Lawmakers still cagey about CUC’s MPLT loan

Lawmakers remain unconvinced the Commonwealth Utilities Corporation’s proposal to borrow money from the Marianas Public Land Trust is legal.

The legislative leadership, in a meeting yesterday, failed to come up with a decision on whether to approve or deny CUC’s loan request amid concerns about its legality. This came despite a recent legal opinion issued by an assistant attorney general saying MPLT can provide the loan to the utility.

“Everyone agrees to the loan as long as everything is legal. The problem is that there are so many questions that have not been answered,” said Rep. Ray N. Yumul, chairman of the House Committee on Ways and Means.

Yumul said the lawmakers are concerned about a constitutional provision that makes it illegal for a CNMI government agency to use borrowed money on operational expenses.

CUC plans to use the proposed $4.5 million loan to pay for its temporary power contract with Aggreko International, for its fuel expenses, and for its debts to contractors Telesource CNMI and Pacific Marine and Industrial Corp.

An alternative to providing the loan, Yumul said, is for MPLT to transfer the money to the general fund for appropriation by the Legislature. But even this approach has a legal setback. By law, the Legislature cannot appropriate money from the general fund at the moment because the CNMI government is operating on last year’s budget—or on what is called “continuing resolution.”

In a legal opinion issued July 3, 2008, assistant attorney general R. Anthony Welch said the MPLT “can make an investment in CUC, if the investment provides the MPLT with a reasonable rate of return through payment of interest and provides MPLT with adequate security for the loan.”

Welch also said the Legislature could secure the loan by passing a law that allows repayment of the loan using the funds that are annually transferred from the MPLT to the general fund of the Commonwealth.

Under the Constitution, the Department of Public Lands is tasked with managing leases of public lands on behalf of the people of Northern Marianas descent. After deducting administrative costs from the collected fees, DPL transfers the balance to the Marianas Public Land Trust. MPLT then invests the money. Income earned from those investments is transferred to the general fund for appropriation by the Legislature.

The MPLT board of trustees initially adopted a resolution in favor of CUC’s loan request. But the board later cancelled the resolution after the potential legal issues were brought to its attention.

One such legal barrier is a 2006 executive order requiring CUC to get the consent of the Legislature before making any loans worth over $500,000.

Because of its financial problems, CUC currently cannot get a loan from outside lending institutions.