AAA Spark Meeting of the Regions

Native American Governments’ Borrowing Costs: Evidence from Municipal Bond Markets

• In Event: Capital, Governance, and the Public Interest

Abstract

The United States contains sovereign tribal nations that issue bonds to fund their governments’ activities and economic development. This study explores a potential determinant of tribal governments’ borrowing costs and investigates whether tribal governments face higher borrowing costs for their bonds than do other state and local governments. Our analysis of 362 bonds issued by 56 unique tribal issuers over the last 30 years suggests that borrowing costs are negatively related to access to revenues. To offer insights for policymakers, we then compare tribal issuances to securities issued by state and local governments. Controlling for a variety of issuance characteristics, including credit rating, offering type, and tax status, results indicate that tribal governments pay significantly higher yields than state and local governments. Overall, our findings offer insights for policymakers reviewing legislative acts intended to increase tribal governments’ access to the tax-exempt bond market by offering empirical insights their borrowing costs.

Authors

• Serena Loftus, Kent State University

• Sarah Shonka McCoy, The University of New Mexico

• Rui-Zhong Zhang, Kent State University