The Senate is expected to pass a crucial legislation that will set in motion a plan by the government to float bonds worth about $60 million as part of the efforts to match federal construction grants and finance various capital improvement projects on the island.
House Bill 11-435, offered by Rep. Karl T. Reyes, is one of the priority measures lined up during a Senate session tomorrow, according to Senate President Paul A. Manglona.
“If we can pass it without amendment, (it would be) better because it’s an urgent piece of legislation that we need to get out of the Legislature,” he said in an interview yesterday. “We realize that we need to come up with the matching funds and this is significant step towards doing that.”
The administration-sponsored measure passed the House last week that will also allow the Commonwealth Development Authority to enter into an interim financing for up to $30 million loan from any banking institution in a first step towards the proposed bond flotation.
Once the bonds are sold, it will mean a public debt for the people which must be repaid in 20 years, although they are anticipated to set off multiplier effect on the local economy in light of the downturn in tourism business.
“We need to move forward with the projects. The administration and this legislature have been working together in moving the CIP plan and this is a major step so we will do our best to pass the legislation,” Manglona pointed out.
Legislators are hoping to tap portion of the business gross revenue tax to pay back the debt at a favorable interest rate of five percent. At least $6 million will have to be set aside from these collections every year to meet the repayment terms of the bonds.
Proponents of the bill maintain the proposed bond flotation will enable the Commonwealth to immediately match 702 Covenant funding and use the money for vital infrastructure projects.
So far, the government has already raised nearly $42 million to meet the dollar-for-dollar matching obligations and will need at least $35 million to spend the remaining balance for a total of $77 million under its CIP share.
Washington will appropriate an equal amount of money as the CNMI comes up with the local funds under a bilateral agreement on the multi-year construction grants between 1996 to 2002.