Legislature wants to restore CPA’s autonomy

The Legislature moved on Friday to overturn the governor’s takeover of the Commonwealth Ports Authority.

In back to back sessions, the House of Representatives and the Senate approved a resolution rejecting an executive order that placed CPA under the Governor’s Office for 120 days. The resolution also urged the governor to replace the members of the currently suspended CPA board of directors.

On May 13, 2008, Gov. Benigno R. Fitial assumed control of CPA. The governor’s action came after the board’s repeated failure to muster a quorum and act on fiscal measures needed to prevent CPA from defaulting on its bond indenture agreement. With the power from the reorganization, the governor has now applied the measures.

The Legislature has 60 days to amend or reject the executive order. If it takes no action, the reorganization plan will be set in the administrative code.

Speaker Arnold I. Palacios said the Legislature recognizes CPA’s need to implement the financial measures. But the lawmakers want to prevent CPA’s current setup from becoming permanent.

“The action plan implemented to aid CPA will still be in place. But we want to keep CPA’s autonomy,” said Palacios.

The resolution argues that the governor can avert a financial crisis at CPA by using his power to remove the members of the CPA board of directors for neglect of duty, and to appoint new members to the board.

“The Legislature stands ready to assist the governor in undertaking further action required or necessary to avert a technical default on CPA’s revenue bond indenture within constitutional and statutory boundaries,” the resolution stated.

Fitial has said a legislative disapproval of his executive order would have “dire consequences” for the CNMI. “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.

He said a technical default notice would ruin the CNMI’s good name and 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.

On March 1, 1998, CPA entered into a $20 million airport revenue bond indenture agreement with Bank of Guam as the bond trustee. This agreement requires CPA to make timely payments and to maintain a 1.25 revenue-to-bond payment ratio at all times during the duration of the bond. In other words, for every $1 owed on the bond, CPA must have $1.25 of net revenue in reserve. CPA, which still owes $17 million, has been making punctual payments. But it has failed to meet the required debt ratio of 1.25.

To help meet the bond terms, the governor has signed directives raising CPA rates, imposing austerity measures, and ending the incentive program for airlines flying to the Northern Marianas.