CPA favors hiked fees •Increasing port fees only alternative to gov’t subsidy

Posted on Dec 21 1998

The Commonwealth Ports Authority will be forced to seek subsidy from the government if it will not raise its airport and seaport fees so that it can repay the $53 million bonds, said Carlos H. Salas, executive director.

“Unfortunately, this alternative is highly unlikely since as we all know, the government is also grappling with its own financial problems,” said Salas. Proceeds of the bond flotation were used to pay its obligations to finance the necessary capital improvements both at the airports and seaports.

Due to the continuous decline in revenue as a result of Asia’s financial crisis, it is unavoidable for the ports authority to increase its fees, according to an analysis made by two financial studies on the airport and the seaport.

Asked how the ports authority will deal with the expected political opposition to raise its fees, Salas said CPA must prove that this is unavoidable because the agency has to pay for its obligations.

The airport study made by Ricondo & Associates projected a mere four and a half percent growth in the aviation division which is not sufficient to pay the $20 million airport revenue bonds.

This is way below the 14 percent growth record of the airport in 1997, thus it is necessary to increase its landing fee by 68 percent from 85 cents per 1,000 gross landing rate to $1.40.

Aside from Asia’s economic problems, the pullout of the garment industry would have a tremendous impact on the seaport revenue specifically its capability to pay the $33 million bonds. More than 50 percent of the containers coming in and out of Saipan belong to the garment factories on the island.

The study conducted by Booz, Allen & Hamilton emphasized the need for the seaport to increase its rate by 30 percent in 1999, an additional 30 percent in the year 2000 and 2002. Furthermore, the ports authority must implement additional 30 percent increases every five years.

The presence of the garment industry on the island has shielded the Northern Marianas from the direct impact of Asia’s economic turmoil. But the future of the industry on the island remains uncertain because of the implementation of international trade agreements and threats of legislation from the U.S. Congress.

The ports authority has sought a reduction in the bond’s interest rates in a recent meeting with two rating agencies which advised the CPA to fix its financial problems first.

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