Gov’t fast-tracks $60-M bond float

The CNMI government is laying down the groundwork for the expeditious flotation of the tax-exempt $60 million municipal bond, as finance managers and economic experts review current trends in regional and global economies.

The $60 million bond will be tapped to match available federal funds under the Section 702 of the Covenant, which guarantees U.S. funding for Capital Improvement Projects provided the Commonwealth identifies local matching money.

The CNMI government took the step in light of criticisms from Washington D.C. and the U.S. Congress on the Commonwealth’s inability to use federal funds earmarked for the CNMI under the Section 702 of the Covenant.

The CNMI gets $11 million annually for CIP. A backlog of approximately $44 million in construction grants has been accumulated by the local government. The full amount of $11 million would be diverted back into the CNMI, but in the form of smaller increments over a longer period of time.

Government finance managers are now looking at the stability of the Commonwealth’s fiscal house, particularly its revenue-generating capability and capacity to make significant reductions in budget deficit, according to Development Authority Board Chair John S. Tenorio.

Several other economic indicators, such as trends in visitor arrivals and the future of the Saipan garment manufacturing industry once U.S. trade quotas are lifted, are also under consideration.

However, the pending audit of the Commonwealth government remains the biggest concern in the $60 million municipal bond float, which will be handled by mainland U.S.-based underwriter Paine Webber Inc.

Paine Webber handled the $16 million bond floated by the Public School System last year. Mr. Tenorio said this gives the agency edge over other underwriters in terms of knowledge and understanding of the CNMI economy.

Half of the total money will be used to pay the $30 million borrowed by the CNMI government from the Bank of Guam. The interim financing was decided by the CDA board to nourish the economy with infrastructure projects identified in the 702 CIP Master Plan.

According to Mr. Tenorio, negotiations surrounding the interest rate of the $30 million interim financing took six months with the government ending up with a little over seven percent.

The government is hoping to expedite construction of infrastructure projects due to the possible multiplier effect of over $60 million worth of capital infrastructure projects which has been anticipated to reach more than $400 million in four years.

The CIP Task Force earlier completed the seven-year spending plan for $154 million in new capital infrastructure projects.

The first $11 million has been appropriated for the construction of a new prison facility and the completion of the long-delayed Marianas High School gymnasium.

Top priority will be given to the construction of a new sanitary landfill in Marpi and the closure of the Puerto Rico Dump due to the risks it pose on public’s health and the environment.

A Division of Solid Waste was created to expedite these efforts, according to Gov. Pedro P. Tenorio. A solid waste specialist has been hired to oversee the project.