CUC debt limit at $5M

Gov. Benigno R. Fitial yesterday issued an executive order allowing the Commonwealth Utilities Corp. to borrow up to $5 million without first obtaining legislative consent.

The governor’s order amends another executive order issued only last Friday, July 25, 2008. In the previous order, Fitial sought to remove a requirement for any CUC debt over $500,000 to be approved by law and thus allow CUC to borrow an unlimited amount of money without going through the legislative process. The new version raises the cap to $5 million, instead of removing it altogether.

The amended version of the executive order also deletes a clause that would have allowed the plan to go into effect as soon as approved by one house of the Legislature. The removal of that clause makes the executive order compliant with the Constitution.

Under the Constitution, the Senate and the House of Representatives have 60 days to amend or modify an executive order. If no action is taken within 60 days, the executive order becomes law.

The House of Representatives referred the executive order to the House Committee on Judiciary and Governmental Operations for further study. The House made this decision after members raised concerns about the intent of the executive order.

Rep. Heinz Hofschneider criticized the administration for not providing specific justification for raising the debt ceiling. “This order is too ambiguous. What exactly are we trying to get a loan for—operations or capital improvement? We don’t know,” he said.

The Constitution prohibits any government agency from borrowing money for operations. However, there is an unresolved legal question as to whether this ban applies to CUC. The Attorney General’s Office has argued that CUC is not a government agency.

Rep. Victor Hocog questioned the need to borrow money for CUC, now that a law has been passed to earmark $3.4 million to the utility. Hocog, who sponsored the measure, said the Marianas Public Land Trust, the source of the earmarked funds, has offered assurance that the money will be available.

Asked about the purpose of the CUC borrowing plan, Press secretary Charles P. Reyes Jr. said, “CUC still has a severe cash flow problem and the Governor wishes to provide CUC with more tools and options to surmount its enormous financial challenges. Financial leverage is a tool used by many businesses and corporations and it should not be denied CUC if it will be used responsibly.”

Reyes added that the administration plans to discuss with the Legislature other options for CUC. He said the governor has not ruled out financing from Independence Bank, a Rhode Island-based bank that offers federal government-backed loan programs.