already there and established which wouldn't make any sense. They keep talking about a grocery store, but no one has made any commitment to a grocery store. A parcel of land will have to be secured, a business will have to be identified -- there is a multitude of steps. What they are focusing on here is whether the tax exemption is the appropriate way to give the Kootenai Tribe of Idaho a tool with which to achieve economic self-sufficiency. Also, the state of Idaho could take the privilege of the sales tax exemption away from the tribe if they should abuse that privilege.

Cochair Thorne stated that the decision of this interim committee is not whether the Kootenai Tribe can buy some land, call it trust land and put a business on it. That has already been decided. The state has to recognize that they cannot interfere with the Kootenai Tribe's desire to open a retail outlet in Bonners Ferry. But the tribe is proposing some restrictions on themselves as to the one parcel, and we must make a decision as to whether we allow the tax exemption. We either have to rescind or back them up on the proposal that they are making. He proposes that they meet once more, but they might have to meet twice. The next meeting will be in Bonners Ferry.

Cochair Black stated that he wanted to reemphasize that the purpose of this meeting was not to make or force any kind of decisions on anybody. It was to hear a proposal with the intention to start out neutral with a proposal before them, discuss it, and then go to Bonners Ferry and have a hearing on it. Then the Bonners Ferry community can make its proposal and counter-proposals.

Mr. Kerby asked how they would handle the public testifying?

Cochair Thorne replied that they will request that people come to them as groups or associations and that one person speak for several. For example, they would want one spokesman from the chamber of commerce, one spokesman from retail merchants, and that would be the pattern they would like to suggest to them.

Mr. Smyser asked if Mike McConnell was in a position to work with them to put a proposal in proper form. Mr. Smyser assumes that is part of his charge to this committee that they can use his services to come up with proposals.

Mr. McConnell replied that he is willing and capable to work on proposals suggested by the Bonners Ferry delegation so long as the co-chairs give him the okay.

The committee scheduled the next meeting for September 12th and 13th in Bonners Ferry. The meeting was adjourned at 3:05 p.m.

The meeting was called to order at 8:05 a.m. by Cochair Representative Max Black. Other members present were: Cochair Senator Jerry Thorne; Senator Claire Wetherell; Representative Carol Pietsch; Darrell Kerby, city council president of Bonners Ferry; Velma Bahe, chairperson of the Kootenai Tribe of Idaho; Ron Abraham, member of the Kootenai tribal council; Skip Smyser, a lawyer representing the Kootenai Tribe of Idaho; Skip O'Fallon, representing the mayor of Bonners Ferry; and Ron Smith, representing the Board of County Commissioners of Boundary County. Legislative Services staff attending were Mike McConnell and Pat Bischoff.

Others attending the meeting included: Lamar Thompson, Safeway; Paul Matejovsky and Gary Morgan, IGA; Bruce Dugal, American Legion; Kqalsan Mayuk, Dianne David, Amy Trice, Leroy Wilder, Kootenai Tribe of Idaho; Mike Boatman, Kootenai Valley Times; Wes Deitz, Panhandle Cafe Inc.; Bill Florea, Shelmon Realty; Barbara Spurgeon, 1st Interstate Bank; Peter B. Wilson, attorney; Dave Wattenbarger; Val Harrington, Lavender & Old Lace; Genevieve Timm, Lila Sweet and Christy Taft, Taft's Inc.; Carol McCoy, McCoy's Home Int.; John Taft, T & H Co., Inc.; Tim Brennan, Idaho Retailers Assn.; Don Carter, Birite Hardware; Stephen Fendos, Boundary County Assessor; Jean Diel, Bonners Ferry Herald; Linda Atchison, NW Gifts; Viola Sims and Larry Engent, South Hill Furniture; Carrie Figgus, Figgus Farms Inc.; Rachel Bonak and Anne Bonar, Boardwalk Boutique, Inc.; Mike Dinning, Athletic Connection; Gini Woodward, Gini Knits; Tony Villelli, Kootenai Valley Motel; James Farber and Gerda Laasch, Bargain Giant; Harlan Schrag, Bonners Ferry Merchants Assoc.; Mary Peterson, Re/Max; Helen Foust, Foust Logging; DaVonna Cada, J C Penney; Gary and Luanna Falcon, Falcon Floral; Joanne Bailey, Pink Lion; Patty Kerby, Pace-Kerby Insurance; Jim Graham, CJ's Tool N Vac; Alan Winkelseth, B.F. Redi-Mix; John and Velma Brumbaugh, Rose Manor Enterprises; Dennis Fitch, Fitch Construction; David Kramer, Bonners Ferry Police; Roko Govorchin, Democratic Valley View Precinct; Nancy Maggi, Maggi Mini Storage; Jim Chubb, Coast to Coast; Ken Mail, Eastport Industries; Ira Earl, National Federation of Independent Businesses; Bob Graham and Merle Dinning, Boundary County. Representing themselves: Patrick Tomulty, Grace Silver, Cheryl Myer, Shirley Hamilton, Verna and Frank Taft, Evelyn Smith, Dolores Sweet, Cleve Shearer, Judith Regehr, Larry Nelson and Jan Dau.

Cochair Black and the rest of the committee introduced themselves. He then read the Statement of Purpose for Senate Concurrent Resolution No. 119. Skip Smyser read the proposed legislation. The Boundary County representatives on the committee presented their comments.

Statement of committee member Darrell Kerby:

I find myself reluctantly before you today. Not that I don't appreciate the opportunity the legislature has provided my community to be heard in the legislative process but because I find myself for the first time in my adult life completely opposed to a proposal brought forth by my neighbor, fellow business associate, and fellow governmental entity the Kootenai Tribe of Idaho.

To begin with, the proposal must be looked at in the context of the community within which the proposal is being made for although the issue requires statewide approval the only area of the state to feel the dramatic and immediate impact of its passage will be Boundary County.

Boundary County is a community of approximately 8,500 people. It is a stable, slowly growing community economically made up of timber, agricultural, and governmental employees who are serviced by a rather small retail and service community. The balance within the economy has allowed the orderly, yet sometime tenuous business climate to remain somewhat stable.

As with any free enterprise economy, competition has been brisk for the few dollars generated by such a small population base and has served our consumers well. The competition offered however by the Kootenai Tribe of Idaho is not one of free enterprise and will seriously jeopardize this competitive balance by tipping the now level playing field dramatically in favor of any business enterprise the Tribe may elect to construct.

There are several issues regarding this proposal that must be considered.

The Kootenai Tribe of Idaho as a Government is unique among governments found in the United States of America, for it is not only established to make and administer the laws of its citizens but holds a relationship of providing religious, cultural and spiritual leadership for its members. Its citizens do not become citizens by acquiring citizenship through naturalization or by virtue of being born within the nation, but instead one gains membership only by ones genealogy. In this context, the Tribal Government can do anything its tribal members desire it to do.

To be Native American is to truly be unique in the United States today. Not only does one have all the rights of an American citizen but also has all the rights of a Native American citizen. In effect dual citizenship. It is in the context of the dual citizenship that this proposal must be examined.

In Idaho today it would not be acceptable for the State of Idaho to tax its citizens and with this tax money purchase a grocery store chain to go into business in direct competition with say the private sector like an Albertsons or Rousaurs. This restriction on the State of Idaho and its subdivisions from entering into private business is on purpose.

If Government, which has the power to tax and regulate, can go into direct competition with the private sector at its will the playing field would allow the Government operated business to compete unfairly against the free enterprise system. There is no such restriction prohibiting Tribal Governments from entering into any business that its members so desire.

This brings up the first unfair issue regarding this proposal. Any and all sources of revenue that a tribal government receives that are not expressly restricted by statute can be used by the Tribe any way it sees fit. This sovereignty of self determination is at the heart of being Native American and is not to be given up lightly. So any revenue that the Tribe might receive from the Citizens of The United States of America or the citizens of the State of Idaho can, if the tribe so desires, be used to operate any business the Tribe may choose to purchase and operate. Thus the ability to use Federal and State tax money to go into direct competition with private enterprise is not only possible but probable. So in essence the private enterprise business that is compelled by Government via color of law to pay taxes to that Government finds itself subsidizing its competitor. Not exactly a natural or even healthy act if one is desiring to remain in business.

Because Tribal Government is unique in its relationship to its citizens ( its Tribal members) economic development does not mean the same to Tribal Government as it does to non-tribal government.

In the case of the Kootenai Tribe of Idaho its members (citizens) currently have 100% employment. All tribal members who desire to work can be employed directly by Tribal owned businesses or enterprises.

Since Tribal members are also US citizens there of course is nothing to prevent Tribal members from seeking employment outside of Tribal controlled enterprises and many Tribal members have in fact sought out and obtained positions outside of Tribal controlled enterprises in both other government positions and the private enterprise sector. Since the Kootenai Tribe of Idaho has no unemployment then one must ask why is the tribe seeking assistance from the State of Idaho tax payer for economic development? In answering this question one can only assume that the Tribe is looking for additional sources of revenue for its Government. This is another inherently unfair part of the Tribes proposal. Since each tribal member is also a US citizen and has all the rights that go along with US citizenship and therefore can take advantage of all programs available to all citizens such as the public school systems, public health systems, public transportation systems, in short every program available to all US citizens then why should US citizens be asked to provide funding to operate Tribal Government when it is only Tribal members who benefit from Tribal Government. Should not the Tribal members who want additional services offered by their Tribal Government be willing to be individually taxed to support these additional services that they desire?

The answers to this question can be somewhat discussed by bringing up Tribal Treaty rights that the Kootenai Tribe of Idaho claim they were provided by negotiations with the United States of America. Through these treaties it is generally accepted and acknowledged that the Kootenai Tribe of Idaho has been granted its sovereignty and as such has the privileges and rights granted to it by the Federal Government and has a similar status in the United States as any other State Government. Therefore, the Tribe has the complete right to self-determination within the confines of federal law. The health and welfare of the Tribe and its members by treaty have also been accepted by the federal Government. As we have heard by the Tribes previous presentation, this trust status has more often been a disaster than a blessing. However, it is clear that through these treaty rights Tribes are the sole responsibility of the Federal Government.

If the welfare of the Kootenai Tribe of Idaho is the responsibility of the Federal Government then why is the State of Idaho involved at all?

To answer this question one needs to look at the current law exempting Idaho Indian Tribes from collecting and remitting Idaho Sales Tax. In the past, the Idaho legislature in its wisdom saw fit to provide a state statute that allowed the recognized Tribes in the State of Idaho to be exempt from collecting and remitting taxes on the then owned tribal properties.

The legislature in their wisdom saw fit to set a deadline on what properties would receive this exemption and any lands placed in trust after this deadline would not be afforded the exemption.

The Kootenai Tribe of Idaho is now approaching the legislature asking for this law to be amended claiming that due to the fact that the Federal Government did not see fit to provide the Kootenai Tribe of Idaho with a large land base that they were left out of being able to take advantage of this law. Nothing could be further from the truth. This facility that we are in today is in fact a recipient of the benefit of this law. Every service you purchase at this facility is in fact taxed by the Kootenai Tribe of Idaho.

This facility has from its very beginning provided a steady stream of tax revenue to this tiny 125 member tribe.

It is with great pride that I make the following observations. Over the past 20 years the Kootenai Tribe of Idaho has made giant strides in bringing itself up by the bootstraps and today in my opinion is per capita the wealthiest Tribe in Idaho. It is of course difficult to determine the true nature of the Tribe's current financial status as the Tribe has not as of yet provided this group with its financial information. But when one realizes that there are only about 125 members receiving benefits from the tribal Government it is not hard to imagine with the tremendous resource that this resort represents as well as all the other grant programs that the tribe is administering, i.e. the Kootenai Tribe of Idaho Fish hatchery program , farm lease program, Indian health program etc. it is not hard to see that the Tribe is not in financial difficulty.

Coupled with no unemployment problem, I would say and say with great pride, that the Kootenai Tribe of Idaho has done and will continue to do quite well.

Which brings me to my last point. The City of Bonners Ferry, in the Spirit of good Government to Government relations, proudly participated in the Tribes progress by supporting the Kootenai Tribes Kootenai River Inn proposal. Even though we knew it would mean the loss of property tax revenue and sales tax revenue we felt that the project could have a dramatic positive impact upon the Tribe as they were beginning to improve their tribal members status sociologically as well as financially.

The City of Bonners Ferry, along with Boundary County, held public hearings on the issue and even though there was some public opposition to the project, the City and County proceeded to write letters of support to all the agencies that were involved and instead of trying to throw up road blocks at every turn we worked along with the Tribe at every opportunity. Up until this most recent tax exempt proposal and more recently the installation of gaming at the Kootenai River Inn, the City of Bonners Ferry has had an outstanding relationship on a Government to Government level with the Kootenai Tribe of Idaho and its members and desires above all else to make sure that this relationship is not destroyed by our opposition to this proposal.

At the public hearing held on the Kootenai River Inn prior to its construction, we were told by existing motel owners that its construction would hurt the existing motel businesses. The tribe countered that their feasibility study showed that this fear was not well founded in that a facility of this type and nature would in fact increase dramatically the number of overnight stays that would occur in Boundary County and should result in an increase for the existing motel and restaurant businesses. Even in the face of our constituents fears we were willing to take a chance for what we saw as an opportunity to improve the status of the Kootenai Tribe and therefore our community as a whole. I believe however that you will hear testimony that the construction and operation of the Inn did in fact hurt some of the existing motel business.

I mentioned the installation of the gaming as causing concern for the City of Bonners Ferry because at the public hearing the Tribe was asked point blank if it intended to operate gaming at the facility to which the answer was a resounding no.

As I have just explained Boundary County and the State of Idaho has already participated in assisting the Kootenai Tribe of Idaho in its efforts to become financially stable. If the legislature in its wisdom still feels that the State of Idaho needs to do more to assist the Tribe, then should not the additional burden to provide this support be born by the State of Idaho and not just the small little community of Bonners Ferry? Perhaps eliminate the 10 mile limitation proposed in the bill. Perhaps the Tribe could become even more self sufficient if it could build a mall or a resort in Coeur d'Alene or purchase a mall in downtown Boise. Perhaps the Tribe could purchase Yoke's Pac n Save in Sandpoint. Aren't Kootenai, Bonner & Boundary Counties all claimed to be aboriginal territories?

Finally, I would ask the legislative members of the committee to answer the following question. How can you be asked to provide financial assistance from the State Treasury without a thorough examination of the applicants current financial status and or need? I, of coarse, do not expect an answer from this rhetorical question as the answer is obvious. You can't.

Again I would like to thank the legislature for allowing my community this opportunity to be involved in these deliberations.

I would like to start my presentation by making it perfectly clear the Boundary County is not a community that is prejudiced or displays racism towards the Kootenai Tribe of Idaho. This was implied by Jerry Jaeger at the last committee meeting in Coeur d'Alene.

I was involved in law enforcement for seven years, five as the Sheriff of this county. I was also County Commissioner for six years, four years as Chairman. I believe that I am in a better position that Jerry Jaeger, who does not live in Boundary County or spend much time in our county, to know whether we have a community that is prejudiced towards the Kootenai Tribe.

However, we do have a community that is very upset that the Kootenai Tribe has been trying to get this grossly unfair legislation passed for the last couple of years. I am speaking of not only business people, but members of our community that live and work here that are not in a retail business.

When you live in a community the size of Boundary County, population 8,332, and you visit a retail store and interact with the owner or manager and their employees, they are not just people providing you with a service, they are our friends and neighbors. We care very much when these people are treated unfairly and much different than their competition.

I believe that any legislation that is passed by the State Legislature should be at the will of the people.

When the first legislative bill surfaced a year ago, we became aware of the bill by accident. The County Auditor, who would receive a copy of all bills proposed by the legislature for her files, brought the bill to the County Commissioners because she thought that we would be interested. We were not aware that the bill was even being talked about.

At this time, I was Chairman of the Board of Boundary County Commissioners, we were then asked to support the bill by the Kootenai Tribe and to not support the bill by local business and a petition with 938 names. I contacted Darrell Kerby; President of the Bonners Ferry City Council and suggested that we call a public meeting and let the citizens of the community have a say, as they should have had before this late date. After hearing the tribal proposal, the very loud and strong message we received from the community through this meeting, the petition, and telephone calls was for us to oppose the legislation and do everything we could to get it defeated.

As the legislators are aware, the community rallied with letters, faxes, and telephone calls to make sure the message was delivered to the legislature that Boundary County was in total opposition to this proposed bill that would exempt the Kootenai Tribe of the five percent sales tax and would also mean that Boundary County would not receive property tax. The people wanted it defeated.

Representative Stoicheff from our district also received the letters, the faxes, and the telephone calls and understood what Boundary County wanted and did not want. He showed his support for our wishes by getting on the House Floor and testifying against the bill. As you know, it was voted down. The bill was defeated because of Representative Stoicheff, local government, the Retail Merchants Association and the taxpayers of Boundary County.

The County Commissioners just completed their 1995 - 1996 Budget Hearing. When they first looked at the budgets, there was a request from the Hospital for $65,000.00, a slight increase over last years budget. The Commissioners were unable to grant the Hospital's request due to a lack of funds, and a levy cap.

If the Kootenai River Inn was paying property tax on this facility and grounds, which according to the County Assessor Steve Fendos would have a value of about $3,000,000.00. The property tax due would be $52,000.00. As you can see, the $52,000.00 would almost fund the county portion of the Hospital budget.

The proposed bill that we received at our last committee meeting in Coeur d'Alene is no different than the past legislation. The five percent sales tax collected would be retained by the Kootenai Tribe, and the one parcel can be of any size.

There can be multiple businesses, in fact, it could be a mall. And all would enjoy the five percent sales tax exemption. This would mean a loss to Boundary County of millions of dollars in property value, thousands of dollars in property taxes, and the loss of federal and state income taxes. It would also mean the closing of many local businesses.

When Boundary County has a loss of sales tax coming back from the State and the loss of property tax from this multi-million dollar venture, someone has to make up the loss of revenue and that would be the already over-taxed taxpayer.

There is no way that this proposed legislation can be fair and equitable to our business community in Boundary County or the taxpayer of Boundary County.

If the legislature thinks something is owed the Kootenai Tribe because of a promise by a past legislature, we believe the Kootenai River Inn is payment in full.

The State of Idaho should pay for this promise, not the taxpayers of Boundary County.

The community and the Kootenai Tribe will not be brought closer together with this legislation. It will only drive a wedge deeper.

I would suggest that the Kootenai Tribe become true neighbors and withdraw this legislation and never let it appear again.

The community would welcome the Kootenai Tribes purchase or constructing of a business in Boundary County and then remit to the State the five percent sales tax, pay their fair share of property tax, pay federal and state income tax, just as all other businesses are required to do.

This would be fair to all concerned, and everyone would be playing on a level playing field with no advantage to anyone.

Thank you.

Chairman Black, Co-chair Thorne, Senator Wetherell, and Representative Pietsch. Committee members of the Kootenai Tribe of Idaho.

Since our last meeting I have spent a considerable amount of time reviewing the proposed legislation and the potential effects of the proposal. I apologize for not having been better prepared for the last meeting, as I only received the agenda the day before our meeting. As I stated in our last meeting I am representing the business community of Boundary County, at the request of Mayor Harold Simms. As the designated representative, I felt it necessary to have several meetings with as many of the people of our business community as possible. At every meeting the resounding statement of "no unfair competition, a level playing field only."

When this most recent proposal was presented to the community, their initial response was, that this is nothing new from the last request. The only difference is that they have committed to one parcel, and to charge the 5% sales tax. What does one parcel mean, 1 acre 100 acres, or 1,000 acres. The amount of acerage has little to do with the the major concern, of having a 5% atvantage over every other business that operates in the same community. By stating that they will charge the same tax as everyone else, also makes no difference, when it comes to competition. Every businessman or woman worth their salt, will try and do everything in their power to assure that the business they are responsible for will succeed. Market share or share of the available wallet becomes the driving force. Providing any atvantage over your competition, dedicated or not, leaves the door wide open for abuse. When you start to add the other atvantages, like zero property taxes, zero federal or state income taxes, does the question arise, why do they need more. The only time the size of the parcel becomes of real concern is when you start to imagine a large parcel of land being developed into a mall with several different retail stores, all having the above mentioned tax atvantages.

Today you will hear many more statements regarding the communities concern over the prospects of having another or possibly several more businesses in Boundary County with competative atvantages vastly superior to most large chain operated businesses. I believe that what you will hear is not racially motivated, but survival driven. I believe that the Kootenai Tribe should seriously consider pulling this request. If you wish to build a retail development, on the same competative playing field as other businesses in Boundary County, we would wish you all the best with your persuits.

In our previous meeting the tribal representatives stated that one of their goals was to be self sufficient. By seeking this waiver they are defeating their expressed goal. I quote from Webster's dictionary "Reliant - someone or something relied on. Dependence - the state of relying on or needing someone or something for aid, support, or the like. Welfare - financial or other assistance to an individual or family from a city, state, or national government." Now let's look at the word self-sufficient. "Self-sufficient - able to supply one's own or it's own needs without external assistance, having extreme confidence in one's own resources or powers, etc." Based upon the preceeding definitions this request more closely fits dependence or welfare.

Today our federal and state governments are struggling with budgetory problems. Last week Governor Batt advised all departments to reduce by 2%. The federal government is attempting to reduce their budget and have indicated that most areas will seek reductions, why? Economy? Probably, but more the point is the people are demanding less taxes in every part of government, city, county, state, and federal. They want to reduce the burden on taxes. And yet today we are gathered here to discuss reducing the amount the state receives annually both in state income and sales taxes. We are being asked to increase the burden in Boundary County in property taxes further by having another piece of property removed from the tax rolls and placed into tribal trust. In addition our property taxes would increase further with the likelihood of other businesses being run asunder due to this proposal.

Last year Boundary County had a economic study done by the University of Idaho to determine the cause and effect of the various business activities currently in Boundary County. Using this template I talked with Neil Meyer at the University of Idaho and asked him what the effect would be if a new grocery store came in. He stated that Boundary County could not support three grocery stores. One would close unless there was an increase based upon his template of 1,854 households in Boundary County. His best case scenario showed an increase in jobs by only forty-seven after the 1,854 new households came to Boundary County. His worst case scenario showed a loss of fifty-five jobs, a reduction of $1,112,200 in personal income, $795,500 in employee compensation such as medical benefits, etc. When you consider union wages and minimum wages added to this it totals out to a buying power loss in Boundary County of $1,898,500 when you include the ripple effect. The middle scenario that he said would probably be closer to the point was a total buying power loss in Boundary County of $238,300 with a loss of seventeen jobs.

Another comment that was made at our first meeting was that the Kootenai Tribe is only asking to receive the same benefit three other tribes are currently enjoying. The speaker was sure that all the business people of Pocatello, Lewiston and Coeur d'Alene were not excited about the five percent exemption, they did not express this much concern. In response I would submit the following: the Shobane, Nez Perce and Coeur d'Alene business activities are in no way even close proximity to the business communities of Pocatello, Lewiston and Coeur d'Alene. Of the four tribes the Kootenai Tribe's Kootenai River Inn sits smack in the middle of Bonners Ferry. The effect for which you will hear shortly. I wonder what the reaction of the business community would say in Boise if the Shobane or Nez Perce or the Kootenai's wanted one parcel and the extension of the five percent sales tax exemption there.

Included in the briefing book, section 1, is a letter from Governor Phil Batt. I am going to read the letter. (see attached)

Jobs, is that what this proposal is all about? That's what I read what Phil Batt has said. That he has directed the Department of Commerce to pay special attention to creating jobs. Is the creation of jobs for the Kootenai Tribe a primary importance? First of all they have stated that their need is to offset the probable loss of federal funds and gaming receipts by taxing the business and using said taxes to run their tribal government. Based upon their statements there are approximately 117 tribal members of which 70 live in Boundary County. What percentage of that 70 are working age I have no idea. But lets look at some numbers provided by the tribe in the briefing book and recorded comments. The Kootenai River Inn employs 70 people of which twelve are tribal members. Currently in their statements they have 29 tribal members employed by the tribal government and I would assume a couple more working at the Sturgeon Fish Hatchery. Forty-two to forty-four tribal members are currently employed. Are there opportunities for employment for the remaining twenty-six assuming they are of age or not farming on their own lands? Definitely, jobs are available at the inn, through the local business community. This is not about providing jobs. Thank you

Representative Pietsch asked who owns the title for the land that the Kootenai River Inn is situated on? Would the new land purchase be the same?

Senator Thorne replied that it was his understanding that it was trust land and the federal government provides that opportunity to the Indian tribes. They can purchase land off of the reservation, it becomes trust land and has all the privileges of a tribal reservation itself. The new land purchase would also be trust land and part of the reservation.

Darrell Kerby, stated the land that the Kootenai River Inn is situated on is under the administration of the Kootenai Tribe of Idaho. It is their government that has the sovereign rights here.

Representative Pietsch stated she was told that the land had been privately owned by a family prior to the tribe purchasing it. There is a conflict in her mind. Did the legislature approve the purchase of this land for purposes of the inn and now this is actually a second request for purchase of land?

Mr. Kerby said the Idaho legislature was not involved in the tribe's ability to acquire property. The tribe petitions the United States through the Bureau of Indian Affairs to take the land in trust on behalf of the Kootenai Tribe of Idaho.

We then heard testimony about the backgrounds of Boundary County and Bonners Ferry.

Peter B. Wilson:

In the written report submitted to you by the Kootenai Tribe of Idaho, you were provided with a general history of the Indian race at this place. Therefore, a repeat of that is not necessary. We are proud of the Indian heritage of this place. We have learned from them and they have gained from us.

While it is true that many Indians have been killed by whites, my family tree shows that some of my family were killed by Indians. I do not expect an apology from them for the acts of their ancestors. I do not apologize for those acts of my ancestors. Let the dead bury the dead. Hopefully, we have all learned from the mistakes of our past and can move on.

The first known white to come to this area was David Thompson. He came exploring for the Hudson Bay Company.

David Thompson arrived here in 1803. This was one year before Lewis and Clark arrived in what is now known as the sovereign State of Idaho. He traveled around and through the area until 1811.

The next matter of moment in the area was the discovery of gold in Canada, just north of here, in 1863. Like the gold rush in southwestern Idaho, this discovery led to many starry-eyed prospectors passing through. They developed a trail that became known as the Wildhorse Trail. I believe it generally followed a route used by the Indians. The highway you used to get here is along that trail. Part of that trail was through what is now the No. 9 fairway of our local golf course.

The Kootenai River was a stumbling block for the prospectors. The Kootenai River was too deep to ford. A ferry was necessary. In your notebook is a pamphlet that describes the development of crossings of the Kootenai River at what is now Bonners Ferry. Paul Flinn prepared that pamphlet from his records.

The first effort was by ferry. Kootenai Chief Abraham granted the right to the ferry crossing from the Indian claim.

The second Session of the Idaho Territorial Legislature gave a franchise for the ferry to E.L. Bonner and his partners. This was on December 22, 1864, the same year and about eight months after the civil war ended, a copy of that legislation is in your notebook. You might find it interesting to note how expensive it was!

The ferry landing naturally caused the area to develop. Mining was a major part of the economy then.

On February 1, 1892, two years after statehood, the Kootenai County Commissioners established the town of Eaton. This included the area where you are now sitting, and continued eastward with the south bank of the Kootenai River as its north line. On October 16, 1893, the County Commissioners established the village of Bonnerport. That village adjoined Eaton and generally included what is now downtown Bonners Ferry.

On April 1, 1899, by joint ordinance, the two towns consolidated and took the name Bonners Ferry, as an acknowledgment to the course of development here. I believe there were about 1200 people in the town at that time.

You will note at that time we were a part of Kootenai County; with Rathdrum as the County seat. In that period, Kootenai County encompassed all of what is now Boundary, Bonner and Kootenai County. Shortly after that time the northern half of Kootenai County spun-off and became Bonner County. Sandpoint was the county seat. In 1915, Boundary County was created, and Bonners Ferry became the county seat.

As an indication of how much this area influenced North Idaho at the time, you will note that we have given our name to three counties.

During those early years, travel was by horseback, stage and steamboat. Some of those river boats were 65 feet in length.

In 1892, the Great Northern Railway completed its main line through our county. This railroad developed into what is now the Burlington Northern Railroad. I understand that 27 trains travel through Bonners Ferry each day.

Shortly thereafter, the Spokane International Railroad was built to connect Spokane with the Canadian Pacific Railroad at Eastport. This railroad is now owned by the Union Pacific. Thus, the two largest railroads in the United States travel through our county.

For over 130 years, the people of this county and of the State of Idaho have developed a cultural and economic life style in this county.

Logging entered the picture as a heavy contributor to our economy in the early 1900's. It remained a mainstay until the 1920's. At that time, a combination of factors temporarily limited it. First, logging had gone as far as logging railroads could go. Second, the Great Depression arrived.

Agriculture gradually developed from the early 1900's, and hit a great stride from around 1916. It continues to be a major contributor to our way of life. At one time fruit trees were a major crop, and this still remains true in Creston, B.C., area, just 30 miles north of us. Our principal crops now are various grains.

Loggers returned in the mid-30's. Trucks had developed, so logging railroads were not necessary. In has grown so that it is now the major economic force for us.

As you can imagine, by living in this rather outlying area, the people developed a sense of unity and rather fierce independence. Of necessity, they had to create their own livelihood, and do it from their own individual efforts, just as their neighbors, the Indians had done.

On December 7, 1941, the infamous attack on Pearl Harbor occurred. At that time, 60 young men from our county were on the high seas. For six months we didn't know what had happened to those boys of Battery B. We later learned they had arrived safely in Australia.

However, this shock and concern created an especially great patriotism in our county. And we equated that pride in country with our imbedded sense of independence.

Everyone in the county gave service. Our Indian friends, like us, served in the military service with valor.

After the war the area continued to develop, and the relationship with the Tribe intertwined more and more.

As an aside, in the 60's, the Aitken family, local Kootenais and my family lived in the same neighborhood, two houses apart. Their children and our children played together. One day my mother, bless her soul, who was visiting, came into the house laughing. The kids were playing cowboys and Indians, and were debating over whose turn it was to be Indians, and whose turn it was to be the cowboys.

I'll leave it to the psychologists and sociologists to explain how we develop a distinction in race as we get older.

As was noted in their written report to you, in 1974, the Kootenai Tribe felt it was necessary to declare war on the United States. They reported to you their fear and concern.

That fear and concern worked both ways. Tension was high.

The local community was gravely concerned. A meeting of citizens was held in Bonners Ferry City Hall to determine how we should proceed. The emphasis was on remaining calm and negotiating with the Tribe so that no one got hurt. One of the key decisions was to not talk to outside media people, but to direct them to one site, the office of the Bonners Ferry Herald, for all information. This worked quite well, and kept us from national notoriety, and the possible resultant frenzy that could occur.

At the same time, numerous meetings were held with tribal officials.

While this did temper matters, there still was concern on both sides. They have mentioned to you some of theirs. I'll mention some of ours.

The tribal office then was in the same building where my title agency office was. In fact, their office was right across the street from the Sheriff's Office in what is now the office of KBFI. Being fearful of what uncontrolled firebrands might do, each night I loaded the twelve 10 to 15 pound tract books of the title company into my car and took them home. At the same time, the high school was having special drills to get the children out of school and into protected areas.

Fortunately, no catastrophe occurred.

But, even within this crisis there was some levity. At that time the Sheriff had a program in which he deputized some trained teenagers to be reserve officers. One of those teenagers was Raymond Abraham - now the Kootenai Chief. The other teenager was my son, Tim - who presently is flying an F-18 off the Theodore Roosevelt in the Adriatic and over Bosnia.

Anyway, according to Tim, the two of them had this little game they played when they changed shift. Tim would come in the back door, and stomp down the hall shouting "I smell Indian." Raymond would jump up and yell "I smell white man." They would then make a fake charge at each other. Well, unbeknownst to Tim, this one day, six or seven of the outside media was in the office interviewing Raymond. Tim made his usual noisy appearance, Raymond jumped up as usual, and the news media scattered and dove for cover!

As indicated above, the Kootenai Tribe and the rest of the local citizenry played the war low-key. It was a serious matter with the Tribe and the rest of us respected that. Their symbolic 10 cent toll road charge was honored.

But both groups did well in keeping the media from sensationalizing it. I previously mentioned that the Sheriff's Office and the Tribal Office were right across the street from each other. One day as I walked to work down the by-pass, I looked down at that street between the two offices. About twenty people were milling around there. I thought, "Oh, no, things have gotten out of hand." After I got downtown, I peered around the corner of the building to see just what was going on. All twenty of the people were outside media with their cameras. No one would talk with them so they were just talking to each other.

As a result of the "War" the Tribe received substantial federal funding.

We bring our history up to date with the arrival of the Kootenai River Inn.

Before the Highway By-Pass was built, the area where you are sitting was an island. It was in a flood plain, just like the rest of the downtown business district. It had not been diked like the rest of the town. It was not a swamp.

When Libby Dam was built, the maximum height of the Kootenai River was under control. By adding several feet to the island elevation it became commercial property. The Tribe acquired the property for entrepreneurial use.

Originally Bob Templin was working on the project. He had the original motel in Coeur d'Alene where the Coeur d'Alene resort now sits.

For some reason, Templin dropped out of the picture here, and the Hagedone Corporation took over the management contract.

Both the City of Bonners Ferry and Boundary County supported this project. They were assured by the Tribe that there would be no gambling.

Hopefully, this brief history will aid you in getting some perspective of our community.

You have received some unflattering comments about us from people who do not live here, and who have their own agenda.

We are proud of how the Kootenais have improved their lifestyle. We are equally proud of the efforts the rest of the community has made in order to help them.

Dave Wattenbarger next spoke about the current status of Boundary County and Bonners Ferry. In 1994 the University of Idaho sent out survey forms to seven or eight hundred people and about five hundred people returned the survey.

Mr. Wattenbarger stated federal lands comprise the majority of Boundary County and private land is a small portion. The major source of income in Boundary County is from timber. The timber cut has been reduced considerably over the last number of years but over the last few years there has been a considerable increase in private timber harvested. Since most land is either federal or state owned the major portion of private land has been harvested so that availability will not continue. Agriculture is the second largest contributor to the county. Between $25,000,000 and $30,000,000 was contributed to the economy of Boundary County from agriculture.

Mr. Wattenbarger next went through the questionnaire. Over ninety percent of the people were satisfied with the community they live in or are nearest to. Eighty percent feel that the economic situation over the next five years will get worse or stay the same and a higher percentage feel the economic situation in the state of Idaho will get worse or stay the same. Concerning questions about land use, forestry and agriculture: using rivers to provide electricity the majority strongly agree, agree or were neutral; most respondents were neutral concerning having enough irrigated farm land in Idaho because they do not have a lot of irrigated land in north Idaho; seventy-five to eighty percent feel there are enough legally designated wild and scenic rivers in Idaho; a majority disagree that there is enough industrial development in Idaho; seventy-three percent agree that the best use of mountainous forested land in Idaho is to provide timber products and jobs for Idahoans; eighty-two percent agree there are enough areas legally designated as wilderness; almost ninety percent agree there are enough roadless areas in Idaho; and seventy percent agree enough land has been set aside for recreation. From this you can get an idea how this community feels about the area they are living in.

Concerning possible goals that have been suggested for improving the overall quality of life in Boundary County: eighty-five to ninety percent gave maintaining the existing economic base a high or medium high priority; sixty-five to seventy percent to encourage tourism; to encourage small businesses a very high percentage; to attract new industry or businesses into the county was a very high percentage; to encourage natural resource products manufacturing industries, to protect the natural environment from damaging activities and to establish additional private funding sources for new enterprises was a very high priority; to increase local taxes to develop new industrial sites was a very low priority; to plan use of land in the towns and county was a high priority; and to encourage cooperation among communities in the county and to encourage and assist local businesses to expand was a very high priority. Of the goals listed twenty percent felt that protecting their way of life was the most important, sixteen percent felt attracting new industry was the most important and ten percent felt maintaining the existing base was the most important. Sixty percent felt the future economic development of Boundary County was very or somewhat important.

Concerning issues facing communities in this area: over ninety percent felt the availability of good jobs for young people was a serious or moderate concern; accessibility of outdoor recreation was not a high concern; seventy percent felt educational opportunities for adults was a serious or moderate concern; individual and family income levels, availability of money needed to develop economically and access to public decision-makers (city, county, state, federal) was a serious concern; and important community decisions made outside the community was a serious concern. The most serious concern that the community felt they must deal with in the next 5 years were: twenty-four percent, jobs for young people, fourteen percent, community decisions made outside the community, twelve percent, infrastructure, and eleven percent, income levels.

Most of the people are full-time residents of Boundary County. Twenty-two percent of the residents are self-employed. Thirty-one percent are employed full-time. Nine percent are employed part-time. Thirty-two percent are retired. Concerning what size community you spent most of your life up to age 18: thirty-five percent, rural farm; six percent, rural nonfarm; and fifteen percent had moved from a city of up to 100,000 population. Concerning the education of the community: thirty percent are high school graduates; twenty-nine percent had some college or vocational training; twenty percent were college graduates; and seven percent had advanced degrees. Concerning in what industry is your primary occupation: seven percent in farming/ranching; nine percent in logging/log hauling; eleven percent in education and professional services; and nineteen percent in others. Concerning total household income: eleven percent were less than $10,000; thirteen percent were $10,000 to $14,999; thirteen percent were $15,000 to $19,999; twenty-three percent were $20,000 to $29,999; eighteen percent were $30,000 to $39,999; eight percent were $40,000 to $49,999; ten percent were $50,000 to $74,999; and five percent were $75,000 or more.

Merle Dinning, a county commissioner in Boundary County, who sees the tribe as an equal to everybody else in Boundary County gave testimony concerning the future goals and objectives for Boundary County.

9/8/95

Boundary county is typical of rural communities in Idaho as well as other rural areas of our country. Our base incomes come from the extractive industries and our community stability is based on our ability to work together and support each other. Though our landscape may different.

Boundary county over the years has not actively recruited industry or large business to our community because so many of these businesses ask for some kind of tax break and we feel that the citizens of Boundary County can not afford to give this kind of support.

We have seen other communities such as Post Falls, who have given tax incentives to bring large businesses into their community, develop cancerous type growing pains. One of these growing pains is the lack of tax revenue that local governments need to supply the additional roads, water systems, sewer systems and road improvements that are required by these business.

The school systems are the biggest losers when there is a loss of tax revenue. Even though the Idaho State Legislature and Governor Batt are trying to transfer more of the schools financial burden from property tax to state funds to relieve the tax burden from property owners, the largest portion of school funding still comes from property tax.

Any reduction in the tax base of a community hurts our children the most, the future leaders of the state of Idaho.

Boundary County and Bonners Ferry are a slow growing community that because of our diverse incomes we are able to weather the ups and downs of the economy fairly well. The price of wheat may drop but the price of timber will be up. Or when a sawmill has a temporary closure because some environmental issue caused a reduction in the volume of saw logs, there are enough citizens with other incomes to keep the local merchants from going bankrupt.

If someone or some group of people were to receive special incentives, such as tax breaks Boundary County would no longer be an equal opportunity community.

Boundary County will continue to support new businesses in our community that, tax wise, compete on an equal basis with other businesses in Boundary County and Bonners Ferry.

The latest proposal brought to the legislature by the Kootenai Tribe of Idaho did not allow for equal opportunities. An example is if the tribe were to build a grocery store. The land and store would be held in trust by the BIA and would be exempt from property taxes. This would be a savings in the cost of operation. This savings could then be used to reduce the cost of groceries. With lower prices being the only difference between the new store and the grocery stores we presently have. The quality of the product and service being equal, then the wise customers who is trying to make their dollar reach from pay-day to pay-day would now go to the new store where the food dollar will buy more food.

This will pull the customers from the other grocery stores and cause one of the present stores to go out of business because there are not enough people in Boundary County to support three large grocery stores!

The number of people working would be about the same so personal income should not change. The loss of income for the schools and local government will be large. This lose will not only come from the tax exemption it also will include the loss in taxable value of the closed store.

Another example is if the tribe were to include businesses such as a hardware store, a variety store, a one hour photo processing store, a clothing store, a book store, a beauty shop, a barber shop, a sporting goods store, a drug store and an auto parts store along with the grocery store, in other words a mall. These stores presently operate in Bonners Ferry.

What affect will the closing of these stores have on the revenues of the schools and local government?

Add the exemption of the 5% sales tax to these examples and you now have created a monopoly that has the financial power to own every piece of private property and every business in Boundary County.

How many people will go bankrupt because of this unequal competition?

Competition is good for business. When government causes unequal competition then the residents and the businesses of the community get hurt.

Boundary County will continue to support the continued slow growth of clean, safe business and light industery that do not need tax incentives for survival and that fit the rural atmosphere that makes Boundary County what it is.

Next we heard testimony concerning the community review of the proposed tribe legislation.

1) 75% of Boundary County land is non-taxable (Federal & State owned).

2) Only 207,602 acres (25%) are privately owned and pay taxes.

3) County government budget has gone from $3.3 million in 1990 to $6.3 million this year - an 89% increase.

4) The Federal fund diverting 25% of Forest Receipts to this County is soon going to drop drastically. Uncut volume under Federal sales contract currently is about 50 mmbf.

5) Last week, a County-wide school bond election gained only 44% favorable vote.

6) Well over 20% of our total population is currently receiving welfare - almost 2,000 people (1995).

Boundary County taxpayers simply cannot afford creating a larger tax burden. This proposed legislation would shift the property taxes to fewer acres and therefore to fewer people. By granting a sales-tax exemption, the sales tax monies returned to the County would diminish.

It would seem that the advantage (taxes, liquor, gambling) given to the Kootenai Inn would be sufficient incentive to the tribe. If that advantage were lost, then that may be the better time to explore new ground.

If that time arrives, lets look for a break that doesn't hurt so many others, but may actually help our community.

SUGGESTED ALTERNATIVES:

1) Remanufacturing of specialized lumber products windows, doors, toys, etc.

2) Set aside timber sales from National Forest Lands. Volumes to be in addition to current allowable sale quantities, (ASQ's).

Mr. Graham is also a retired forest service ranger. He has been in this community for twenty-five years. If the tribe deserves a break taxes are not a fair area in which to give that break. He is basing that on his experience working with county budgets. County government has increased eighty-nine percent over the last five years while market value in Boundary County has gone up forty percent. That eighty-nine percent is mostly through mandated programs not because of an increase in employment. The reason the forest receipts are going to drop is the uncut volume under federal sales contract is down to about fifty million board feet. The forest service tries to keep that amount up to 2 1/2 times the mill capacity of the community. For this county it has been around one hundred fifty board feet. That is the amount of volume that is under federal contract that is not yet harvested. It is the bank account for the mills. In the last four or five years the forest service has been selling considerably less. The figure has gone from fifty million down to less then twenty million. On half of this ranger district there has been over ninety million board feet growing each year and half of this ranger district is supposed to be available for timber harvest. They are growing over ninety million and selling less then twenty million board feet.

Chairman Black

Co-Chairman Thorne

Senator Wetherell

Representative Pietsch

Representatives of the Kootenai Tribe

Members of the Committee

Presented by: Harold Sims

Mayor of Bonners Ferry

My name is Harold Sims, I am the Mayor of Bonners Ferry

City officials of Bonners Ferry are appropriately sensitive to All existing or proposed business so they have the environment and the ability to succeed. This assumes the business is began on a `level playing field,' that is, that all are subject to the same laws, rules, regulations and taxes.

At the very beginning of the original Kootenai River Inn proposal the tribe, led by Raymond A. Abraham, approached the city for it's approval and endorsement. The project was painted as ECONOMIC development for The Tribe as well as an opportunity to train Tribal members for employment. Promises were given The City that gambling would not be engaged in or offered.

Based on theses premises, economic development for The Tribe, opportunity to train Tribal members for work, and assurances that gambling would not be installed The City did give approval and endorse the proposal.

We do not now see growing numbers of Kootenai Tribal members employed at the Inn, indeed we rarely see a Kootenai Indian working there.

The main focus of the Kootenai River Inn now appears to be gambling and the Inn has been enlarged several times to accommodate MORE GAMBLING.

The proposal we are now commenting on would dig enormous and perhaps insurmountable holes in that so called `level playing field'! Whether business proposal is located within The City limits or a radius beyond The City limits, the impact on The City and businesses within, is very important and crucial to consider. The City of Bonners Ferry would be impacted/affected very Specifically to its detriment if this proposal is allowed.

All Businesses buy from the City 1) Electric Power and 2) Water; and Sewer Services. but the Business entities also receive other certain services because the city taxes the residents to enable the provision of those services. If a business would be exempted from paying the taxes that provide those services, those service would have to be paid for by those who already pay their fairshare of tax in order to receive the services.

Service the City provides from tax revenue are often "taken for granted" or dismissed from mind as "not that important"; however They are extremely important and they establish the CLIMATE and ENVIRONMENT that is Bonners Ferry.

Consider the Services that are in place beacuse of the taxes paid by residents.

-Fire Protection, including State Fire codes enforced by the local fire chief.

-Police Protection

-Street building, maintainance-regular cleaning street light installation & maintenances

-Swimming pool, parks and recreation

-City planning & zoning development & enforcement

-City Parking lot

There are also indirect impacts on the City of Bonners Ferry. Additionally & Importantly the loss of the 5% sales tax monies for the state also has negative impact on the city budget. The City shares in the State's sales tax distribution formula, as set by the State Legislature. About 10% of our General Fund budget comes from the Sales tax revenue we receive from the State. If the State shared amount is decreased, we would have to increase our local tax levy to keep our income the same.

I urge you not to introduce or adopt this bill!

Cochair Thorne asked Mr. Sims if the tribe pays any fees in lieu of property taxes for these services which are provided to them by the city?

Mr. Sims replied that the city has an agreement with the tribe to provide police and fire protection.

Skip Smyser commented that the tribe is not required to make any payment for those services but have voluntarily entered into agreements with the city to pay for those services.

Mr. Sims stated it was his understanding that the city did not have to provide those services because the Kootenai River Inn is not within the city limits.

Mr. Kerby stated it is true that the Kootenai Tribe pays a fee for the services of police and fire and when the Kootenai River Inn was being built their cash flow was small, so voluntarily the city of Bonners Ferry agreed to hold those fees for services down to a minimum. Which is an example of cooperation between the city and the tribe and that cooperation will continue in the future.

Mr. Smyser stated that with the cooperation that has existed there is no indication that it would not continue to exist with any future development that the tribe would go forward with.

Cochair Thorne asked Mr. Sims what the amount was that the tribe pays?

Mr. Sims replied the amount for the last year was $17,500.

Next to speak was Robert T. Pluid, the Mayor of Moyie Springs, which falls into the ten mile radius:

I feel allowing Indian tribes to be exempted from paying sales tax as stated in the proposed bill is a bad idea.

First, the conditions stated in the bill are too vague. The parcel of land could be any size under 500 acres. Even though it limits the exemption to one parcel it does not limit the exemption to one business.

The bill would create an unfair advantage for other businesses in the county, which have already been hit hard economically by the effects of roadless areas and the Endangered Species Act.

Moyie Springs is attracting new business interests at present and I feel this bill would be detrimental to its future growth and tax base.

Next was John Schwartz, superintendent of the Boundary County school district:

September 11, 1995

Any proposal that may have economic impact on the economy of Boundary County has to be viewed with concern by the Boundary County School District. Our school district relies on property tax and the ability of our patrons to pay other forms of state taxes to generate funding for our schools. Therefore, when property is taken off tax rolls and tax exemptions are offered, we have concern for school funding.

When faced with operational, as well as facility needs and with the recent defeat of a Facility Bond Levy as well as an announced 2% cutback in State support for the current year, we have concern for additional impacts on our local economy. Also, for the past five (5) years, our district has needed a Supplemental Levy in order to meet the maintenance and operational needs of our schools, and it appears this condition will be prevalent in the future. Thus, another concern for us regarding the economy in Boundary County.

Sincerely,

John Schwartz, Superintendent

Boundary County School District No. 101

P.O. Box 899

Bonners Ferry, ID 83805

Cochair Black asked Mr. Schwartz what kind of funding the school district gets for the education of the Indian population?

Mr. Schwartz replied that the Kootenai Tribe operates the funding. The tribe makes the application and the funds, roughly $3,000, go directly to them to be used for Indian education.

Senator Wetherell asked what the breakdown of school age children is?

Velma Bahe replied there are thirty-two students in Boundary County. There are thirty-six under the age of eighteen and ten in preschool.

On behalf of the greater Bonners Ferry chamber of commerce, I would like to welcome each of you to our community and I would ask that you approach the task set before you with an open mind and with consideration not only to the Kootenai Tribe of Idaho, but to everyone whose future rests on the decisions before you.

The primary purpose of any chamber of commerce is to foster an economic climate conducive to trade and economic opportunity for the benefit of everyone within the community. In light of this responsibility, this chamber stands opposed to the proposal placed before the legislature last year and the year before to grant the Kootenai Tribe of Idaho an exemption on sales taxes for retail business enterprises.

Our opposition is not racially motivated, but rather is based upon principals that have made the United States economy one of the world's strongest. Our system of free enterprise gains its strength and vigor through the crucible of competition ... That competition built upon a level playing field with each competitor bound by the same rules and obligations as all others ... To grant any business entity legislative relief from the tax burdens faced by all others can only come at the expense of all other business entities. The only outcome can be the gradual decimation of the community as a whole.

This chamber welcomes and endorses the Kootenai Tribe of Idaho's efforts toward self-sufficiency and economic well being and we look forward to participating in that development ... We cannot, however, abide such development if it comes at the expense of those who share this community with them and who have existed and adapted to the rigid and unforgiving local economic conditions to build for themselves a future.

The Kootenai Tribe of Idaho has made great strides toward economic self sufficiency on its own merits and has proven that it can compete in business on a level playing field and excel. It is this chamber's conviction that the Kootenai Tribe can attain its economic goals without gaining advantage over other community businesses and that, in so doing, their efforts will further strengthen and enhance our community, both economically and culturally, to the benefit of all.

Tim Brennan, president of the Idaho Retailers Association, stated the retail industry considers this a statewide issue. The surrounding towns are very concerned about this legislation. The fact that it says it must be a tribe with less then five hundred acres and a ten mile radius simply opens the door for the same arguments that are being used to justify this legislation, the identical arguments that are being used when the tribe says "they have stores in Blackfoot or Fort Hall, therefore we are entitled to a store, therefore we need a ten mile radius", the other tribes will use that same basic principal in an argument if this is adopted to say "they are entitled to a ten mile radius because it was given to the Kootenai Tribe." They have to look at what this might mean in the future.

It is important to recognize what this means to public schools. The tax commission is estimating that they are losing $13,000,000 a year from cigarette sales on Indian reservations. Half of that would go to schools. The rest would go to support other state government activities. Expanding this exemption to the entire retail industry, fifteen to twenty years from now the headlines could read "Now ten percent of the revenue from sales tax has been lost because of this sales tax exemption which could amount to $100,000,000." Another headline could say "Another Safeway store closes." That is the type of thing that could happen if you give one segment of the economy a significant advantage in the marketplace over the rest of the community.

Mr. Brennan thanked the business community for rising up and fighting for their rights and he encourages them to continue to do so. The retailers throughout the rest of the state will continue to oppose this legislation, they opposed it last year, and will continue to fight it statewide.

Mr. Smyser stated it was his understanding that the retailers prime concerns were to keep from having the Kootenai Tribe being able to leap frog through the business community and buy up all of the lands in the area and thus apply the exemption to them. The language was then inserted to limit the purchase to one parcel. The second area that was a concern was that they charge a sales tax equivalent also and that was specifically put into the law. In a conversation with Mr. Brennan he understood that if this was done in such a way that the funds were not allowed to be put back into the business and there was an audit trail to show that, that the retailers would view this in a different light. He then asked Mr. Brennan if that was a fair statement of what he has advised him in the past?

Mr. Brennan replied that after visiting with the community and listening to the testimony he is going to have to take this issue to his board of directors. He thinks they are getting into an area that is wrong. This kind of an approach of giving the tribe these tax advantages. He will have to do a lot of studying, thinking and continued communication with the community and the committee in discussing this issue. They have a communication going that is very important. He cannot answer the position of the retailers association. One definite requirement for the legislation is that there was a "thorough audit trail."

The Retailers Association is opposed to granting the Kootenai Tribe a tax exemption for their grocery and retail store plans.

64 local business owners and managers were polled in August, 1995, and each was strongly opposed to the Tribe's proposal

If tax exemption is granted, we estimate ten or more local businesses could close

Surviving businesses negatively effected

No new business would want to start in Bonners Ferry

Union scale jobs would be replaced with minimum wage jobs

Average net profit in grocery business approximately one percent

Tax exemption would result in five times the average store profit

Tax exemption can result in predatory pricing

Audits and safeguards will not eliminate ability to reinvest five percent back into business

Unhealthy situations of one-store towns

Tragic results of unfair competition

Example of one business that could close due to unfair competition:

Has served Bonners Ferry for 63 years

Employees represent over 40 families - more than tribe families in area

Collected over $300,000 in sales tax for State; paid over $125,000 in property taxes; paid over $1,000 in miscellaneous license fees; employees paid over $120,000 in state income taxes

Senior employees who would have difficult time finding new jobs other than minimum wage entry leval

Group of community-minded people helped raise over $12,000 last year for local youth groups and charity

Donated approximately $1,500 per year to local charities

SUMMARY: Tragic what tax exemption plan would do to the businesses and the citizens of Bonners Ferry and Boundary County.

For many years the business community has grappled with economic change, expansion, and diversification in Boundary County. Several years ago the State of Idaho through the Department of Commerce, implemented a program to help communities develop plans for their respective areas. The program is called the Gem Community, of which Boundary County is a member. There are several steps involved in attaining gem status. One step involves polling the community as to their wishes, and desires for the community they live in. From this survey, several volenteers from the community attempt to forge an economic plan that will fit the direction of the people.

Throughout this process a member of the Department of Commerce is available to help and or give information on the many steps necessary to develop a viable plan. One comment the Commerce Department made over and over, was that the plan was our plan. If we didn't want to expand or diversify, that was our choise,based upon the desires of the community. They assured the committee members that the State of Idaho did not require us to produce a plan that adheared to a state vision. If the community wanted to remain the same as it has been for the past 150 years that was just fine. Everyone agreed that the only way to stay the same or change was to have some plan of direction, in order to achieve the desired goals.

The survey showed that the people liked their way of life in Boundary County, and really didn't want to see much in the way of major economic change. There was some indication that there was a need for some lifestyle compatable economic enhancements, that would take advantage of our existing way of life. Beyond a one and five year plan, we developed a quick response group, made up of 5 members. One member each from the city, and county, and 3 from the Gem Committee. The purpose of the group was to be available and prepared to help and answer questions from any new or existing business inquirey. In order to be fully prepared to answer most questions, we asked several other county and state officials, involved in economic development, to provide us with their insite and experience with handling business development inquiries. One area arose several times regarding incentives to induce a prospect to move to our area, or for an existing business to expand here instead of moving to another area. After much discussion we as a group determined that Boundary County, and Bonners Ferry were not in positions to waive or provide special financial considerations (tax waivers, reduced fee services,ect). It was the committees opinion that if a business needed these concessions, that the businesses financial viablity should be questioned. As an example; not too long ago a community in New Mexico opted to provide several economic inducements to bring a very large business to their community. Based upon reports from 60 Minutes this community is faced with emergency type problems with schools, police, fire, and health protection. Closer to home, Kootenai County and Post Falls have been providing incentives to new businesses, and they are now faced with major overcrowding in their schools, and esclating government costs due to the demands of the new people moving to that area. Based upon this information, the committee felt that any type of incentive would be counter productive, costly, and discrminitory to existing businesses not afforded the same benifit.

It is with grave concern that the State of Idaho or any other government enity would attempt to provide monitary incentives to anyone, when the people of the affected area are expressly aganst incentives of this type. Further I find it very upsetting that when this request was made, and opposed, the opposition was declaired although veiled, rasist. Through inuendo and not so curbed comments, many members of this community have been declaired prejudiced. Is it prejudice to stand up for your economic survival, when threatened. Is it prejudice to ask why one group receives special treatment when the same treatment is not available to all who work and pay towards the special considerations. For those who doubt that any threat exists let's look at some facts.

Based upon Robert Morris and Associates, statement studies, businesses with a 5% advantage over the competition invariably will run the competition under. The tribes past proposal was for a grocery store. RMA studues show that a grocery store with 5 to 10 million in annual sales have a net profit before federal taxes of 1.3% imagine if you had a 5% head start. Add to this the fact that the property will be exempt property taxes, state income taxes, and federal income taxes. Any business that has the ability to produce income and not be responsible for paying for the taxes required of all others is a serious threat. I have no desire to deny the Kootenai Tribe of Idaho any right to self sufficiency, or a right to a better life. I do however strongly object to the Kootenai Tribe attempting to do this at my eventual expense.

Self sufficiency to me means that you or your group are reliant upon yourself, and your endeavors. To require others not participating or benifiting directly in the endeavor, to provide some level of economic support, is dependency.

Tony Villelli, Kootenai Valley Motel, who spoke in place of his father, stated the tribe has had a previous unfair tax advantage.

TO: Skip O'Fallon, Ron Smith, Darrell Kerby

FROM: Dick Villelli

REF: Kootenai Tribe Sales TAx

Gentlemen:

Tonight you requested specific information regarding the above referenced topic. I would like to provide the following information and observations.

Our partnership, Idaho Ltd., as owners of the Kootenai Valley Motel, has perhaps been impacted more severely than any other commercial operation in the state of Idaho, and most certainly than any in north Idaho.

Case in point: In 1985 our net income was $44,000. In 1986 our net income was $41,000. Down because of our lost income in December of that year. The first month of operation of the Kootenai River Inn. In 1987 our net income was $4,400. That is a 90% reduction. Even though tourism was up our gross and net incomes were down as a direct result of the opening of the inn.

This was not a result of losing business to a new fancy motel, because we had a similar amount of business. It was because the inn was able to charge less for a room than we were. In fact they were able to charge less, collect sale tax, and end up making more net per room than we were able to do.

We were forced after two years to increase our prices in order to avoid a negative cash flow. Unfortunately the inn was able to increase their prices but stay below ours and because of the tax advantage still make more net than us.

This investment is owned by some of my secretaries and others who were hoping to use it as a retirement fund. Our company is too small to provide such a fund. We are a small family owned company. However my secretaries and friends can no longer rely on this for their retirement. In fact they have had to put money into the motel to keep it going the last two years because of the additional business the inn has been able to glean from the addition of gambling.

I have offered to sell the property to the tribe but they are not interested. They have however looked at another motel in town to purchase. If they are able to do that and charge sales tax without having to pay that tax, it will be another severe blow to the Kootenai Valley Motel.

With the tribe provided advantages such as; no sales tax, no property tax, no income tax, health coverage, federal monthly support, I fear the time will soon come that they will be in a position to charge much less than market in any venture they become involved in and any competitor will soon be brought to their knees.

I wish the tribe no harm. But soon many good and industrious people will be harmed by the unfair advantages or a few.

My son Tony will be available for any presentation for the hearing on the 12th of September. I would appreciate him being given an opportunity to speak. He is articulate and composed and will represent our interests well. I would be there but will be out of town.

Perhaps it is best he speak. He represents the next generation. The ones that will not be able to start or continue a family business if these unfair advantages are not stopped.

Sincerely,

Idaho Ltd.

Villelli Enterprises Inc. General Partner

Richard A. Villelli, President

Mr. Smyser asked Mr. Villelli if it was not true that two other motels have opened up in Bonners Ferry since the tribe started gambling at the inn and maybe that was the reason for the decrease in net income?

Mr. Villelli replied there are two other motels that have opened up. One of those motels is on the verge of going under and two other motels have closed since the opening of the Kootenai River Inn.

Next to speak was John Taft, Jack Tice and Paul Matejovsky:

September 5, 1995

TO: Honorable Committee Co-Chairman Representative Black,

Honorable Committee Co-Chairman Senator Thorne,

and members of the Committee:

FROM: John A Taft - Local Merchant

I would like to thank the legislature for having the foresight to table the previous legislation. I thank you for allowing local and regional input on this complex sales tax exemption issue for Boundary County's Kootenai Tribe.

My family and I have lived in Bonners Ferry for over 48 years. When my father chose to start a business in Bonners Ferry, he did so by purchasing and building on property; this property was NOT on reservation land. We are friends with many Kootenai Indians. They are very good customers of ours, and we wish to keep that relationship in tact.

Which one of you legislators present today or your fellow legislators in Boise, wants to tell the small businessmen of Bonners Ferry that your committee chose them to be a sacrificial lamb for the economic recovery of the Kootenai Tribe? Which one of you will tell the small businessmen that a portion or all of their livelihood, their future business plans, and part of their retirement are to be sacrificed so the legislature can keep a promise to the Kootenai Tribe? I, personally as a businessman, do not object to giving the Kootenai Tribe their fair share of monies, but I do object to the sales tax mechanism to create the funds. If the Idaho State Legislature owes the Kootenai Tribe these funds, then let every Idaho citizen pay their proportionate share. The private businessman in Boundary County should not have to shoulder an inappropriate burden of sacrifice for the legislature to create these funds.

As a businessman, I have no problem working with or competing against the Kootenai Tribe on a level playing field. I do not want to compete against any tribal business that possesses this state sales tax exempt status. In my existing business with this sales tax exempt status, I could secure an additional $60,000 profit per year over my competitors with the same price structure. What is more important, a sales tax exemption, would encourage me to reduce my sales prices to as low as the cost I paid for the merchandise and/or product. The price-conscious consumer will shop for the lowest price, and my market share would grow considerably. I would eventually eliminate my competitors as their prices could never fall to under their expenses plus merchandise cost. I would always insure a 5% profit from the sales tax I collect although I sell merchandise at the same price that I purchase it.

It would be very unfair to put this sales-tax-exempt mechanism in the grasps of a very shrewd entrepreneur. The legislature could be sending innocent, honest, and hardworking small businessmen into reduced sales and possible forced liquidations. The economic climate of retailers in Bonners Ferry is very fragile at best. The recent reduction in timber industry and the high Canadian exchange rate has been a drain on existing retail businesses. Local businesses cannot stand to be negatively impacted by legislation that could place small businessmen in a weaker position.

The business that the Kootenai Tribe starts probably will be managed or operated by an outside entity much as Hagadone Hospitality operates the Kootenai River Inn. Management would want to maximize their investment with a high volume business much like Costco in Spokane or a full service Wal Mart. These businesses price their merchandise for high turnover and expand their inventory to include not only groceries, but also hardware, clothing, shoes, automotive, plants and even carpets. The management entity would operate under the theory of profit dollars rather than profit percentages. This would be done by merely lower their prices to a breakeven point. They would still make a 5% profit from the sales tax they charge but are exempt from paying to the State. This type of operation is very realistic for the Kootenai Tribe and their business management to undertake.

The Kootenai Tribe is presently enjoying sales tax exempt status at the Kootenai River Inn and the luxury of not paying property tax to Boundary County. These two exemptions are conservatively adding $8,000 to $10,000 per month into profits. These figures are based on just food, beverage, and lodging revenues; they do not address the revenues generated from gaming. When the Kootenai River Inn opened eight years ago, some of their fellow food and lodging businesses suffered sales losses of 15% to 25%. Not many businesses closed, but some businesses were sold. These small businesses were placed in a vulnerable position in the private sector by state and federal legislation. Legislators, which one of you or your colleagues is willing to reduce your salary 15% to 30% to help the Kootenai Tribe continue their economic recovery? Will you also be willing to increase that salary reduction next year and to also give up a portion of your retirement? It is the sacrament of the wallet; if it doesn't affect yours, it doesn't seem to be a threat.

If this committee decides to recommend this proposed legislation, I hope you don't put any restrictions within a 15 mile radius of the property. Then the existing businesses can all sell to the Kootenai Tribe and enjoy the same tax exempt benefits.

In conclusion, I wish to thank the committee for the time to expound my concerns. I also want the Kootenai Tribe to know that I do not object to them making an economic recovery. I simply object to using the sales tax exempt mechanism to create the funds. I strongly support the abolishing of any legislation introduced that employs the sales tax exemption to generate funds for the Kootenai Tribe.

Thank you.

John A Taft

Local Merchant

Gentlemen,

My name is Jack Tice. I have lived in Bonners Ferry (Boundary County) for more than 20 years. I started a contracting business in the early seventies and ran it until the late eighties. Seven years ago I, along with three partners, purchased what was then a defunct lumber yard. Northern Home Center emerged and is now employing nine people. I can assure you we had no special tax break or any other form of assistance from the state or government.

Equality of opportunity is competing, performing and succeeding on one's own merits. When the Kootenai River Inn was built I supported the concept that, in the future, the Kootenai tribe would eventually own and operate the business and thus provide employment for many of its members. That plan was never realized.

Now the Kootenai tribe wishes to embark on a business(s) and I believe that they should have the opportunity to establish any business of their choosing, PROVIDED they start that business(s) under the same playing conditions that every other business in Bonners Ferry, Boundary County did. That means without preferential treatment, without subsidies from the state or government, without special tax breaks, without unfair advantages of any kind.

Equality of outcome is a whole other matter. It attempts to guarantee results without performance. To give one an advantage over the other is trying to guarantee outcome.

If you truly desire to help the Kootenai Indians teach them to be self sufficient and they will become self reliant. Learned skills are tools to success. Don't create another welfare status situation. Instead, let them taste the fruits of their labor through hard work and determination. Give them direction and encouragement - and keep the playing equal.

Sincerely,

Jack Tice

BONNER FOODS, INC.

dba BOUNDARY COUNTY IGA

P.O. BOX 1296

BONNERS FERRY, ID. 83805

September 7, 1995

Co chairmen Senator Jerry Thorne

Co chairmen Representative Max Black

Committee members

Co chairmen Sen. Thorne and Rep. Black, respected committee members, ladies and gentlemen. My name is Paul Matejovsky, and together with my business partner, Mr. Gary Morgan, I own and operate Boundary County IGA. My purpose here today is to speak in opposition to the proposed Kootenai Tribe amendment to Idaho Code 63-3622-Z.

During the next few minutes, I will

1. Give you a brief history of how we came to be in business in Bonners Ferry.

2. Clarify any questions you may have after the hearing in Coeur d'Alene, with regard to our meeting with the Kootenai Tribe and our intentions.

3. Provide you with a brief overview of what we have planned in the near future.

4. Discuss the inequity of this legislation as it relates to the retail grocery business.

5. And share with you a brief general overview of the legislation and possible alternatives.

In October of 1994 - Gary and I finalized the purchase of Bargain Giant Foods in Bonners Ferry, Idaho. This purchase was not made on the spur of the moment but was the result of months - even years - of careful consideration and planning. From 1990 thru 1993, I worked as a retail counselor for Super Valu, the wholesaler that supplied Bargain Giant. Simply put, my responsibility was to assist independent retailers in any way possible to operate successfully and profitably, because their success had a direct impact on the success of Super Valu. During that time, I made a strong effort to convince Jim Farber, the owner of Bargain Giant Foods, to make specific changes in his operation that I felt would enhance his sales and profitability. I also suggested on numerous occasions, that he consider selling me the business, and that I would then make the suggested changes.

As a result of that relationship, in the summer of 1993, Jim contacted me and expressed an interest in selling me the store. At that time, however, the possibility of the Kootenai Tribe building a store was being tossed around, and I elected not to persue any purchase until that issue was put to rest. In early 1994, legislation to provide special tax exemptions for the tribe was solidly defeated in the Idaho legislature, for the 4th time. Following, the defeat of that legislation, I initiated contact with Jim Farber in an effort to purchase Bargain Giant Foods, along with at least two other major independent retailers. This resulted in the purchase of the store on Oct. 30, 1994, by Paul Matejovsky and Gary Morgan.

At the last hearing by this committee in Coeur d'Alene, it was suggested that diligent business people would have known that this legislation was in the works. The point I would like to make is that prudent business people did know that it was soundly defeated in the legislature, and that all 3 interested parties witheld any offers until after the legislature made their decision clear.

Second - it was mentioned that Gary and I were in negotiations with the tribe to manage on their behalf, and we feel that this issue deserves to be clarified. Bonner Foods Inc. received a letter dated April 5, 1995, from Steven Garwood, CPA, the financial director for the Kootenai Tribe of Idaho. In this letter, Mr. Garwood stated "the Kootenai Tribe of Idaho is looking at the possibility of building a large discount grocery store in the Bonners Ferry area." He further stated that the tribe was interested in pursuing a relationship with an established grocery store, and asked us to contact him to discuss a possible co-venture. We did contact Mr. Garwood, partially out of concern for the potential impact this could have on our business and partially due to the percieved possibility of their constructing a building on our real estate and leasing it back to us for the purpose of operating a new store. We felt that this arrangement could have been mutually beneficial.

We met with the tribal council on two occasions, the first time was strictly a "get acquainted" meeting, and the second time to actually discuss the possibilities. At the second meeting, we were offered information on the tribes retail research and financial projections, information that we chose not to accept until we had an understanding of what type of relationship they would consider. At this second meeting, it became clear that the tribes interest was limited to a store that they would "own and operate on a tax exempt basis", located on real estate that they intended to make trust land, exempt from property tax.. It further became clear that our role would be limited to that of management on behalf of the tribe. These terms were in no way acceptable to us and we subsequently notified Mr. Garwood that we were not interested in any co-venture under these terms.

Since that time, we have completed all the groundwork necessary to begin construction of a new supermarket in Bonners Ferry. We have a complete set of plans, and loan commitments from a primary lender and from Super Valu. We are pursuing the final approval of the S.B.A., and anticipate starting construction as soon as that approval is granted.

With regard to the legislation itself, it is clear to Gary and I that this bill would provide the tribe with a grossly unfair competitive advantage vs I.G.A., Safeway, or any other retail business against whom they might choose to compete. In the example of a retail grocery store with weekly sales of $150,000.00, this advantage amounts to nearly 1/2 million dollars annually!! Assuming that 90 % of the sales are taxable (10% food stamp, wic, and wholesale sales not subject to sales tax) the sales tax advantage alone is $351,000.. Add to that approximately $40,000. in property tax exemption, $61,500.00 in federal income tax exemption, and $16,000.00 in Idaho state income tax exemption, and you have a competitive advantage in one year greater than the projected net profit of our business for the first 3 years combined!!!

Some people have suggested guidelines that would prohibit re-investing monies derived as a result of this proposed tax exemption back into the business. What, however, is going to preclude the use of these monies to fund programs now paid for with federal grants and revenues from the gambling at the Kootenai River Inn, - and the diversion of these current revenues to subsidize the proposed new retail outlet(s)? This would seem to create some sort of auditors nightmare that would be virtually impossible to enforce. The end result could very easily be the demise of one or more retail businesses in Bonners Ferry - businesses that currently exist and pay taxes according to laws of the state of Idaho.

Finally, I would like to take a moment to consider the overall reasons that this legislation is being proposed. Are we being asked to again pay for the sins of our forefathers? How can any legislation even be considered to help any group with out first quantifying how much help is needed? Once that figure is determined; it would seem appropriate to determine how much help is already being provided in the form of federal grants, and in the opportunity that the tribe currently enjoys at the Kootenai River Inn. If we were to estimate that 50% of all monies gambled in this facility are returned in the form of prizes paid, and if their announcement of prizes paid during August thru Labor Day weekend totaled 1.2 million dollars is acurate, then it follows that gross gambling revenues alone exceeded 2 million dollars last month!!! How accurate is this guess, and how much revenue this facility generates for a tribe of less than 200 members needs to be determined if we are to determine how much more help is needed - if any!

Consider, also, that the tribal goals are to position themselves for the day when federal monies are no longer forthcoming, and to replace gambling revenues. To the best of my knowledge, there is no pending legislation or legal action that threatens either one of these sources of income, so why are we trying to replace them? Their other goals of education, medical and dental care for their members, adequate income to keep their lands and property, and to be civic minded are the same goals that most of us have for ourselves, our families, and our friends and neighbors. We strive towards those goals day in and day out, within the laws of our government, and without any special priviledges or tax advantages. It would seem to me to be totally unfair to threaten our ability to achieve those goals, thru passage of legislation that could easily result in bankruptcy for myself, my partner - Gary Morgan, and any other business person in Bonners Ferry with whom the tribe might decide to compete on their "one parcel" of land.

In summary, to draw a 10 mile circle around Bonners Ferry, and make the business people in this area potential sacrificial lambs simply is not fair. I feel that this committee needs to

First - determine how much help if any is needed.

Second - determine how much help is already being given thru federal funds and tax exemptions and revenues at the K.R.I.

Third - find an equitable method to provide any additional help needed, a plan that shares the burden among all citizens in the state of Idaho, not limits the burden to a few select business people in Boundary County. Remember -- Bonners Ferry and Boundary County are and never have been part of any Indian reservation. Furthermore, this county can ill afford the revenue loss that this bill would cause.

On behalf of Gary Morgan, and the employees and families of Boundary County IGA, I thank you for coming to Bonners Ferry, and allowing us to present our views on this matter. I urge you to reject this bill. To analize what, if anything, needs to be done to assist the Kootenai Tribe of Idaho, and to then find an equitable means of providing that assistance. Perhaps that help should be in the form of education and job training, maybe a grant of some type, or possibly it should be to do nothing other than to allow them to continue to enjoy the benefits they now have in their operations at the Kootenai River Inn.

Mr. Kerby stated it was mentioned at the last meeting that the only reason Mr. Matejovsky placed a sign up on their property announcing the future construction of their business was to put a shadow on this hearing. Was that accurate?

Mr. Matejovsky replied that it was not. At the time of the Coeur d'Alene meeting they had completed consumer research and market analysis, a complete floor plan, a letter of commitment from the primary lender and a letter of commitment for financing from their supplier.

Next to speak was Orrin Everhart a businessman and part-time commissioner:

Mr. Cochairmen and ladies and gentlemen of the interim legislative committee. Thank you for giving me the opportunity to speak to you about the proposed legislation, giving additional privileges to the Kootenai Indian Tribe. I am speaking as a concerned businessman in Bonners Ferry. I am Orrin Everhart and I am speaking for myself and my wife.

I am talking from both my head and my heart. Hopefully, today's dialogue will help you reach a decision that will not displace several existing small businesses or negatively impact the tax paying citizens in Boundary County. The building in which we are meeting today apparently represents the most successful business in this county. Yet this business pays no property tax in contrast to all other businesses in this county. This business collects sales tax and lodging tax from customers but does not forward these taxes to the state tax commission as other businesses must do. This business has another obvious advantage over other local firms namely the gaming operations.

My observation is that the huge success of the Kootenai River Inn is primarily due to the various tax exemptions and special gambling status that has been afforded to the Kootenai Indians. Let me make a general observation. When special privileges are requested, as incorporated in this legislative proposal then most unprivileged people are usually not very appreciative. This unappreciation is compounded when a group of people already having special status are requesting additional privileges. The unprivileged should not be called prejudiced for voicing opposition to more legislation granting additional exemptions from state laws and regulations under which the rest of us must toil. The legislative granting of special privileges is a grave matter that must be approached cautiously and dealt with seriously.

The recommendation that your committee will eventually bring to the upcoming legislative session could impact this county immensely. The impact will be much heavier than a mere sales tax exemption. The Idaho Code is already riddled with dozens if not hundreds of sales tax exemptions. While the fairness of various exemptions may be debated, in many cases at least, the impact of those various exemptions are spread throughout the state of Idaho. What is being proposed here however, will negatively impact only this economically poor county. That negative impact will flow not only from reduced sales tax receipts by local governments but also from a significant property tax reduction caused by the withdrawal of private sector land from our small tax base. The economic impact will also doubtlessly include the crippling or actual bankruptcy of several small businesses.

Boundary County is one of Idaho's poorest counties economically. The per capita income in Boundary County is consistently in the lowest quartile in the state of Idaho. The state Department of Education report shows that Boundary County had a per capita income of $13,566 for 1993. This means Boundary County ranked thirty-eighth, only six other counties ranked lower on the per capita scale. Only one-fourth of Boundary County is privately owned. This land is mostly undeveloped. Our property tax base is obviously very small so we are heavily dependent upon the funding generated by the cutting and processing of timber which comes primarily from federal public lands.

The infrastructure, especially schools and roads, depend upon that logging for in-lieu-of tax support. The business community also depends heavily upon the revenue generated by those logging jobs. But, we see our logging-dependent economy quickly shrinking. The logging industry is being hit extra hard because of the declining home building industry nationwide and because of significantly increasing imports of Canadian lumber and the rapidly decreasing supplies of federal timber locally. The vastly reduced supply of local timber is the economic dark cloud hanging over our county.

So the scenario is this: The local community truly feels threatened because the local economy is already under heavy and continuing pressure. Then another legislative proposal is made to take additional land out of the private sector and put into a tax-exempt status. Property taxes on the remaining private property will have to be increased to make up for the exemption, or vital services will have to be cut. Local governments will also receive smaller distribution of sales taxes from the State Tax Commission, and of course, the reduced timber activity will mean fewer dollars certainly in the local economy. The business community in Boundary County is not very large. The State Tax Commission has reported that the total taxable sales in Boundary County last year was only forty million dollars. Economic activity has been declining recently mainly due to the rapid decline of our timber industry. As the co-owner of two small businesses I have first hand knowledge of the difficulty in meeting payrolls and paying bills monthly. The continual turnover of small businesses as they start-up and then go out of business in Bonners Ferry is mute evidence of their losing struggle to survive.

In summary any legislation granting additional special privileges should not and cannot be borne by the small and economically depressed business community and general population in Boundary County. The whole state should share in that burden. Secondly, an in-lieu-of tax should be authorized for annual payment to local governments so that the county citizens do not have to choose between additional property taxes or reduced governmental services. Thirdly, any legislation of this sort should be geared toward expanding economic activity rather then merely displacing existing small businesses. Thank you.

Mr. Kerby asked Mr. Everhart as a county commissioner what has the county been able to do about wages for all county employees?

Mr. Everhart replied there was a zero increase. No increase in salaries and no increase in benefits.

Next to speak was David Anderson:

I reside here in Bonners Ferry, have for sixteen years. I have a nursery, Christmas tree farm. I am a member of the Kootenai Valley Nursery Growers Association, the Audubon Society, the Citizens for Education, the Democratic Central Committee and more importantly concerning the matters before us today, I am involved as a de facto retailer in that I am the vice-chairman of the board of directors of the co-op gas and supply company of Bonner and Boundary County. All of these are involved and intricately dependent upon this community. But I did not come here today representing any given one of those groups. I come here today sort of as a self appointed spokesman for involved people in the community.

I am not today going to deal with the advantages these proposed tax allowances will give to any type of business the tribe wishes to pursue. Let it suffice to say that Sam Walton has already proven what devastating effect a five percent margin can have on competition. In other words it is my firm belief that the creation of this governmentally subsidized business will be the demise of existing competitive businesses in the county.

My fear goes deeper then merely the loss of local businesses but the resulting loss to our sense of community. Having been involved with various community groups all of my life this greatly concerns me. I view the life blood of a community as its schools, its business core and its media, more importantly the newspaper. The loss of any of these three leads to a decrease in the viability of the community.

Let me give you a personal example. I was born in Burley, Idaho and lived there through my grade school years. My family moved to Colorado a similar town to this, Montrose. I attended college in Greeley, Colorado and then returned to the birthplace of my mother, Filer, Idaho. On to Buhl, Idaho for two years, then to Moscow and finally to Bonners Ferry, Idaho where I reside and am raising my children now. At the turn of the century Filer and Twin Falls were virtually identical towns. The irrigation district was created with the construction of the Miller Dam in 1903. They fought for the right to be the new county seat of Twin Falls County. Filer lost that fight, Twin became the seat. But a plum was given to Filer, Idaho, the county fairgrounds. One of my earliest recollections in life was the fiftieth anniversary of the Twin Falls County fair. My grandparents were annointed king and queen and there was a huge parade through the then viable main street of Filer, Idaho. A town that had two grocery stores, two hardware stores, a lumber yard, three restaurants, a newspaper and a high school marching band.

My return to Filer in 1975 found the newspaper sold and gone. The businesses sold as chief business locations for light industry and any sense of community among the citizens badly eroded. The civic groups were gone or reduced to impotency. The library ran unlimited hours and there was no chamber of commerce to promote the benefits of being a part of Filer. Only the schools remained. Filer's demise was a natural phenomenon, it is only ten miles away from Twin Falls, a much larger community, and a widened four lane highway was put there to connect them. But the sadness is still there. Filer has no community choir, offers no Santa Claus for the children in December. This community does not send it's cheerleaders to Florida when they are a competitive group on a national scale. It does not run fundraisers for fire victims. It does not help Mckenzie Kelly and her family cope with the severe injuries she had this spring. Nor do they have a yearly celebration there. There is no Filer days.

I know that this is an extreme case. That this is not going to happen to Bonners Ferry. We are the county government. We have viable industry that are dependent upon this town. Our retail and commercial competition is over thirty miles away on a two lane road, not just ten miles on a four land road. But these things are a matter of degree. The fewer the home owned businesses the lower the input into community projects and problems. The fewer the charity dollars the fewer the service organizations. The fewer good deeds done in the community, the lower the pride one has in his own community. This community has often astounded me with its compassion and its charity and its resiliency. I feel that a business here with an unfair advantage would mean the demise of businesses here and the demise of our life style. Thank you very much.

Next to speak was Anne Bonar who personally does not believe that there can be any compromise on this issue:

Ladies Designer Fashions

Fine Jewelry & Gemstones

Gifts, Collectables & Art

P.0.Box 914

302 Main Street

Bonners Ferry Idaho 83805

Telephone (208) 267-3313

Legislative Committee September 9, 1995

Dear Sir;

Why should any soverign nation doing business in the United States be given any tax advantage over American taxpayers? As a business owner and a taxpayer I am perfectly willing to compete with anyone, however, as an American I expect a level playing field. No one should get any advantage in business given them by law. In doing so you, as legislators are discriminating against the very people who are supporting our government, the taxpayer. This soverign nation would be doing business in direct competition with all the taxpaying businesses in this area.

It is time for our government to stop doling money out for past history. It is time to look at this community and see just how the proposed legislation will effect us all. Our tax base should not be diminished, Idaho cannot afford it and neither can we, the American taxpayer.

Yours truly,

Anne M. Bonar

Next was Lamar Thompson:

Mr. Chairman and other members of the interim committee.

I am opposed to the proposed tax exemption.

As in the past there is overwhelming local opposition to this proposal. Not only from the business community but from local city and county government along with local citizens.

Kootenai tribal members have been my good customers at Safeway since I first came to Bonners Ferry in 1977. I do not like being put in an adversarial position against the tribe.

It was my hope that a new proposal would be forth coming from the tribe that in a spirit of cooperation the whole community could support.

Mr Graham had some interesting suggested alternatives. I have also heard that the tribe has plans for a large natural gas electrical plant.

It would be fun to work with the Kootenai Tribe on developing a base industry that would provide more jobs for Boundary County. Especially in light of the high unemployment in our county.

I have the pleasure of serving on the board of directors for the Boundary County Habitat for Humanity. Like David Anderson I have been amazed at the level of support our community and the businesses give to people in need here.

I know the Kootenai Tribe can come up with a proposal that would be good for our county and they would be happy with the spirit of cooperation and support they would receive if it was something that did not endanger our existence and everyone felt was fair.

Lamar Thompson

Mr. Kqalsan Mayuk who is a member of the Kootenai Tribe of Idaho spoke next. He is also on the council and is a director of the health for the Kootenai Tribe of Idaho. He is for this proposal but he also sees some good points that were made and he would like to see those explored. He also heard some statements that were made that to him were total exaggerations, painting the bleakest picture possible. And he did not see these backed up with any hard statistical facts.

Mr. Mayuk was asked to explain what situations were portrayed as the bleakest without any facts backing them up.

Mr. Mayuk replied there was a petition that was supposed to have been signed by a thousand people and it was his understanding that some of these people were not residents of this community, were not even residents of this country. If they are going to use a petition then it needs to be certified through an independent organization that these people are residents of the county. There were statements made that the community cannot support three grocery stores. There were statements made that the tribe would have an unfair advantage because they would be using the tax money to funnel back into whatever business they would purchase. According to the last petition that was not part of it. The agreement was that this money would not be going back into the business, so there could not be a tax advantage for the business. There are other large corporations that receive tremendous tax breaks and the people in those communities are not doing anything about it. But when it comes to the tribe the whole community is up in arms.

A question was asked concerning where the taxes that the Inn collects right now for food, on beverage, on rooms, where does that money go?

Mr. Smyser replied that money goes to support the tribal government. That was why in the original legislation when they proposed to collect the tax in the same method, assuming that would be acceptable because they have been doing that since the Inn was created. The other tribes in the state of Idaho do not charge sales tax. They have a clear five percent advantage over their competitors. It is to help replace the federal cuts.

Mr. Kerby stated the committee has had one meeting before today. At that meeting the Kootenai Tribe of Idaho was able to bring up their position from their perspective historically to the current date. Today the community has been able to bring the committee historically up to date. The committee as a whole has yet to sit and ask these questions that the community is coming up with. That is to occur today after they are through with the public commentary.

Mr. Wilson asked if there was anything in the new legislation that provides for a public audit?

Mr. Smyser replied it would not have that in the direct language involved. He has heard several proposals today that would be appropriate for the continued work and efforts of this group. Out of the testimony they have heard some positive things that they would be willing to consider.

Ira Earl, National Federation of Independent Business, owns his own business and has twenty-five years banking experience. The National Federation of Independent Business is a small business lobby representing 600,000 members nationwide, about 7,500 here in Idaho. They lobby both on state and national issues based upon the majority of their business members concerns. NFIB supports the American enterprise system based on private ownership, fair competition and the opportunity to pursue entrepreneurship. NFIB believes in government of laws that is representative and responsive, limited in its power and restrained in its use of that power. To secure these goals NFIB believes that it is essential to maintain and defend the individual rights guaranteed by the U.S. Constitution.

Mr. Earl read a letter that Ms. Bonar received from Pete Skamser the state director for NFIB. He is concerned about the precedent that this type of legislation will establish for other communities throughout the state. Legislation that establishes unfair market advantage for any group by any means is expressly at odds with the philosophy and goals of the free enterprise system and NFIB.

Grace Siler, who lives in Boundary County, stated she is the dissenting voice here because in one form or another the Kootenai proposal is not the evil thing that she is hearing today. She was disturbed by the article in the Bonners Ferry Herald last week. It seemed to suggest that everyone in the county, except the Kootenai Tribe, have the same identical interest as the Idaho Retailers Association. She was offended by the statement in the article that at the previous meeting "they had crying, they had tears, they had mistruths." She seems to find in that article and here today some pretty good crying, about how terrible it is going to be if the Kootenai proposal goes through. Maybe it will be altered, maybe there will be some safeguards written into it but what she is hearing today is that the Kootenais are no different from anybody else.

Ms. Siler stated the Kootenai Tribe wants to find a way to maintain their identity and she does not see this as an evil thing. Other tribes in Idaho do have enterprises that are tax free and the Retailers Association always oppose it. There is talk about not being room for a third grocery store and there might not be, but many people here go to Sandpoint to do their shopping because it is more economical. If there was an economical store here maybe some of the money would remain in the community.

Cochair Black stated hopefully they can now sit down and discuss in more detail the tribe's proposal. He has heard today that there are some possible counter-proposals. The purpose of the committee being in Bonners Ferry is to gather information and their instruction from the legislature was to come up here and see if there are mediated grounds to do this. The committee is now aware of the feelings of the tribe and the local community. They want to find out if there is a proposal that Boundary County would accept and exploring restrictions that could be added to the proposal.

Cochair Thorne stated that everyone needs to understand that what the tribe is requesting is now already granted to the tribe by federal law. They can buy a piece of property as trust land, they can open a store and the only question is what happens to the sales tax. Do they not collect it? Do they collect it and submit it to the Tax Commission to have it refunded? That is a question that the state has attempted to answer. They have passed a law that says from now on no tribe can purchase land and not charge sales tax and submit it to the state. If the tribe wants to go ahead with their plans and they want to take it to court they would win. Because they have the right of a sovereign nation and the state of Idaho cannot tax them. The state has a bill that says that they must pay sales tax but in court it would not hold up because the state would be violating federal law. The committee has to either turn thumbs down and invite the tribe to go to court, which would alienate the fine position they have in this community, or there has to be a compromise which would work for both the community and the tribe.

Senator Wetherell asked if there was anything in the legislation that would restrict the sales strictly to the members of the tribe?

Cochair Thorne replied he does not think so but looking at the other tribes, their stores are on their tribal land and away from the cities but they still solicit business from the community.

Mr. Smyser stated the difference in the proposal was in limiting it to one parcel and to charge the same sales tax and use tax on the sale of taxable tangible personal property or services that the state of Idaho would charge. Today there were some very valid points that were made by those that testified. The size of the parcel is something that could be looked at if there was a counter proposal. Additional concerns have been raised concerning the level playing field concept. That was the reason putting in the language dealing with charging the same tax because it was stated to the legislature that the Kootenais would do the same as they do at the Kootenai River Inn but it was not in the law. Concerning an audit trail, so the money could not be put back into the business from another area, if that was part of a proposal they would certainly look at that.

Representative Pietsch stated that there once had been a proposal supported by the tribe that the sales tax money would somehow be distributed not only to the tribe. A certain amount would go to the hospital, or the school district and some portion would be kept by the tribe for its own use. Was that correct?

Mr. Smith replied that the proposal was rejected because the original compact stated they would give 10 percent to the schools and 10 percent to the hospital but only after all of the tribe's overhead was paid, so they did not feel there would be any money left to be distributed.

Cochair Black asked if that compact would still be considered as a compromise?

Mr. Smyser replied that there is a procedure that the tribe has to go through. The lands have to be taken into trust and one of the factors that has to be determined by the Bureau of Indian Affairs and the Department of Interior are in-lieu-of taxes. At that time there is the possibility for hearings and citizen input as to that issue. This is not the only time the county governments of this area and the city government are going to have a shot at this. That is a consideration that the Department of Interior has to consider before they can take lands into trust. It certainly depends on the parcel of land that is selected, the characteristics of it, and the taxes it is currently paying. It would be subject to consideration at that time.

Mr. O'Fallon stated the question of self-sufficiency has come up several times today. They have no way of knowing if the tribe is currently self-sufficient. The committee needs to obtain the audited financial information to show that the tribe has this need because without it they have no way of sitting down and saying "yes or no."

Mr. Smyser stated the current status of Indian tribes in this country is under attack from any number of federal legislators. There is little doubt that the current financial status of this tribe will be impacted in a negative sense. If the state of Idaho will allow the tribe to continue with it's gaming operations they will get up out of this meeting and they will leave and will not say another word about this. But the state of Idaho has an interest in stopping Indian gaming. It is currently being litigated and the opinion that they are waiting on comes from the federal court system. They are looking at the long-term future of the Kootenai Tribe without the gaming and also with continued pressure from the federal government at reducing funds.

Mr. Kerby stated that today gambling is a reality at the Kootenai River Inn. Whether it remains a steady stream of income source for the Kootenai Tribe of Idaho is debatable. It is not an appropriate approach to ignore the fact that there is gaming as they deliberate this issue. It is not inappropriate when trying to discuss an issue concerning state tax revenue that the committee members need to understand the financial needs of the applicant or the recipient of the funds. Without financial information to review there is no logical way that one in a fiduciary capacity can act. If there are no public disclosure laws maybe there could be a voluntary system where the tribe can provide that information to a group of committee members that will not publicly disclose the information. We are talking about public moneys of the state of Idaho. Even the Kootenai Tribe of Idaho is not unanimous in this proposal. How can you proceed without knowing the financial need?

Cochair Black asked Mr. Smyser if he could give a general overview of the financial condition of the Kootenai Tribe and the self-sufficiency level that they are at now and the need for further funds?

Mr. Smyser replied that he does not have that information.

Velma Bahe replied that she would have to bring that request to the tribal council and get their direction. The tribal policy is not to give out that information.

Mr. Kerby asked Mr. Wilder if there was a freedom of information act or any federal laws that could be used to obtain information relative to the tribe's financial status?

Mr. Wilder replied there was with regard to the federal budget.

Cochair Thorne asked Ms. Bahe if they do an audit of the tribe's financial affairs?

Ms. Bahe replied that yes they do have an audit done.

Mr. Smith stated that a letter was sent to the tribe asking for a consolidated financial statement for the last three years for all operations either reviewed or audited of all tribal operations either governmental, quasi-governmental, or private and also tribal, quasi-governmental and private tribal budgets for the last three years.

Cochair Black asked Ms. Bahe to take a copy of that letter to the council and make a determination of what information they can share with the committee.

Mr. O'Fallon stated the reason this letter was sent and the request was for three years was because they want to see what the situation was before gambling.

Senator Wetherell requested that Ms. Bahe also include the statistics on the employment of the members of the tribe.

Cochair Black stated there are several points he would like to ask the representatives of the community and find out what their feelings are about a counteroffer and if there are grounds for one. One condition was limiting the purchase to one business. Is there a parameter of what do they mean by one business? Is it strictly one grocery store or one restaurant? Concerning the property tax issue and the tribe paying for services that are provided by the city and county, what would they expect or require the tribe to pay? They have addressed the accountability of funds and maybe they could set some parameters of how much accountability they would expect.

Cochair Thorne stated they need to discuss the Tax Commission's role. He called Commissioner Mike Southcombe who is in charge of the area of sales tax. He explained to Mr. Southcombe what is being proposed by the tribe and would it be possible for the tribe to collect the sales tax money and keep it. Mr. Southcombe replied that if the tribe keeps the money it is not a sales tax. He then asked Mr. Southcombe if the money collected could be submitted to the Tax Commission and then resubmitted back to the tribe? Mr. Southcombe replied that the tribe could collect the money as a sales tax, submit it to the Tax Commission, and then have it sent back to the tribe. If the Tax Commission would do this, they would write the legislation. If the Tax Commission collects the money they would demand that the tribe provide an audit trail. That money could not even be used for a day care or transportation for employees.

Mr. Brennan stated he is concerned about funds from somewhere else being shifted back into the business to reduce the cost of operation of that business. If they could be sure that money would not get back into the business to give them a competitive advantage then everyone would be more comfortable. If they cannot clarify that, he will have a hard time selling his people on accepting any kind of a compromise.

Cochair Thorne stated that would have to be left up to the attorneys at the Tax Commission. He feels they should have the Tax Commission draw up a bill for the committee to look at and then consider.

Senator Wetherell asked Ms. Bahe what the expenses are for the tribe? Are the expenses salaries or health care?

Ms. Bahe replied the expenses are for the general health and welfare of the people. They have their own welfare system so their tribal members will not have to go to the state.

Senator Wetherell asked if they do not use the State Department of Health and Welfare for such things as food stamps?

Ms. Bahe replied she could not speak for all of the tribal members but they have a fund called personal assistance that the tribal members take advantage of if they are unemployed or a single parent. They give them vouchers if they need to purchase food or diapers and it excludes tobacco and alcohol.

Mr. Smyser stated that the tribe is the second largest employer in Boundary County so they have a large payroll.

Mr. Kerby stated that the tribe is not the second largest employer in Boundary County. The financial need of the tribe is probably not here today, and they may need it in the future, so why do it now. Mr. Kerby asked Cochair Thorne if it is the state of Idaho's fiscal responsibility to fund the tribal government or is that the federal government's responsibility?

Cochair Thorne replied it is not the state of Idaho's responsibility but they are held hostage like every other state in the union by the federal government who decides whose responsibility it is.

Mr. Kerby stated it is his perception that the request is for a source of revenue to operate tribal government programs and needs, not necessarily for developing jobs for tribal members. If the purpose is for generating revenue to operate the tribal government and you are trying to bear that burden of assisting the tribe in that effort by the state why tie it to a business enterprise. Why not grant money from the general fund? If it is an unfunded mandate and it is somehow the state's fiscal responsibility by providing money from the general fund you would allow all of the people of Idaho to share that burden. Untie the business enterprise and not harm any single business or community in the process.

Cochair Thorne stated he has no objections to anything that Mr. Kerby just said.

Mr. Smyser stated that going back to the historical way of how this was proposed the Kootenai Tribe is a sovereign entity. The Kootenai Tribe had an absolute right to go ahead with gaming in the state of Idaho. The Idaho Legislature changed the constitution to take that absolute right away from the tribe. The people who did that at that time made promises and assurances to the Kootenai Tribe and the other Indian tribes, that if they took this absolute right away from them they would work with those tribes to try and replace those funds. This isn't something the Kootenai Tribe just said all of a sudden "we think the state of Idaho should do this for us." The state of Idaho said we are going to take this away but we are going to work with you to replace those funds in other ways and that is how we got into this situation.

Mr. Wilder stated the federal government took away the absolute right and the state of Idaho participated in that process.

Mr. Smith stated if the tribe knows that they are going to be getting back at least a half million dollars every year by not paying taxes they could cut their prices and operate at somewhat of a loss, and take money from this Inn to subsidize the other business knowing that half million dollars is coming back every year. It is not a level playing field and should not be advertised as that because they can use monies from other entities to subsidize whatever business they choose to operate.

Mr. Kerby stated that concerning the question of limiting the purchase to one business, that is an unfair question to ask someone who lives here. He would not want to look around at which one of his friends and neighbors business he could say goodby to.

Cochair Black replied he was not asking for a specific job. He was talking about the concept because it is one of the proposals.

Representative Pietsch asked for a time schedule concerning the National Gaming Law and the change in the state constitution concerning gaming.

Mr. Wilder replied one of the things that is happening nationally is that there are a number of Indian tribes that have made a great deal of money in gaming. Many legislators in Washington are saying "if there is gaming then we want a commensurate reduction in the federal dollars." A separate issue is the twenty-six percent cut in the federal budget for Indian affairs. In terms of timing it is very difficult to predict. The proposal to amend the National Indian Gaming Act to restrict further tribal gaming has been on the table for about two years. As long as there is tribal gaming, federal funding is going to disappear. He does not know when it is going to happen and does not know which is going to be first. Whether the federal budget will disappear because of tribal gaming or tribal gaming will disappear and then the federal budget behind it. But it will happen within the next two or three years.

Mr. Kerby stated the Kootenai Tribe of Idaho is a member of this community. They have treaty rights and they are a sovereign nation. The only real debate here is what business is going to be destroyed. They need to find a business operation that is an added value to the community, and isn't taking and destroying the economic base of the community. There is no will here to keep the tribe in poverty. It benefits their community to make sure they are not in poverty. There is no underlying theme trying to deny the tribe their rightful sources of revenue.

Cochair Thorne asked the Bonners Ferry community if they have an alternative proposal for this community to consider?

Mr. Kerby replied that lacking financial information they did not have the ability to come up with a consensus among themselves. They talked about alternate proposals but they were going towards an attempt to create a business operation that would not be unfairly competitive.

Cochair Thorne stated they would need to have another meeting. Things they will need to have at that meeting are: 1) the tribe's audit; 2) proposal from the tax commission; 3) the tribe's proposal; and 4) a proposal from the community or a statement that there will be no proposal.

The committee decided that the next meeting should be held thirty days after the committee receives the tribe's audit and it should be held in Bonners Ferry. The meeting was adjourned at 3:00 p.m.

This telephonic meeting was called to order from Boise at 2:05 p.m. by Co-chair Senator Jerry Thorne. Other committee members present in Boise were: Co-chair Representative Max Black; Senator Claire Wetherell; C. A. "Skip" Smyser, representing the Kootenai Tribe of Idaho; and legislative staff members Mike McConnell and Pat Bischoff. Committee members participating at other locations were Representative Carol Pietsch; Darrell Kerby, Bonners Ferry city council president; Velma Bahe, chairperson of the Kootenai Tribe of Idaho; Skip O'Fallon, representing the mayor of Bonners Ferry; and Ron Smith, representing the Board of County Commissioners of Boundary County.

Non-committee members attending the meeting included: Peter B. Wilson, attorney; Leroy Wilder, attorney; and Betsy Russell, a journalist with the Spokesman-Review newspaper.

Mike McConnell presented a short history of events since the last meeting. He informed the committee that the minutes of the last meeting contained a request by Co-chair Thorne that at the final meeting, the parties have: 1) the tribe's financial audit; 2) a proposal from the State Tax Commission; 3) the tribe's proposal; and 4) a proposal from the community or a statement that there will be no proposal. Ms. Bahe's request to the tribal council to make public the tribe's financial information was declined by the tribal council. Ms. Bahe informed the committee of that refusal by letter dated October 12, 1995. Attached to that letter was a proposal for a sales tax exemption, later prepared in legislative draft form. The tribe's proposal was sent to the Attorney General's office at the request of Co-chair Thorne, and forwarded to the State Tax Commission. Ted Spangler from the State Tax Commission sent a response. In answer to Mr. Spangler's response, Leroy Wilder sent a letter to Mr. von Tagen of the Attorney General's office, in which he clarified the tribe's proposal. In the meantime, on November 8, 1995, Darrell Kerby, Ron Smith and Skip O'Fallon sent a letter to the co-chairs, responding to the tribe's refusal to produce financial information. On December 19, 1995, Darrell Kerby, Ron Smith, and Skip O'Fallon, with help of their attorney Peter B. Wilson, sent the committee a letter stating their position and providing their own summary of the tribe's finances.

Skip Smyser spoke next. He stated that after the last meeting in Bonners Ferry, some individuals expressed concern that moneys from a tribal sales tax exemption would be used to subsidize the business created, producing an unfair business advantage for the tribe. He stated that the current operation of the Kootenai River Inn demonstrated that the tribe was not intending to provide a subsidy. To relieve concerns, the tribe proposed that it not own the business, but would collect the sales tax on it as the state would, along with other limitations.

Ron Smith stated that even with those protections, he and his community thought the proposal would give the tribe an unfair business advantage. He stated that the comment he hears most in the community is: "If the Kootenai Tribe of Idaho wants to operate a business, why don't they do it like everybody else?"

Darrell Kerby stated that their letter dated December 19, 1995, identified the concerns of the community. He said that if the Kootenai Tribe is justified to receive public funds from the state, all of the state, not just Boundary County, should provide the funds.

Co-chair Black stated it does not matter where sales tax is collected. Sales tax money is put into the general fund, and then the general fund is distributed back to the different entities. If a lesser amount is collected out of Idaho Falls, or Boundary County, then the entire state is participating in the lost sales tax.

Mr. Kerby agreed with Co-chair Black. However, he also said that the lost property tax revenue created by having another parcel of land put into trust for the tribe, followed by other lost revenues and the subsidizing of the business by the tribe, will mean that Boundary County will carry the burden.

Co-chair Black stated the tribe had agreed to pay its share of required services.

Mr. Kerby stated the Kootenai River Inn currently contracts with the City of Bonners Ferry for police and fire protection. He said that the Inn pays no moneys to Boundary County, the school district, or any taxing districts; or for the roads that go in and out of the Inn. He said that the big issue is the ability to use the sales tax revenues to subsidize a business. He said that the proposal creates an unlevel playing field for other businesses. He also said that there was no financial need for the proposed sales tax exemption.

Co-chair Thorne stated that the committee has agreed that so long as the tribe has gambling, they do not have a financial need. The tribe is preparing for a time when gaming is restricted and they will have a financial need.

Skip O'Fallon commented on the proposed financial condition of the tribe as suggested in the letter by him, Darrell Kerby, and Ron Smith. Mr. O'Fallon said that based on his calculations, by operating 181 electronic pull-tab machines, in two years the tribe will have sufficient funds to provide each tribal member $23,000 annually. These numbers could only be proved or disproved if the tribe produced its financial information. The pull-tab machines have operated for two years, so a substantial amount of money should be available to the tribe, which could become 100% self-sufficient.

Ron Smith stated he wanted clarification on the new proposal. He said he thought that the tribe would own only the land itself, but thought he heard Co-chair Black say that they would own the building.

Mr. Smyser replied they would own the real property, fixtures and equipment, which would include the building.

Mr. Kerby asked when does the tribe, once they've put land into trust, have to comply with Bonners Ferry or Boundary County zoning ordinances?

Leroy Wilder replied that before land can be taken into trust, the Secretary of the Interior must consult with local governments, etc., and must determine the impact on local zoning before the land can be taken in trust. It's a separate process, but those concerns, the tax impact, and other concerns must be addressed by the Secretary in an entirely separate administrative process.

Mr. Kerby commented that in his years as a member of the Bonners Ferry City Council, nobody from the Bureau of Indian Affairs or the Department of Interior has consulted with the city before putting land in trust. He asked who wants to trust the matter to the Washington bureaucracy?

Co-chair Black stated the inference is that we can't trust the federal government. But, we have to trust them to a point. He said that we cannot just conclude that, due to certain past problems, all transactions are unfair. From the first committee meeting, we had a proposal that the tribe would own a piece of property and that they would collect the 5% sales tax. In the minutes of the first meeting, on page 17, members of the committee representing Bonners Ferry said that the business community's concern is that if a tax incentive is provided to the tribe it should be done so that it does not create an unfair playing field. The minutes indicate that the business community does not want to deny the tribe their revenue source for the operations of their governmental entities, but they do want to prevent that source from subsidizing the business. The minutes state "Maybe there needs to be some way to track these funds so it will be certain that they don't come back in to help subsidize that business." Co-chair Black said that the most recent proposal answers that concern. He said that it looks like we have come full circle and Bonners Ferry seems to be saying that there cannot be any business operated by the tribe that would be fair to the community. He asked for comment.

Mr. Kerby described the following scenario: The sales tax moneys received by the tribe under the current proposal could be returned to the tribal government and used for the purposes of health, welfare, promotion of long-term educational benefits, etc. The tribe could then offset other tribal moneys that were previously earmarked for those purposes. Then, because the tribe is a sovereign entity it could redirect other funds into a rent subsidy or other subsidy for its business. However, the tribe will not subject their budget to scrutiny, to make sure that revenues are not redirected.

Mr. Smyser said that he believed these comments were red herrings, and more of the same thing the committee has heard throughout. He said that the tribe is making an honest attempt to provide answers to the questions raised by the community. He expressed his feeling that, regardless of how far the tribe goes to try and address this, there will only be another hurdle or obstacle placed in the way, and the answer will continue to be "no." He said that there is no valid argument why the Kootenai Tribe would take sales tax moneys and subsidize a business that they do not own. The purpose of this proposal is for the Kootenai Tribe to become self-sufficient. The purpose is to use the sales tax money to help the tribe make up for the 31% that has been cut out of their portion of the budget of the Department of the Interior. They have to replace these funds to continue their programs. The tribe has a demonstrated history of not subsidizing businesses with its relationship with the Hagadone Corporation, which operates the Kootenai River Inn.

Mr. Smith stated that if the tribe entered into an agreement with the operator of the business to generate more sales by reducing prices, the agreement will generate more than 5% in taxes that will be returned to the tribe. He said he did not see how anybody can look at that legislation and not see that it could be used to create an unfair business advantage for the tribe. It will create more volume and sales, and will result in more than 5% going to the tribe. On the issue of whether the Department of the Interior consults with city or county government regarding lands to be put into trust: just because they consult, it does not mean that they'd be bound by anything local governments demanded. He said that he feels you cannot present any legislation involving the 5% sales tax that would be fair to the community.

Co-chair Black responded and said that many pieces of legislation he has voted on in his three years in the legislature could have a lot of "ifs", "ands" and "what ifs." When legislation is passed a statement of intent is attached. If it became obvious in the future that legislative intent is not being met, the legislature could take action to undo things. He said that it is not the intent of the legislature to harm Bonners Ferry and that the legislature would not let Bonners Ferry be injured. He expressed a need to have confidence in the legislative process and its evaluating and audit processes.

Mr. Kerby replied that the community's opposition to the proposal is legitimate, not a product of fear. He said that he would have more confidence in the measure if there existed the legislative ability to audit funds. However, the State of Idaho cannot compel the Kootenai Tribe of Idaho to produce their financial information. They've already denied it once.

Co-chair Black stated that there is no need for such an audit in relation to the proposed legislation. The state will have access to the records of the business, and would know exactly how much money is given to the tribe from the business's books. The state would be able to analyze the rents, and the other ways of subsidizing or creating unfair competition. He did not think we would have to analyze what the tribe was doing internally. The state would have access to the business and would know exactly how much money was being given to the tribe.

Mr. Kerby replied that certified public accountants have informed him that a person cannot accurately track the funds without looking at all the revenues of the operating entity. He said that by attempting to replace lost federal revenue we have gotten away from creating any jobs or economic development. Further, the tribe has not shown a need. Mr. Kerby stated that Mr. Smyser indicated that the tribe's federal money will be cut 34%, but we don't know how much of that money has already been made up by other tribal sources. Mr. Kerby asked how can we, as elected officials acting as fiduciaries with public funds, redistribute those funds to an entity that we don't know has a need? He said this seems to be contrary to public policy.

Mr. Smyser stated that this argument has been made repeatedly, and it appears that we want the Kootenai Tribe to be destitute and without any resources before we look at the issue. He said that the argument seems to be that unless the tribe is down and out, we shouldn't consider anything. The tribe has pulled itself up by its bootstraps and have turned the lives of its members around substantially. The tribe is looking at a future in which federal and other resources are drying up. He said the tribe is trying to plan for the future, when gaming probably will be restricted. Currently, the tribe is making money on gaming, but gaming is under attack. He said he believes that it is the position of the state of Idaho that this tribe will not be conducting gaming in the future. The state has gone so far as to change its constitution to prohibit certain kinds of gaming. He said he did not know when the Ninth Circuit Court of Appeals will decide current issues regarding gaming. However, such issues are before the court, and it should not be long before a decision is made. He said that if the court says that gaming in Idaho is fine, and the Idaho legislature doesn't go forward and say, "well, we're going to do something else to change," then he thought the Kootenais would be very happy to continue with the gaming operation they have. But the tribe is under attack, not only with the state, but a number of pieces of federal legislation that are attacking Indian gaming throughout the country. That is why we're here today. We are looking at a future that precludes gaming, but includes federal budget cutbacks.

Mr. Kerby commented that if Idaho cities, acting through their association, approached the legislature and said "we're doing well today, but it looks like there's going to be some changes in federal revenue-sharing, we don't know what our revenues might be in the future, but we would like you to return to us a greater share of state revenue-sharing, just in case," are you not going to want the cities to demonstrate where their money is, where its coming from, and where it's going before you give more of Idaho's revenues to municipalities?

Mr. Smyser stated that is the priority of the Association of Idaho Cities to have revenue-sharing with the state of Idaho. The association is trying to plan for a future in which more responsibilities are shifted from the federal government to the states. He sees it as a very close parallel with what the tribe is doing, and it is prudent for both entities. In the scenario, both the tribe and the cities are looking at a changing society. The changes are being brought about by federal budget cuts and shifting responsibilities from the federal to the state level.

Co-chair Thorne stated he agreed that it would be great if we could have an audit and accounting of the tribal funds, but that is not going to happen. The tribe is a sovereign nation. The next thing on the agenda is to ask if the Bonners Ferry members have any alternative proposals. They have made it pretty clear in their letter what their alternatives are. He then asked if there was any further discussion on the point?

Mr. Kerby stated that item 4, page 3 of the letter presents an alternative proposal. The Bonners Ferry committee members would have no objection if the legislature enacted legislation to authorize payment solely from state funds, of an amount sufficient to annually replace that shortfall from the federal budget. The payment should not be tied to any business, land, or economic venture that might produce unfair competition. The intent of the proposal is that it would not be borne by a small segment of Idaho's communities.

Co-chair Thorne asked if there are any motions pending from the Bonners Ferry community or the tribe?

Mr. Kerby moved, seconded by Ron Smith, that the committee adopt item 4, page 3, as he had just read.

Mr. Smyser offered an amended motion. He moved, seconded by Velma Bahe, that the proposal submitted by the Kootenai Tribe of Idaho be sent to the legislature as a whole, with a do pass recommendation.

Mr. Kerby asked that Co-chair Thorne rule that motion out of order, because it is a new motion that replaces the intent of the original motion.

Co-chair Thorne stated that Mr. Smyser's motion is in order. He said that an alternative motion is always in order, to any original motion, regardless of content.

Mr. Kerby stated he would encourage the committee members to vote no on this proposal.

Mr. Smyser, speaking to the motion, said he feels that the tribe has tried to meet the concerns of the community by limiting the proposal to one parcel of land. Originally the community objected that the tribe would leapfrog through Bonners Ferry buying one parcel after another. Then the concern was that the tribe would pour money back into the business. This proposal attempts to limit that. It takes the tribe out of the ownership loop, so the incentive to try and put the money back in would be eliminated. The tribe has made considerable efforts to meet the concerns of the community. Mr. Smyser said that when the tribe agreed to pull this legislation last year, he was assured by community members that they would work with the tribe to come up with an acceptable format. He believes that the tribe would all have been better off if it had just gone forward in the legislature last year, because he has not felt the give and take necessary for a compromise. He said he would have liked to have seen this be something we all walked out of here feeling good about, but it does not look like that is going to happen.

Mr. O'Fallon said there is still the question whether there is a financial need to support the proposal. In our belief, in this community, there is none. He said that based on the information presented to the committee, there is no need, and therefore, there is no need to compromise. Mr. O'Fallon recommended that the committee turn down Mr. Smyser's proposal.

Mr. Kerby said he thinks the committee members need to know that legislation such as this is not passed in a vacuum. It has very real repercussions in the community. Unless there is a consensus that we can work together, this legislation has the possibility of becoming very divisive and damaging to the welfare of Boundary County. He expressed hope, therefore, that legislation wouldn't be attempted to be forced through the legislature without some kind of consensus being reached in the community.

Co-chair Thorne assured Mr. Kerby that this legislation will be received and enacted as all legislation is. There will be hearings, there will be opportunity for discussion on both sides, and the majority will rule.

Mr. Kerby asked if he missed something, whether the committee had voted, and whether Co-chair Thorne was speaking in favor of Mr. Smyser's motion?

Co-chair Thorne replied that he was merely describing the legislative process. He said that we are not passing Mr. Smyser's bill today, we are recommending whether or not it is presented to the legislature, and in what form. Mr. Smyser has suggested that it be with the do pass recommendation. Co-chair Thorne doubted if this legislation would go through as it is. He said that if it goes through at all, there will be amendments made to it. Co-chair Thorne will request that an enactment clause be put in it. The enactment clause will be that the measure will become effective the day that gaming is curtailed. That could mean next year, five years from now, or never. If gaming continues, the measure would never be enacted.

Mr. Smith stated that according to his figures, the county income for a family of four is $15,000 to $30,000, but the Kootenai Tribe income for a family of four is $92,000. He said that there is no need for a tax break and he recommended that the committee vote against Mr. Smyser's motion.

Senator Wetherell stated that with the enactment clause, she could vote for Mr. Smyser's proposal.

Co-chair Black stated that his comments are similar to Co-chair Thorne's. Co-chair Black said that our charge when this committee was created was to try to work out a proposal or some consensus which, it is obvious has not been reached, that could be presented to the legislature. He said he had no doubt that the proposal is going to cause a lot of debate. Mr. Smyser's proposal would allow some type of a commercial enterprise. Co-chair Black said that in his opinion the committee has met the objections lodged. However, he cautioned that the vote he makes today is not necessarily the vote that he may make on the floor, because there's going to be a lot of debate, proposals and counter proposals.

Co-chair Thorne reminded the committee that there is an amended motion on the floor. Allowed under the procedures are an original, an amended, and an amended substitute motion. There is still room for another motion.

Mr. O'Fallon moved, seconded by Ron Smith, that the committee deny the tribe's request. He stated that the tribe is financially stable and will be financially stable in the future. He saw no need for state support.

Co-chair Thorne stated the committee now has three motions on the floor. He asked if there was further discussion.

Mr. Kerby said he thought that Co-chair Thorne's idea to amend the proposal so the legislation would take effect only if gaming ceased failed to recognize the amount of money that may already have been generated by gaming. It also fails to recognize that the tribe may be self-sufficient by that time. Mr. Kerby said that at the last meeting, Co-chair Thorne asked about the tribe's employment level. He assumed that the co-chair asked those questions to find out if there was a need. These questions have not been answered.

Senator Wetherell asked if they have any record of what gambling is providing to the tribe at this time?

Mr. Smyser stated they do not know what those figures are, but he commented that he just came back from the Silver Legacy Casino in Reno and there operators have pointed out the casino has a 97.6% payback level. He said he thinks the numbers provided by some members of the committee were distorted. Any gaming operation that only pays out 25% would not be in business very long. People get a better return at church bingo. The recommendation made by Co-chair Thorne is something that we will have to consider if this legislation is to go forward.

Mr. O'Fallon stated that the figures he produced were provided by Caesar's Palace of Las Vegas, and the payback was from 25% to 50%. Mr. O'Fallon suggested that Mr. Smyser contact Robert Morris and Associates regarding the issue.

Mr. Kerby stated it might be interesting for the committee members to know that the Association of Idaho Cities has voted to oppose this legislation.

Co-chair Thorne said there are three motions before the committee and asked for further discussion.

Mr. Kerby stated the only discussion seems to be that the members of the committee may not have had an opportunity to read the position statement of the community of Boundary County. Mr. Kerby said that the only facts presented to the committee show that members of the Kootenai Tribe are receiving approximately $23,000 per year, or will be. Regardless of whether or not casino-style gaming is curtailed, the tribe will continue to operate bingo games and other forms of gaming that are acceptable to the state of Idaho. Gaming revenues will not completely go away just because they do away with the casino. Unless other factual information is presented the tribe already is on its way to being self-sufficient.

Mr. McConnell restated the amended substitute motion made by Skip O'Fallon, seconded by Ron Smith, to deny the proposal forwarded by the tribe and a vote was held.

Mr. McConnell called the roll: Senator Thorne, Senator Wetherell, Representative Black, Velma Bahe and Skip Smyser voted -- No. Representative Pietsch, Ron Smith, Darrell Kerby and Skip O'Fallon voted -- Yes. The votes are four voting yes, five voting no. Co-chair Thorne stated by failing to reach a majority vote, the motion failed.

Mr. Kerby asked Co-chair Thorne to please inform the committee as to the parliamentary procedure in the event of a failure of the alternative proposal, what the next vote would be on?

Co-chair Thorne stated the next vote would then be on the original motion.

Mr. Kerby asked if that could be restated, please?

Mr. McConnell restated the first motion made by Darrell Kerby, seconded by Ron Smith, to adopt what is item number 4, on page 3 of the letter from Peter Wilson's office. It is the proposal of the community of Bonners Ferry that if legislation is enacted, it be to authorize payment solely from state funds of an amount sufficient to annually replace the shortfall lost to the tribe from the federal government.

Mr. McConnell then restated the alternative motion made by Skip Smyser, and seconded by Velma Bahe, to send the proposal by the Kootenai Tribe to the legislature with a do pass recommendation. Senator Thorne, Senator Wetherell, Representative Black, Velma Bahe and Skip Smyser voted -- Yes. Representative Pietsch, Ron Smith, Darryl Kerby and Skip O'Fallon voted -- No. The votes are five voting yes, four voting no. Co-chair Thorne stated having received the majority of the vote, the motion is passed.

Co-chair Thorne thanked everyone who participated in the committee. He said that the committee was charged by the legislature to come up with a proposal, and did so. The task was not easy, but he noted that everyone was diligent and helpful. He said the vote merely states that we will submit the proposal to the legislative process, and gives people plenty of time to get organized. He said the legislature will be glad to have participants in committee hearings. He did not know whether the measure will start in the Senate or the House. That will be up to the tribe and its advisors. He thanked participants for their efforts and wished them a Merry Christmas.

Mr. Smyser moved, seconded by Co-chair Black, that the meeting be adjourned. The meeting was adjourned.