CPA bond ratio takes a steep dive

The Commonwealth Ports Authority’s bond ratio for the first four months of the fiscal year plunged to a low 0.29, which the authority attributed to expenses incurred to meet retirement obligations, in addition to decreased airport revenue brought on by the pullout of Japan Airlines from Saipan.

Nine CPA employees, including former executive director Carlos Salas, retired from government service in December 2005, according to CPA comptroller George Palican.

These retirement expenses totaled $195,167. Of this amount, the CPA spent some $88,724 for the 30-percent retirement bonus given to seven of the nine employees who were eligible for the benefit. Salas received some $21,000 in retirement bonus, excluding other retirement pay.

The CPA’s airport revenues also dropped by $629,459 from some $4.29 million during the first four months of Fiscal Year 2005 to $3.67 million for the same period in the current fiscal year. Total airport expenses, however, increased by 20 percent from $3.13 million to $3.77 million—an increase of $639,855.

Palican assured, though, that the CPA will be able to meet its bond obligations this March. Monthly bond payments, which are due semi-annually, total $491,960.

Palican said the CPA will source out funds from the bond’s cash balance to meet the bond obligations, as funds available for bond payment during the period only totaled $144,967.

The 0.29 bond ratio falls far lower than the required 1.25 bond ratio for the CPA to meet its bond obligations and maintain liquidity. The bond ratio for the first four months of the current fiscal year becomes an all-time low, excluding Fiscal Year 2002, when bond ratio plunged to negative 0.28 following the 911 terror attacks.

In fiscal year 2003, the bond ratio improved to 0.94, but still lower than the target ratio. The CPA attributed the turnout to the outbreak of SARS and the Iraq war. The CPA met the bond ration requirement in FY 2004, which posted at 1.26. Palican said projected bond ratio for FY 2005 is 1.3.

“Even though we have a difficulty, we always have our bonds current,” Palican said.

Despite the low performance in the first four months of the current fiscal year, the CPA expects the official bond ratio to improve in the succeeding eight months, citing the addition of another Northwest flight to Saipan.

The CPA disclosed that aviation and concession revenue declined during the first four months due to the JAL pullout. Aviation revenue dropped by almost $500,000 from $2.76 million to $2.3 million, while concession revenues dipped from over $1 million to $843,182.

Enplanement during the period only totaled 197,508, while arrivals totaled 190, 124. During the same period in the previous fiscal year, depature and arrival totals reached 223,126 and 219,999, respectively.

Personnel costs during the period increased from $2.25 million to $2.59 million, while maintenance and operating expenses also jumped from $875,957 to over $1.17 million.

The CPA floated a $20-million bond in 1998 for airport improvement projects. Outstanding bond payments to bondholders Franklin Templeton of California and Oppenheimer Funds of New York remain at $17.6 million, and the CPA projects to complete bond payments and interests in 2028.