$60 M bond float for CIP under AGO review

A plan by the government to borrow between $30 million to $60 million for its capital improvement projects gained ground yesterday after the Attorney General’s Office stepped in to review its legality.

House Ways and Means Committee chair Rep. Karl T. Reyes said the review will determine the exact amount of bonds to be floated and the extent of projects to be funded.

Once the legal questions are cleared, it is more than likely that the government will begin the process of choosing which investments firm will handle the bond flotation.

“If we get clearance from the AG, yes it’s a sure thing,” Reyes said in an interview after meeting yesterday with Mike Sablan, head of the government CIP task force, as well as representatives from the attorney general.

The review is needed to find out which CIP will be qualified to receive funding from the proceeds of the bonds as well as whether projects that have yet been completed can still be included in the plan.

“First we have to clear the hurdle of what can and what can not (be part of the bonds) and how far back we can take these funds and use it for local matching,” Reyes explained.

The Commonwealth is hoping to borrow up to $60 million from investment firms to match federal grants under the Covenant 702 appropriation in a bid to immediately tap millions of dollars in CIP.

Government officials and lawmakers met early last week to lay the groundwork for the plan which, if it goes through, will be the largest financial obligation of the CNMI.

The Northern Marianas also expects to release within the next five years between $60 million to $120 million in CIP money for its massive infrastructure development plan intended to boost the local economy.

This will also take care of a huge portion of the $154 million in both federal and CNMI funds under the seven-year grants which have been kept idle since 1996 due to failure by the island government to meet the matching requirement.

Reyes, however, stressed a forthcoming legislation fleshing out the proposal has to come up with specific amount to avoid incurring interests that will not set aside right away for certain projects.

“If we don’t need that much to use immediately, then we might come back with request to authorize floating of the bond and certain amount will be used first so that we don’t have to pay much the interest,” he said.

The representative was the sponsor of two initial CIP measures that allocated close to $33 million in both local and federal funds for projects such as the new prison on Saipan, the expansion of the Rota Airport runway and the improvement of West Tinian Airport.

Reyes assured the government is allowed under the Constitution to borrow money for infrastructure plan, and not for operational costs, but they have to be specific on the amount to reduce the repayment obligation of the government.

Successfully conducted by the Commonwealth Ports Authority and the Public School System for its various facility improvement projects in the past, bond flotation requires full faith and credit backing of the government to assure investors that it will remain committed in paying off its debt.