Fitial warns BoG vs debt

House Speaker Benigno R. Fitial has formally cautioned the Bank of Guam about potential constitutional liabilities if it lends money to the CNMI government for operational purposes without a legislative approval.

In a June 2 letter to BoG, which was released to the media yesterday, Fitial warned the bank against allowing the government to withdraw from a $10 million letter of credit for “CUC’s operating expenses.”

“Although you did not require an opinion from the Legislative Branch of the Commonwealth government, the branch which serves as a check and balance in protecting public funds, I highly caution the bank in approving any withdrawal of funds pursuant to the standby letter of credit,” said Fitial in the letter, which was addressed to BoG executive vice president and chief operating officer William D. Leon Guerrero.

He cited Article 10 section 3 of the CNMI Constitution, which provides that a public debt may not be authorized or incurred without an affirmative vote of two-thirds of the members in each house of the legislature.

Public debt, he said, “means obligations of the CNMI government that are fixed, such as bonds, notes, debentures, or other forms of debt.”

Further, he said the Constitution prohibits the government from borrowing money for operating expenses.

“The governor is seeking funding through the standby letter of credit in order to have the operating expenses [for] CUC. No matter what the governor calls the letter of credit, the minute a penny is drawn upon it, a debt exists. The debt, without Legislative approval, is a violation of the CNMI Constitution,” said Fitial.

The bank earlier approved a $10 million standby letter of credit for CUC’s use to buy fuel from Mobil Oil Marianas.

The standby credit line was obtained a day after Gov. Juan N. Babauta declared a state of disaster emergency due to power failures.

The Executive Branch said Friday that it managed to secure a two-year fuel contract with Mobil without using the $10 million letter of credit.

The Governor’s Office said the new agreement provides for a cash guarantee to Mobil of $7.5 million, using CUC’s “restricted account” at the bank.

CUC is said to have some $9 million in restricted deposits at BoG.

“There is no additional long-term credit or debt added by this agreement,” said the Governor’s Office in an earlier statement.