The Department of Public Lands would like to inform the public of a matter with one of its lessees, A&M Corporation, which has received public attention in the recent weeks.
DPL is responsible for executing, monitoring, and collecting on all leases and permits on public lands in the CNMI. DPL upholds this responsibility to the furthest extent possible. In March 2018, DPL began billing all delinquent accounts. Delinquent accounts are those defined as being in arrears with DPL in excess of 90 days. As of June 30, 2018, DPL collected close to $400,000 from all outstanding accounts.
DPL’s records show that the on Dec. 14, 1990, Jose I. Guerrero, chairman of the Marianas Public Lands Corp., predecessor of DPL, and Arnold Palacios, entered into a 25-year lease agreement for Lot No. 057 E 05, containing an area of 2,813 square meters, in Lower Base, Saipan. The purpose of this lease was to operate a warehouse, maintenance and repair shop, carpentry shop, management office, and other related activities. This lease was amended on April 28, 1992, to reflect an updated appraisal.
On Aug. 18, 1992, A&M submitted a written request to MPLC to lease the adjoining public lands in Lower Base, Lot No. 057 E 15, containing an area of 1,718 square meters and Lot No. 057 E 29, containing an area of 2,072 square meters (adjoining lots), a combined area of 3,790 square meters. A&M requested that MPLC amend the lease to include these two (2) lots with one (1) expiration date instead of executing an additional, separate lease. On Nov. 22, 1992, MPLC approved A&M’s request to lease the adjoining lots described above. The lease, however, was not amended to include the adjoining lots until Oct. 31, 2014.
Because of the language contained in the amended lease, DPL retroactively and inadvertently assessed the lease rentals for the additional properties containing a combined area of 6,573 square meters to take effect on Nov. 30, 1992. A&M did not possess the adjoining lots in 1992 but was charged. A&M’s ledger reflects consistent payments for the property in the original lease, Lot No. 057 E 05. It was not until 2014 that A&M was aware that DPL was charging for the adjoining lots, retrospectively, despite A&M not having signed approval until 2014 by then DPL secretary, Pete A. Tenorio. A&M disputed the billing on Nov. 20, 2014 for the adjoining lots and even further memorialized their position in a letter to DPL dated Nov. 25, 2014. DPL’s records reflect numerous meetings and email correspondence in between A&M and DPL since that time.
In the case of A&M, DPL acknowledges that the unintended circumstance led to delays and disputes in regards to the amended lease. The purpose of the amendment was to include the adjoining lots on public land (Lot No. 057 E 15 and Lot No. 057 E 29) to be part of the original lease. Although the document was signed in 2014, the effective date caused an assessment in lease rental fees dating back to 1992, the date it was first approved by MPLC. DPL recognized that the intent of A&M was to honor the approval of MPLC to lease the adjoining public lands—not to assess the lease rental retroactively. In short, DPL inadvertently billed A&M retrospectively for Lot No. 057 E 15 and Lot No. 057 E 29 since 1992 when A&M did not have a lease for these lots until 2014.
In a letter to DPL dated Feb. 23, 2016, the lessee requested to recall the amended lease for further revision, as the disputes raised were not immediately resolved. DPL had numerous internal meetings between legal counsel, and the divisions of Compliance and Finance from 2016 to present. On June 8, 2018, DPL’s Legal Counsel agreed that DPL will charge A&M for the related use of the adjacent properties as described in the second amendment, prospectively, from the date it was executed in 2014. This guidance affirmed that DPL can correct the ledger and only charge A&M for Lot 057 E 05 since 1990 to present and Lot No. 057 E 15 and Lot No. 057 E 29 from 2014 to present. Therefore, DPL corrected A&M’s ledger. DPL is now proceeding with a promissory note to allow the lessee to make payments at a fixed rate for a period of five years. This is a very common resolution offered to DPL’s clients who have outstanding arrearages. A&M is not the first lessee to be given this option. This is a business practice that is consistent with past leases and ensures that DPL collects on arrearages in a way that is still affordable to the client and prevents further arrears from becoming delinquent and uncollectible.
The information that DPL waived a debt is unfounded because it was not a debt in the first place. DPL cannot bill a client for land that has not been possessed. DPL assures the public most especially the beneficiaries of public lands, people of Northern Marianas descent, that DPL remains committed to resolve all outstanding compliance-related matters. The circumstance of this lease is no exception.
To view a listing of all public land leases as of Dec. 31, 2017, visit DPL’s website. The published 2017 Annual Report has this information in more detail. A copy can also be picked up at DPL’s office. A listing of requirements to lease public land is available at www.dpl.gov.mp. It is important to note that as a basis for calculation, a potential investor who intends to lease public lands is required to acquire a land appraisal for the desired public land parcel. Additionally, executed leases require updated land appraisals every 10 years. DPL uses land appraisals as a basis for determining rent. A form of additional rent is derived from the collecting a percentage of business gross receipts (BGR) which is required from all public land leases. The more the company makes on public lands, the higher the rent is in the form of collections based on a percentage of BGR. Land appraisals are performed by a third-party certified appraiser, which is then forwarded to DPL for review, for acceptance or rejection. DPL ensures that all leases are in compliance with lease provisions and work to resolve those leases that are not in compliance.
It is important to note that DPL has made great progress since this administration took office to effectively fulfill its fiduciary duty to manage our public lands and to protect them for the benefit of our people of Northern Marianas descent. Under the leadership of Gov. Ralph DLG Torres, DPL initiated a more effective system to enforce noncompliant leases, while also ensuring that the use of our land is planned out accordingly. This is why it was made a priority to initiate the first update to the CNMI Comprehensive Land Use Plan since 1989. The department has also committed additional plans for homestead lots so that applicants who have waited patiently for decades through past administrations.
DPL welcomes any questions or inquiries regarding its programs and has a dedicated staff available to address any concerns.
For more information about DPL’s leasing requirements and for update information, please log onto www.dpl.gov.mp and www.facebook.com/DPLCNMI. (PR)