The Variety’s article of Aug. 3, 2012, "Bond to Cost NMI $30 Million a Year," seems to miss the point of pension obligation bonds (POBs) entirely.
In the article, the Variety quotes Maggie Ralbovsky, who is not a policymaker, as advocating against issuing POBs since the interest cost, according to her, would be $30 million per year, and since the fund might incur "negative arbitrage" (earning less return than paid to bondholders), while ignoring entirely the purpose of POBs.
The purpose of POBs is to shore up the otherwise bankrupt NMI Retirement Fund, which the CNMI consistently has been unable to fund since the 1990s, even in the face of a court order. POBs are the ONLY viable means of accomplishing this objective today.
While it is true that, assuming a $300 million issuance and a 10 percent interest rate (which may or may not be the actual rate the CNMI would pay), interest would be $30 million in the first year, this amount would decline as bonds are paid down annually.
More importantly, this ignores the growing unfunded obligation of the NMI Retirement Fund, which has grown significantly MORE than $30 million per year over the last several years. This is a debt of CNMI just as surely as the POBs would be. POBs serve the dual benefits of both replenishing the NMI Retirement Fund immediately and converting the debt to bonds, which the CNMI cannot avoid paying as it has its obligations to the NMI Retirement Fund.
The recent bankruptcy filing of the NMI Retirement Fund and the prediction that funds will be depleted by 2015 emphasize the need to address this with urgency and make the moral and business common sense choice by funding a legal debt of the CNMI, ensuring retirement benefits owed to retirees and keeping the money circulating in our economy, which we surely need. Please join me in supporting Initiative 17-5.
Ivan A. Blanco
Capitol Hill
Home | Weather | Advertising | Classifieds | Subscription | Contact
Us | About Us | Archives
©2006 Saipan Tribune. All Rights Reserved
