Decisions for higher education without politics

It is now time to revisit the issue of the La Fiesta Mall, Pacific Gateway project, and the Northern Marianas College. Right now it is appropriate to take a hard look at what has transpired since the above project was promoted in 2002. A recap of the events that took place over the past two fiscal years will make sense of how it evolved to where it is right now. Moreover, I believe it is important for the island community to have the information about the mall and Pacific Gateway in the forefront prior to the NMC Board of Regents meeting on July 28, 2004 to conduct a formal session on how to deal with the college’s current fiscal dilemma as well as issues involving accreditation with the Western Association of Schools and Colleges.

Looking in retrospect, it was quite evident that Gov. Juan N. Babauta was an ardent supporter of higher education for the CNMI before and subsequent to winning the gubernatorial race in Nov. 2001. Approximately six months after his inauguration in Jan. 2002, Kenneth Wright was hired as NMC president. Shortly thereafter, an announcement regarding the Pacific Gateway project was made by Wright and publicly supported by Babauta. Immediately following the purchase of the La Fiesta facility, there was talk that Babauta’s family would gain monetarily from the transaction. The governor denied that neither he nor his family members were recipients of any funds stemming from the transaction.

During Wright’s 18-month tenure as NMC president, the Asian Development Bank, Commonwealth Development Authority, and the U.S. Department of Agriculture-Rural Development organizations were approached to borrow and finance a projected $34 million for the ambitious venture. None of these organizations stepped forward and offered a loan package to make the project come to fruition. At the time, the issue of NMC going into debt without the approval of the CNMI Legislature was brought up by several members of the House and Senate. It is still an issue and, whether or not it will be addressed by the elected officials of the 14th Legislature, remains to be seen.

Subsequent to one year after the NMC Board of Regents hired Wright, the CNMI was approved for and issued $10 million in funding for two years from the Jobs Tax and Relief Act appropriated by the Bush administration in 2003. Approximately $3.5 million of that funding was issued to NMC Board of Regents via Babauta’s office to purchase the La Fiesta Mall for $7.5 million with a $4-million balance to be repaid back over a 20-year period at $200,000 per annum plus interest.

The transaction was made official by the approval of the regents and signed by then board chair Vince Seman. Shortly after, the governor’s office issued another $250,000 for the project for architectural improvements.

A year following the official purchase of the La Fiesta Mall in July 2003, the 14th Legislature authorized in June 2004 approximately $666,634 ($438,251 for personnel and $228,383 for operations) to cover the said obligations by the college through the end of FY 2003-2004 which will be on Sept. 30, 2004.

Thus far, the CNMI governor’s office has doled out approximately $4.42 million for the La Fiesta Mall and Pacific Gateway project ($3.5 million from the federal government and $916,634 from the CNMI fiscal coffers). Had the $4.42 million been expended on eradicating the institution’s deficit, making repairs on the As Terlaje campus, and creating a small reserve, in lieu of purchasing the La Fiesta Mall, the college regents would more than likely not be faced with being on tenuous financial ground and worried sick about the issue of maintaining and retaining accreditation with WASC.

Prior to Wright’s arrival to NMC, the college had a deficit. When Wright submitted his resignation in Feb. 2004, the college had a higher deficit and was in the red to the tune of $1.5 million and had no monetary resources available to take care of the $50,000 a month operational costs of the mall ($600,000 a year). Consequently, the board decided to shutdown the mall facility due to the inability to handle the fiscal obligation on a monthly basis and placed a moratorium on the hiring of any new employees for the college.

According to the present interim president for NMC, the budgetary shortfall at the end of FY 2003-2004 is projected to be in the vicinity of $250,000. If this shortfall is added to the $1.5 million that was a result of prior fiscal years, then the total deficit level for NMC going into FY 2004-2005 will be $1.75 million. If this deficit is not eradicated, then the accreditation status with WASC will not improve and maintaining acceptable accreditation will hang in the balance. If it should remain in the balance for up to two years, then there is a strong possibility that the institution will be asked to “show cause” in terms of why it believes that WASC should allow it to remain accredited. The College of Marshall Islands is currently faced with a “show cause” and will lose their accreditation by January 2005 if WASC does not accept their rationale. Because WASC must adhere to federal regulations of not allowing an institution to be tenuous in terms of accreditation for more than two years, they are compelled to discontinue the accreditation of an institution if warranted.

At the onset of NMC’s new fiscal year which commences on Oct. 1, 2004, the $200,000 annual payment plus interest from the La Fiesta transaction will be due on the $4 million balance of the $7.5 million transaction conducted in 2003. Since the funding that the 14th Legislature approved is only up through the end of Sept. 2004, the sixty-four dollar question will be: “Where will the money come from to meet and satisfy the annual payment with interest? Since there are no extra monetary resources in the general fund or in the reserves, and the fiscal instability of the college will eliminate any possibility of borrowing from a financial institution to pull themselves out of this problematic disposition, there are very few options available for the board to use to answer the above question.

Galvin Guerrero, a board member and chair of the finance committee, told the media in June 2004: “There is no money to run the college; only $90,000 is available and there is a $200K liability.” The $666,634 authorized in June 2004 by the 14th Legislature was clearly a temporary remedy for the serious fiscal problem expressed by Guerrero.

The total cost obligation for NMC for the La Fiesta Mall on an annual basis is $825,000, i.e., $600,000 ($50,000 a month for operations, and the annual payment of $200,000 plus interest every year for the next twenty years). If we add this $825,000 to the $1.75 million budgetary deficit for NMC, then the deficit mode for the college would be $2.75 million. Being in the red at this level would not be acceptable to WASC and would also be problematic for the college over the short and long run.

The La Fiesta Mall in San Rogue is a “Taj Majal” that is presently not benefiting the college, students, faculty, or staff of NMC. As a matter of fact, it is a financial drain on the college and island community because it is a structure that is presently without a function. Retaining it without doing anything with it would be like never wearing one of the five hundred pairs of shoes that Imelda Marcos purchased and placed in storage during the time her husband was President of the Philippines during the 1970’s and early 1980’s.

The survey conducted by Professor Sam McPhertes’ class in May 2004 revealed that 40 of 76 students said to “forget about La Fiesta” and 88 percent believed that the As Terlaje campus should be improved and renovated.” These results speak volumes about how the mall purchase and Pacific Gateway project has impacted local students.

A survey of the entire island community incorporating all islands should be taken to ascertain what the actual sentiments of the residents are regarding La Fiesta and Pacific Gateway projects. The comments made by the island community should not be taken for granted by the Board of Regents.

The members who comprise the NMC Board of Regents were all appointed by the governor. Since the regents are appointed, then there is always the possibility of their loyalty and politics getting in the way of prudent decisions. Not all decisions made with the inclusion of politics by appointed college board members will be in the best interest of the internal and external stakeholders of the institution. And since the decisions that the board will be making soon will be critical in terms of whether the college moves forward or falters with the WASC, then the board members must be clear with what the consequences will be of the decisions they make for the college.

Dr. Jack Angelo, a former NMC academic administrator, stated publicly that if the La Fiesta Mall was sold it would allow the regents to move toward bringing the college back to solvency. Dr. Angelo’s recommendation would not only help eradicate the current budgetary deficit of $1.75 million the college is besieged with, but it would also eliminate the necessity of trying to rationalize to WASC how NMC will financially support two campuses with no funds available in the coffers and the abovementioned deficit.

Two wrongs do not make a right. The first wrong was to allow the indiscriminate spending by the former NMC president, which placed the college more in the hole fiscally and jeopardized losing accreditation with WASC. The second wrong, which hasn’t been made yet, will be to try and keep La Fiesta Mall facility running without having the financial wherewithal to maintain it monthly and/or annually. Should the appointed NMC Board of Regents decide to allow politics into their decision regarding the La Fiesta facility and go with making a second wrong, then the consequences that follow inevitably will severely hinder the preservation and continuation of higher education in the CNMI. The stable future of the college will hinge on the prudent decisions by the NMC Board of Regents that will need to be void of politics or the influence of it.

Dr. Jesus D. Camacho
Delano, California