Huge Navajo Farm Project Still
Losing Money After Two Decades

(Editor's note: The moral of this story is that taxpayers' money isn't the solution to all problems, especially if, as apparently was the case here, the initial problem was what to do with a whole pile of taxpayers' money.)

ALBUQUERQUE, N.M. —(AP)— When it is complete — if it is ever completed — the Navajo Indian Irrigation Project, which brought green vegetable farms to an arid swath of San Juan County, will have cost about $1 billion.

It's all money from the United States government meant to settle water claims and establish a farm to provide jobs and industry for the Navajo tribe.

But to date, the 61,000-acre Navajo Agriculture Products Industry farm, known as NAPI, has been a huge financial failure. Despite a few profit-making years, it has lost an average of about $1 million annually over the past 24 years. Last year was one of the worst: $4 million in the red.

The numbers don't look good. And NAPI general manager LoRenzo Bates knows it.

``Why are we losing money? It's constantly brought up. Constantly,'' Bates said.

He has heard it so often, he can parrot the line of questioning: ``'You don't pay taxes. You don't buy land. Your water is basically free. Why can't you make it?'''

Bates believes he knows.

— The farm has been treated as an employment project and has paid twice as many workers as it needs.

— Tribal and federal red tape keeps the farm from acting like a business and prevents long-term leases of farmland to off-reservation growers.

— The land that water is pumped to takes thousands of dollars an acre to level, till and irrigate in the years before it can produce a marketable crop.

Add it all up — and factor in the vagaries of farming — and it should be no surprise that the farm has struggled, Bates said.

To change the tide, the company has cut its work force from 320 full-time employees last year to 182 today. It hopes to trim the number to 160.

Bates makes $68,000 a year as the farm's general manager. His seven division directors each are paid salaries between $50,000 and $60,000. The average wage of a NAPI worker is $17,000 a year.

In addition to cutting jobs, Bates instituted a direct-deposit system to cut payroll costs; planted pumpkins, a high-profit crop; and bought crop insurance to guard against large losses due to uncooperative weather.

Bates, who has managed the farm since 1993, knows that this is do-or-die time and hopes that reforms have not come too late.

After years of struggle, the success of the whole venture rests on the dimming likelihood that a french-fry processing plant will be built to chop up the farm's potatoes.

The french-fry plant has hovered like a mirage of economic independence since the mid-1980s. The farm has flirted with two potato-processing companies over the years. Two years ago, the farm signed a letter of intent with R.D. Offutt Corp. of Minnesota, one of the giants of the potato industry. It then began looking for ways to fund its portion of the deal — a water delivery system and potato-processing building.

The Navajo Nation kicked in $10 million toward the deal. And the New Mexico Legislature passed a law that would allow Indian tribes to borrow money from the state through the New Mexico Mortgage Finance Authority.

It all looked bright until the deal hit snags.

The Navajo Tribal Council balked at guaranteeing the $20 million loan that would allow NAPI to build the plant. And lawyers for NAPI and Offutt realized they were structuring a partnership that would never be approved by the Bureau of Indian Affairs under a law which permits only tribes, not tribal enterprises, to enter into long-term leases.

The tribal council's economic development committee, the farm's first hurdle to getting tribal cooperation on the deal, convened a meeting of NAPI managers, Offutt representatives and the tribe's comptroller and attorney general two weeks ago to find a solution.

One option is to restructure the partnership so that the tribe is the major partner and leases to Offutt. Another is to allow the farm to shed its tribal enterprise status and become a federally chartered corporation.

That would solve another of the problems. Offutt wants legal disputes heard in federal court, not tribal court. If NAPI were a federal corporation, its legal matters would fall under federal court jurisdiction.

The clock is ticking. The tribe's $10 million appropriation expires Jan. 23. That is the same day the letter of intent between NAPI and Offutt expires.

David John, a council delegate who heads the economic development committee, has given the matter to the parties to settle.

``Those folks better come back with something — or else,'' he said. ``We want this. This is economic development.''

The speaker of the Navajo Tribal Council, however, has called on NAPI to begin making a profit before it comes to the tribe to ask for a guarantee to the loan that would set the french-fry plant in motion.

Navajo President Kelsey Begaye said through a spokesman that he wants the tribe to complete a feasibility study of the project before he decides whether he would support a tribal loan guarantee.

Time is running out on the project in another sense. Sen. Raymond Kysar, the Farmington Republican who sponsored the bill two years ago that allows the tribe to borrow from the state, is angry that the tribe has not acted on the offer.

``I had a commitment from those people that it would get through the council and they didn't do it,'' Kysar said. ``I'm not so sure that I shouldn't go in and rescind that bill.''

The farm made profits between 1986 and 1992 when it was operated under different management.

``It's not impossible,'' said Al Keller, who directed the farm during those years.

When Keller was in charge, the farm was smaller than it is today and made profits mainly off potatoes, he said. Additionally, Keller said, those were years of good weather and fairly high prices.

Losing money on a large corporate farm is not necessarily the fault of poor management, Keller said.

``That ain't hard to do, especially if the weather doesn't cooperate just right,'' Keller said.

The biggest obstacle to profitability, Bates said, is the continued expansion of the farm as the Bureau of Reclamation works toward its goal of irrigating 100 percent of the 400-square-mile project.

Six of the planned 11 sections are open now, constituting 60,000 acres. A seventh 10,000-acre section is due to open this year.

Bates said each time a section is opened, the farm must pay to have it leveled, buy center-pivot irrigating systems for the fields, enrich the soil and plant and fertilize cover crops to ready the earth for vegetable planting.

``It's not farmland. You make it into farmland,'' Bates said. ``And it's an expensive process.''

But calling off expansion isn't an option the tribe would support.

The Navajo Nation wants the irrigation project completed because it will help protect the tribe's water. When more acreage is farmed, the project uses more water. If the tribe doesn't use the water, it is in danger of losing its right to it.

The french-fry plant would make expansion pay, Bates said, by providing a willing buyer for tens of thousands of additional acres of potatoes.

With lease payments and an expanded potato crop, the farm could routinely turn a profit, its managers say.

Without it, the farm will limp along as it has for the past two decades, although it would be difficult for the tribe to make a case for Congress funding the remaining portion of the irrigation project, Bates conceded.

``NAPI will always be around one way or another,'' Bates said. ``How profitable it will be is another question.''

Although the farm receives no operating subsidies from either the tribe or the federal government, the pumping of water to irrigate former sheep-grazing land is a benefit the tribe should capitalize on, not waste, Bates said.

``If you get a freebie you should capitalize on it,'' Bates said. ``The Navajo Nation is not accustomed to taking financial risk.''