Reyes prefers direct loans over bonds

The chair of the powerful House Ways and Means Committee yesterday renewed his call to Gov. Pedro P. Tenorio to seriously look into foreign financing in a bid to bail out the cash-strapped government from its worst crisis in years.

Rep. Karl T. Reyes also said he doubted whether bond flotation would work when the NMI government is scrambling for funds to meet operational costs and could hardly identify local sources to repay its financial obligations.

He maintained foreign companies willing to invest on infrastructure development projects will help save the government from the deepening financial crisis as it would stir the local economy and increase revenues.

“If we can find a company or a group of investors to loan money to the CNMI based on easy payment terms, then we can use that for our (Capital Improvement Projects),” Reyes told in an interview.

The legislator was reacting to plans of the Tenorio administration on how to finance some $77 million in federal funds as provided in the Section 702 of the Covenant which have been sitting idle since 1995 due to CNMI’s failure to meet the matching requirement.

If it allots an equal amount from local sources, the island government will tap $154 million in capital-intensive projects ready for construction as early as next year.

But so far, only $58 million have been identified by a government body tasked to draw up a seven-year CIP master plan which is required before CNMI can receive the federal grants.

Reyes pointed out, however, additional funds can come from direct loans that will be negotiated with private firms willing to raise the seed money for use as matching obligations of the government.

“What else can we do if we don’t have the money now? You have to borrow them,” he said, adding that terms will have to be worked out for easy payment plan.

Mike Sablan, chair of the CNMI Multi-agency 702/OMIP CIP Task Force, has underscored the difficulty in sourcing local revenues to match the U.S. assistance dollar-for-dollar in view of the worsening economic crisis here.

A feasible financing scheme is currently being reviewed by the task force as an option to get the projects going seen by local leaders as their last hope to revitalize the slowing business activity on the island.

“A lot of the projects are not revenue generating so they won’t be attractive to developers to operate,” Sablan explained in an earlier interview.

“But we have discussed at length the possibility a design-build-finance construction scheme to push forward these projects, especially those where local matching has yet been identified,” he added.

A good number of offers from private companies have been received by the government to handle the CIP-funded infrastructure development, including a new prison facility on Saipan, according to Sablan.