Cabrera: CPA status remains under a cloud

Hopes are bleak that the Commonwealth Ports Authority will see some improvement in its situation when financial reports come out next month.

CPA is expecting delivery of an updated report on its airport revenue bond in late June. Lee Cabrera, acting executive director at CPA, said the report is likely to note a continued failure by the ports authority to meet bond requirements.

“[CPA] anticipates a report that the debt service coverage continues to be deficient and may require additional increases to meet the coverage within a reasonable period,” Cabrera said in a report to the Gov. Benigno R. Fitial and the Legislature.

It has been a month since the governor declared a state of emergency to prevent CPA from defaulting on its airport revenue bond. Under the governor’s direct control, CPA has implemented measures to improve CPA’s finances. These include raising airport rates, ending the incentive program for airlines flying to the Northern Marianas, and imposing cost-cutting measures at CPA.

Ricondo & Associates, which serves as CPA’s bond consultant, is now updating its 2006 airport rate report. The work includes reviewing all CPA revenue sources and expense items, which will result in projections of rates for at least five years. The report is due later this month.

CPA is also expecting the draft audit of its fiscal year 2007 financial statements. The audit report, being prepared by Deloitte & Touche, is seen to deliver more bad news for the ports authority. Cabrera said the audit will likely reveal that the debt service ration for the seaport bond will also become deficient.

The Commonwealth’s seaport has seen its revenue plunge by 60 percent due to the decline of the garment industry.

According to Cabrera, a negative finding on the seaport revenue bond will require CPA to hire another bond consultant for the $33-million bond and implement rate increases for the Port of Saipan. He said CPA has begun contacting a prospective bond consultant, BST & Associates, for the seaport bond.

A huge portion of the bond was used to complete the $43 million Saipan Harbor Improvement Project. The bond is a separate obligation and indenture.

“The challenges to CPA continue to be tremendous and serious. … [We] continue to need your support in various ways,” Cabrera said.

CPA is still under a state of emergency. CPA management reports directly to the governor, as all of the members of the CPA board of directors have resigned.