Fitial justifies CPA exec orders

Gov. Benigno R. Fitial has warned that a legislative rejection of his recent actions at the Commonwealth Ports Authority would hurt the CNMI’s ability to borrow money in the future.

Fitial in a press statement yesterday insisted that his executive orders and state of emergency declaration for the Commonwealth Ports Authority are “in the absolute best interest of the Commonwealth.” He argued that such actions protect the CNMI government’s financial standing in the international bond market.

“If the Legislature were to reject my executive orders and administrative directives for CPA, the bond trustee would quickly issue a notice of technical default and this development would have very dire consequences for the CNMI,” said Fitial.

Fitial said a technical default notice would ruin the CNMI’s reputation in the international bond market and prevent the CNMI from issuing bonds and raising funds for many legitimate public purposes, including a pension obligation bond for the CNMI Retirement Fund.

“No one would trust us anymore,” said Fitial, who urged the Legislature to support his CPA actions.

The House of Representatives on Thursday adopted a resolution critical of the governor’s move to shift CPA to the Governor’s Office, place the autonomous agency under a state of disaster emergency, and apply measures recommended by the CPA bond consultant to help CPA meet its airport bond requirements.

The House members said the governor’s actions were unjustified and extreme—“ nothing more than an unoriginal attempt to circumvent legislative oversight.”

During session, Rep. Heinz Hofschneider said he had received assurance from the bond trustee, Bank of Guam, that CPA was “not in technical default.”

But the Fitial administration disputed that claim, saying CPA was in fact in technical default by failing to meet the minimum debt coverage ratio and by failing to follow the bond counsel’s recommendations.

“The CPA Board did not increase rates and charges, as the bond counsel report advised,” said Finance Secretary Eloy Inos. “They generously reduced rates and failed to properly identify funds to support airline discount and incentive programs.”

Inos said CPA extended the airline incentive program beyond the original $2 million legislative appropriation and operated with a deficit, thereby jeopardizing CPA’s bond obligations and commitments.

“The only way to prevent a technical default notice was through the issuance of the governor’s executive orders,” said Attorney General Matthew T. Gregory, who spoke with the bond trustee.

The Fitial administration also dismissed Hofschneider’s other claim as being impractical and unrealistic. Hofschneider said the governor should have just removed CPA board members instead. But the administration said this process would take too much time and cause unnecessary delay, inviting a technical default notice for CPA.

“How long would it take to terminate the board and secure Senate confirmations for new CPA board members?” asked press secretary Charles P. Reyes Jr. “By the time this process was completed, CPA would be declared in technical default.”

On Monday, Fitial issued an executive order placing CPA under the Governor’s Office for 120 days. By law, however, such reorganization plan cannot go into effect until the Legislature has had 60 days to review—and possibly to amend or void—the proposal.

Citing the urgency of CPA’s financial trouble, the governor on Tuesday issued the state of emergency declaration. This allowed him to take over the ports authority immediately. Using his state of emergency powers, Fitial on the same day signed directives raising CPA rates, imposing austerity measures, and ending the incentive program for airlines flying to the Northern Marianas.