The real reason why ‘La Fiesta’ became ‘La Fiasco’

Gov. Juan Babauta made it evident subsequent to his inauguration in January 2002 that he had a genuine interest in the NMC BOR purchasing the La Fiesta Mall with a leasehold arrangement until the year 2024, as well as the implementation of the Pacific Gateway project. The governor’s involvement and support for the La Fiesta Mall acquisition and Pacific Gateway became apparent when he signed the Memorandum of Understanding with BOR chair Vince Seman in August 2003. Signing the MOU was a validation that the governor was going to make a serious commitment to ensure there would be moral and monetary support available from his office to the NMC BOR. The only problem with this arrangement was that the governor neglected to involve members of both houses of the Legislature and allow them to be able to analyze and deliberate the monetary ramifications surrounding the purchase of the physical structure, as well as the leasehold arrangement with the property owners.

When the $3.5 million from the Jobs and Tax Relief and Reconciliation Appropriations Act of 2003 was transferred from the governor’s office to consummate the $7.5 million transaction with the proprietors of the mall and property, the governor became intimately involved with not only the policy making of the BOR and NMC, but the direction of higher education in the CNMI as well. This can be substantiated by his later comments to the media indicating, “the $3.5 million investment can’t be abandoned”, as well as assuring the BOR chair, Kimberlyn King-Hinds, that the college would be reimbursed for the operating expenses of $50,000 a month for several months. Subsequently, some $350,000 from the Tobacco Control Fund was forwarded to the college to meet the fiscal responsibilities through September 2004.

The governor’s office forwarded a total of $3.5 million from the JTGRRA 03 funding between August and October 2003. Another $1.1 million was subsequently given, making the grand total of $4.6 million expended on the La Fiesta Mall transaction. If we could turn back the clock and undo the La Fiesta Mall transaction, the $4.6 million could have been used for building repairs at As Terlaje, enhancing important programs like elementary and vocational education, giving the faculty much deserved salary increases that they have been waiting for nearly a decade; and eradicate most of the budgetary deficit the college is currently besieged with and remove the prospect of losing valuable accreditation with WASC.

Prior to these funds being forwarded to NMC, there was never any formal request for a “business and marketing plan” submitted by the governor to the BOR and the then NMC president Kenneth Wright. The only thing that was presented was a PowerPoint presentation by Wright that was not substantiated by a verifiable and substantive business and marketing plan outlining the upside and downside of the La Fiesta Mall acquisition and Pacific Gateway project.

The Speaker of the 13th House of Representatives, Heinz Hofschneider, repeatedly asked Wright and the BOR during 2002 and 2003 for a formal business plan for the Legislature to peruse and deliberate on. Nothing was ever produced and the answers to the questions posed by the members of the 13th Legislature regarding the La Fiesta Mall acquisition and Pacific Gateway project were never answered by the BOR and Wright during his 18-month tenure.

The Commonwealth Constitution stipulates that NMC shall have “autonomy” in the administration of its affairs and shall formulate policy relating to the higher education needs of the CNMI. Nowhere in Section 2 of Article XV does it stipulate that the BOR must concur and adhere to the desires of the governor’s office regarding higher education. Moreover, Section 21 (Boards and Commissions) of Article III (Executive Branch) states that “the members of such a board or commission shall be independent and may be removed only on grounds of gross neglect or dereliction of duty, breach of fiduciary duty, conviction of a felony, or mental or physical incapacity.” Had any of the members of the BOR refused to accept the transaction involving the La Fiesta Mall and Pacific Gateway project in August 2003, would the governor be able to remove any regents because they were not on the same page politically? To exercise the power to remove any regents for political reasons flies in the face of the language of the Commonwealth Constitution that justifies removal.

According to Section 8 (Control of Public Finance) of Article X (Taxation and Public Finance) of the Commonwealth Constitution, the control of public finance is under the auspices of the Department of Finance and it shall control and regulate the expenditure of public funds. Furthermore, this responsibility involves promulgating regulations including accounting procedures that require public officials to provide full and reasonable documentation that public funds are expended for public purposes.

The control of the public finance by the CNMI Department of Finance is with regard to properly disseminating public funds from what is collected in the CNMI, as well as what comes in from the federal government through approved appropriations. It does not authorize the Department of Finance and/or the governor to unilaterally designate funds to specific areas, e.g., $3.5 million from the JTGRRA 03 funds to NMC, whenever they felt it deemed necessary. Moreover, nowhere in Article III (Executive Branch) of Commonwealth Constitution does it permit a governor to take public monies, whether they are from the feds or CNMI fiscal coffers, and use personal discretion in terms of what and who to fund. To allow this would be akin to establishing a checking account at a bank with free reign in writing checks to recipients, e.g., NMC.

Likewise, nowhere in the federal statutes regarding acts like the JTRRA O3, or the legislation passed in by U.S. Congress involving the $6 to $8 million of Compact funds expected every year for the CNMI in the next 20 years, does it say that a governor has carte blanche to take federal appropriations and designate it to a specific area, e.g., NMC, without allowing the House and Senate of the CNMI Legislature to review and deliberate on how the funds should be utilized.

Rep. Justo Quitagua, chair of the House Committee on Education, recently made comments to the media that NMC and PSS should “run” to Governor Babauta’s office for federal funds, i.e., 702 funds totaling over $11 million and some $5 million in Compact-impact funds. Where does it say that the CNMI governor can exercise his discretion in the handling and dissemination of the 702 funds totaling $16 million as if they were his personal checking account at the bank?

If it cannot be substantiated and justified that the governor can have free reign in terms of exercising full discretion with 702 and Compact impact funds, then we can add this to the violations of the JTGRRA 03 appropriations and the CNMI Constitution with the $4 million dollar debt established by NMC and the governor’s office without the consent of both houses of the CNMI Legislature.

Checks and balances in government allow for the elimination of improprieties, collusion, and potential misuse of public monies. Without “oversight” in terms of validating who is handling the public funds and where it is designated, then there is the potential for the misuse and inappropriate handling of federal and/or Commonwealth funding. Corruption is generally the net result of any misuse and inappropriate handling of public monies.

Government has been traditionally involved with assisting education via appropriations and implementing programs that will assist society in educating the populace, e.g., Head Start or the Educational Opportunity Program in California community colleges and universities. The assistance from politicians elected into office should not go beyond appropriations, however. Whenever elected officials decide to get involved with the direction of education for reasons that are political and/or personal, as opposed to a genuine and sincere desire to move higher education forward, then the net result will turn out to be something like what transpired with the La Fiesta Mall transaction which, in some circles, is referred to as, “the La Fiasco.”

Dr. Jesus D. Camacho
Delano, California