CPA presses ahead with port fees hike

The Commonwealth Ports Authority will meet with the Legislature and airline executives this week to explain the urgency of carrying out a rate increase at the airport so that it can repay its $53 million debt.

Carlos H. Salas, executive director, said he will discuss with officials of Continental Micronesia and Northwest Airlines on Guam the planned rate hike. A similar meeting was also held with Japan Airlines executives. A week ago, CPA officials led by board chairman Roman S. Palacios talked to Gov. Pedro P. Tenorio seeking his support on the rate increase.

Amid mounting losses from its operation, Salas had expressed concern that the ports authority will not be able to meet the required 1.25 percent debt service requirement. If the ports authority fails to implement an increase, it will be forced to seek subsidy from the government to be able to pay for its obligations, he said.

The ports authority was forced to carry out a $53 million revenue bond flotation in March 1998 so that it can finance the necessary capital improvement projects both at the airports and the seaports.

CPA is paying a 6.25 percent interest rate for the airport bond and 6.40 for the seaport bond. Both series were sold non-rated.

In a move to maintain the current interest rates, the ports authority has hired the services of two bond rating agencies — Fitch IBCA and Standards and Poor’s. A bond rating will also prove CPA’s capability to repay its debt.

A study made by Ricondo & Associate, an Ohio-based firm commissioned by CPA to make an analysis, projected a 4.5 percent growth in the aviation division which is not even sufficient to pay the revenue bonds.

As a result, it is necessary for the ports authority to increase the passenger facility charge by 39 percent from $5.79 to $8.00 and a 65 percent increase of the landing fee from $.85 to $1.40 .

Although the ports authority has been implementing various cost-cutting measures since last year, CPA is still having difficulty to survive as the tourism economy continue to suffer due to Asia’s financial crisis. With declining tourist arrivals, Salas said CPA has been incurring losses every month making it difficult for the ports authority to meet its operation.

Similarly, a study conducted by Booz, Allen & Hamilton on the marine division of the ports authority disclosed that CPA will have to carry out a 30 percent rate increase in the year 2000-2002 and an additional five percent every five years.

Based on the analysis of the seaport operation, the garment industry has shielded the CNMI from the tremendous effects of Asia’s economic problems and the departure of manufacturers would devastate the island’s economy.

The board of directors approved a combined $11.10 million budget for the airport and the seaport for fiscal year 1999. Of this, some $9.73 million has been allotted to the airport and $1.37 for the seaport. Salaries and wages of employees at the airport operation make up about 58 percent of the total budget.