Previous Story
CPA opposes measure stopping port fee collection
|
Posted on Sep 07 1999
The Commonwealth Ports Authority has told Sen Herman M. Manglona that it cannot support his proposed measure preventing the imposition and collection of passenger fees because it conflicts with the sale of the 1998 $33 million Seaport revenue bonds.
According to Carlos H. Salas, executive director and Roman S. Palacios, board chairman, Senate Bill 11-151 runs counter with the obligation of CPA officials to protect the financial integrity of the ports authority as required by the bond agreement and their ability to further meet the transportation needs of Tinian.
When CPA issued the bonds, it agreed to produce annual net revenues equal to at least 125 percent of annual debt service. With the current economic conditions, CPA projections suggest that without such fees, it won’t be able to maintain the cash flow to meet that agreement.
Salas and Palacios emphasized that the ports authority must be allowed to collect passenger fees in order to pay debt service, meet operating expenses and complete capital improvement projects already in progress.
Failure to collect fees to meet debt service requirements and expenses would make the ports authority to be in technical default of the bonds inviting a wide range of legal problems, the two officials said.
“While there are cures for technical default, CPA will be putting itself in a very difficult position to enter the capital market at a future date,” said Salas and Palacios.
Furthermore, if CPA complies with the intent of the bill, they said it may negatively impact efforts to achieve investment grade ratings on its seaport bonds which would help maintain the current low interest rates.
The two officials expressed concern that the current bondholders of CPA bonds may look at Senate bill as a form of control over CPA’s financial affairs that could suggest a direct conflict with bond agreements made when the 1998 bonds were sold.
Amid the downturn on the island’s economy, CPA would have to look for another source of revenue if it must waive or reduce passenger fees. A subsidy from the legislature would become necessary if it does not have an alternative source, Salas and Palacios said.
