Santos provides OPA info to assist probe on six issues raised by MPLT against DPL
Public Lands Secretary Teresita A. Santos has provided the Office of the Public Auditor with information that, according to her, will assist OPA and Office of the Attorney General in their investigation on each of the six issues the Marianas Public Land Trust board of trustees had complained against DPL.
In her letter Tuesday to acting Public Auditor Dora Inos-Deleon Guerrero, Santos provided OPA with information that she believes renders moot the MPLT trustees’ complaints against DPL.
The MPLT complaint identifies six issues that they believe show a violation of DPL’s constitutional and statutory responsibilities. The MPLT trustees, through counsel Robert T. Torres, asked the OAG and OPA to investigate DPL for its alleged continuing withholding of net land lease funds and failure to remit the funds to MPLT.
For one, MPLT takes issue with DPL’s determination that no remittances to MPLT are due for fiscal years 2021 and 2022.
Santos said, however, in her letter to Inos-Deleon Guerrero Tuesday that MPLT improperly assumes that there should be a remittance due every fiscal year.
Santos pointed out that, in DPL lawsuit against the CNMI, the NMI Supreme Court determined that, although Article 11 Section 5 is no longer constitutionally operative following the dissolution of the Marianas Public Land Corp., MPLT exists in perpetuity and is intended to continue to receive lease proceeds from public lands.
Santos said DPL has therefore continued to remit funds as required by Article 11, Section 5 (g), and has continued to retain only “the amount necessary to meet reasonable expenses of administration and management, land surveying, homestead development, and any other expenses reasonably necessary for the accomplishment of its functions.”
Santos said in those years in which the revenue to DPL is lower than average or its expenses are higher than average, the amounts spent by DPL as reasonably necessary expenses may be higher than its collected revenue.
For instance, she said, DPL did not receive the total amount of its forecasted revenues in 2021 due to the COVID-19 pandemic.
She said DPL’s revenues include additional rent paid by lessees and is tied to the Business Gross Revenue received by the lessees, so significant reductions in a lessee’s BGR results in reductions in DPL’s revenue.
In addition, she said, numerous lessees simply failed to make payments of base rent, despite DPL’s collection efforts.
DPL also had increased expenses in 2021 and 2022, she said, to maintain public lands that were not under lease, such as Mañagaha Island and the Mariana Resort & Spa property.
Santos said that, based on DPL’s unaudited financial reports, no remittances were due to MPLT in 2021 and 2022 because DPL’s revenue did not exceed its reasonably necessary expenses in those fiscal years.
She noted that DPL’s practice has been to remit funds to MPLT once an excess is verified by an audit of its financial statements.
Santos said the audit for 2021 is expected to be completed within the next few weeks, and DPL has issued a request for proposals for the 2022 audit.
To accommodate MPLT’s requests for earlier remittances, Santos said DPL made an estimate remittance for 2023 based on its unaudited financial statements, in the amount of $500,000.
As for MPLT’s complaint that DPL failed to remit $1 million from settlement funds in the lawsuit involving Mariana Resort & Spa property, Santos said MPLT is correct that DPL must remit supplemental or excess funds to MPLT, but its determination that the funds are supplemental or excess is “premature.”
At this time, she said, DPL has not made any expenditures from the $1 million in revenue now recorded for fiscal year 2024. To remain in compliance with the statutory mandate, DPL has now submitted a supplemental budget for its proposed additional expenditures, she said.
The intended expenditures include purchase of a vessel and vehicle, professional services, and maintenance costs for the DPL Compliance Division; the purchase of a vehicle for the Office of the Secretary; funding for land use plan development; and funding for surveying work on Rota and Tinian to promote homestead development.
Santos said the supplemental budget also itemizes the estimated $300,000 that will be transferred to MPLT at the end of the fiscal year. She said any remittance of these funds to MPLT, minus DPL’s reasonably necessary expenses for its administration, must be determined after the end of fiscal year 2024.
As for the MPLT trustees’ allegation that DPL failed to remit $2.5 million transferred by then-governor Benigno R. Fitial in fiscal year 2010, Santos said DPL has verified that this amount was transferred pursuant to a declaration of a state of emergency signed by Fitial on June 8, 2010.
Santos said Fitial directed the immediate reprogramming of the $2.5 million “due to the imminent incapacity of the Commonwealth Utilities Corp. to provide critical power service to the CNMI.” Fitial noted the imminent threat to the Commonwealth from a disruption of water, wastewater, and electrical services due to CUC’s financial uncertainties.
Santos said DPL, however, does not have information regarding any efforts taken to secure the return of those funds to DPL.
To the extent that the transfer of funds to the general fund in 2010 infringed on Article 11 Section 6 of the NMI Constitution, reimbursement of the $2.5 million transferred by DPL from the general fund would be appropriate, Santos said.
“Any such recovery of those funds would be returned to the DPL Operations Fund as revenue in the current fiscal year from the management of public lands and subject to expenditure by DPL for its reasonably necessary costs of administration,” said Santos, adding that DPL does not object to MPLT requesting a direct appropriation from the general fund in this amount.
Regarding the MPLT trustees’ allegation that DPL failed to remit $1.977 million paid by DPL for land compensation, Santos said they have verified from their records that between March 2009 and November 2010, DPL reimbursed the CNMI $1.39 million for land compensation payments made by the CNMI and recorded $583,508 as due the CNMI for additional reimbursement.
She said DPL has not confirmed whether the additional $583,508 was later transferred to the CNMI.
Santos said DPL also does not object to MPLT requesting a direct appropriation from the general fund in this amount.
In the MPLT trustees’ complaint against DPL’s alleged unauthorized creation of bank accounts to deposit land lease funds, Santos acknowledges that DPL has several bank accounts into which revenues from the management of public lands are deposited, including a savings account, several investment accounts opened by DPL to maximize interest on funds held for operations, and an account in which DPL maintains lessee security deposits.
Santos said DPL has been unable to determine when such accounts were established, but notes that at least some of the accounts predate the adoption of the Public Lands Act of 2006, Public Law 15-2.
Public Law 15-2 establishes a fund to be known as the “DPL Operations Fund” to be maintained by the Department of Finance, and mandates that all revenues received by DPL are to be deposited into such Fund.
Santos said this mandate has not yet been fully implemented as Finance only recently created the DPL Operations Fund account.
She said the transfer of all funds currently held by DPL (with the exception of lessee security deposits) is expected to be completed within the week.
On the issue of DPL submitting its budget to the Legislature for mere informational purposes, Santos said DPL has continued to submit its annual budget to the Legislature for information purposes only, as stated in Article 11, Section 5(g).
She said DPL’s practice is consistent with the authority granted to it in Public Law 15-2 and the Legislature has not questioned this practice in reviewing its annual budget submissions.
“To the extent that P.L. 15-2 is held to be unconstitutional by Commonwealth courts or is amended by the Legislature, DPL will, of course, comply with applicable law,” the secretary said.
Teresita A. Santos
