CPA cite flaws in bills stripping boards of power

“What is the Legislature trying to fix?”

The Commonwealth Ports Authority asked this, citing flaws in two House bills that would eliminate the independence of CNMI autonomous agencies and place their operations back in the political arena.

One of the proposed legislations is House Bill 14-154 or the Public Corporation Board Reform Act of 2004, which seeks to transform boards of directors into an advisory board and place operational control under the governor through appointment of an executive director.

The other is H.B. 14-227 or the Fiscal Reform Act of 2004, which would require all revenues of public corporations to be placed in the general fund and subject the agencies to the legislative appropriation process.

Both bills remain pending at the House Special Committee and the House Committee on Judiciary and Governmental Operations, respectively.

In a written comment submitted to the House of Representatives, CPA chair Jose R. Lifoifoi and CPA executive director Carlos H. Salas said both bills set forth their purposes quite clearly, but they state no legislative findings that identify the problems with the current arrangement.

“Thus, the authority is at something of a loss to address problems as perceived by the drafters of these bills, which is difficult for the authority to determine what the Legislature is trying to fix. How will this legislation help the authority and ultimately the people of the Commonwealth solve the problems of the day?” the CPA officials asked.

Nevertheless, the ports authority maintained that both bills would harm the CNMI aviation and maritime industries by placing CPA’s funding sources in peril.

One such funding source is the revenue bonds, which finance many CPA projects, including the $50-million development of the Saipan seaport and major runway and terminal building improvements at the airport.

CPA noted that revenue bonds require a certain reserve to be maintained at all times above and beyond the normal payments. Further, the bondholders and bond trustee look to CPA as an independent financial entity for payment, relying upon CPA revenues and collateral.

“If H.B. 14-154 is passed, the independent board with fiduciary obligations to the authority and its bondholders will cease. With the passage of H.B. 14-227, the funds…are mandated into general fund. There will be no bond reserve. There will be no debt ratio maintained. All bond payments must be appropriated.

“With the passage of either bill, it must be anticipated that the bonds will be in default and the bond trustee will place a call on the bonds and demand immediate payment. This will destroy the credit rating of the authority and perhaps the CNMI government as well,” CPA said.

The bills would also harm CPA’s eligibility for funds under the Federal Aviation Administration’s airport improvement program. For fiscal year 2004 alone, CPA has been awarded over $16 million of AIP funds.

CPA stressed that as part of the grant process, the FAA requires that all airport revenues be used for airport purposes only. Even the use of airport funds for seaport activities is not allowed.

Therefore, CPA would be violating FAA grant policy and the AIP funding requirements if it placed the ports’ revenues into the general fund, it said.

The ports authority also projected that it would be difficult to convince any competent individual to serve as a board member under the circumstances proposed by H.B. 14-227, which strips board members of financial control but retains their obligation over funds.

Further, H.B. 14-227 is just not practical because the measure would require the Department of Finance approval for all payments, CPA said.

“The authority has prided itself on its ability to pay vendors promptly. The problems in the past with prompt payment have nearly always arisen because local [capital improvement project] funds are used and the approval process through Finance is so very lengthy and perhaps convoluted. Control of funds within the authority permits quicker reaction to emergencies and a better knowledge of what is available for funding,” CPA said.