IPI request to make a payment plan for $15.5M casino license fee is denied
The Commonwealth Lottery Commission yesterday took out from its agenda several proposals of the Imperial Pacific International (CNMI) LLC, but allowed IPI to defer for six months its payment of the $20-million community benefit fund.
At the CLC meeting at the Office of the Governor’s conference room on Capital Hill, CLC chair Mark O. Rabauliman said that IPI made nine requests, but the commission would only entertain the community benefit fund matter because the other IPI proposals are covered by law or need legislative action and review by the Commonwealth Casino Commission.
CLC commissioners David DLG Atalig and Robert Guerrero agreed with Rabauliman to amend the meeting’s agenda.
After discussions with other commissioners and their legal counsel, assistant attorney general John P. Lowrey, Atalig moved to entertain the postponement of the payment of $20 million in CBF due in October 2020 for six months due to “force majeure.” That refers to unforeseeable circumstances that prevent someone or a business from fulfilling a contract. The three commissioners unanimously voted in favor for the deferment.
Earlier in the meeting, Atalig moved to grant IPI’s proposal to pay the $15.5 million in installments due to “force majeure,” but he later withdrew that motion after Lowrey advised that CLC has no authority over the matter.
Atalig initially did not agree with that opinion. This prompted Rabauliman to call for a recess to discuss the issue further with Lowrey and the other commissioners.
Lowrey said the CLC is capable of applying the “force majeure” clause to the community development fund liability for October 2020. “The force majeure clause goes up to six months,” he said.
In accepting the “force majeure” argument, it would be possible for the CLC to attach some requirements to it, Lowrey said, but that they would have to be very careful, to be very clear on what those requirements are.
“And I don’t think we have a clear proposal before the commission today to be able to vote on what those requirements would be,” he added.
Lowrey noted that it would be within the CLC’s power if it decides to apply the “force majeure” to the October 2020 liability to then use that six months for negotiation or further discussion of an amendment for a broader restructuring of the CBF.
In IPI’s request for amendment No. 9 of the casino license agreement, IPI chief executive officer Donald Browne proposed, among other things, to postpone payment of the 2020 community benefit fund due to the COVID-19 pandemic.
Browne proposed that any CBF that are past due be paid back for development of infrastructure such as road, sewer, public schools, and social benefit projects, subject to the approval of both the CNMI government and IPI—provided, however, that any request for such payment of overdue CBF will not be made within three years immediately after the approval of the proposal.
He said the annual CBF payments in the amount of $20 million will resume upon the first full year of operation of the first hotel on the Marpi land.
At the hearing, some persons, including Rep. Tina Sablan (D-Saipan), spoke against granting IPI’s requests.
As for IPI’s payment plan proposal for the annual casino license fee, Rabauliman said in a later interview that Lowrey advised them that that’s something that’s already in the law and that the CLC can CLC can do nothing about.
Rabauliman said they then moved on to the deferment of the community benefit fund.
“But, you know, even with that, we got clarification on…the length of a deferment that is allowable under the casino license agreement,” he said.
Rabauliman said he mentioned that the community benefit fund is tied indirectly to having the room counts in the integrated gaming facility be counted toward the 2,000 rooms that is required by law.
Rabauliman said he is hoping that IPI will use this time to start paying off what is needed, so that the suffering of some in the community can be relieved.
“So that being said, we’re just trying to give them a fair shake. At the end of the day, that’s what they’re asking. Unfortunately, we couldn’t provide everything. But with that, hopefully it does give them some sort of relief,” the chairman said.
At the hearing, Browne said IPI needs a commitment from the government about the exclusive casino agreement. Browne said it is undisputed that there exists casino gambling devices outside the casino, and that IPI is actually being taken advantage of.
Atalig said the purpose of deferring or postponing the $20 million CBF will allow IPI to use this money to finish the casino resort project. “That my goal is that they finish this and we avoid having an unfinished facility in Garapan,” Atalig said.
According to IPI’s latest proposal, the base amount of the annual casino license fee will remain at $15 million and that it will pay $7.75 million within 10 days after the CLC’s approval of its request to amend the casino license agreement, and pay the remaining $7.75 million on Feb. 12, 2021.
The casino license agreement adjusts the annual casino license fee from $15 million in Years 1 to 5 to $15.5 million in Years 6 to 10. This year is the 6th.
Browne said payment of the full $15.5 million casino license fee per year will resume in January 2022.