Gov. Ralph DLG Torres enacted yesterday afternoon legislation that clarified some of the possible parameters that could surround future CNMI government bond agreements with the Commonwealth Development Authority.
Torres signed into law House Speaker Blas Jonathan “B.J.” Attao’s (R-Saipan) House Bill 21-63, or the Bond Amendment Act of 2019 at the Office of the Governor’s conference room on Capital Hill.
Now Public Law 21-4, the Bond Amendment Act of 2019 essentially allows the CNMI government to float different bond types that are taxable.
Previously, the CNMI government was only allowed to undertake a type of bond that is non-taxable, specifically a general obligation bond. With the enactment of the Bond Amendment Act of 2019, the government can generate income by taxing bond agreements.
“…This [legislation] essentially allows our bond underwriters to go and research other types of bonds that the CNMI can get into, which is more beneficial to the CNMI because a general obligation bond is not beneficial to the CNMI at all,” Attao told Saipan Tribune.
He noted that CDA had been looking at some of the possible bonds the CNMI government could get into, but could not fully commit because of the previously restrictive language pertaining to bond underwriting.
“…That’s why this amendment was needed so that they could have other options that are more beneficial [to the CNMI] such as a taxable bond,” Attao said.
According to Torres, he is signing the bill into law with the intention of allowing the CDA to float a pension obligation bond—a taxable bond.
“…This is to give authorization to CDA to float a pension obligation bond. …We are here to ask [CDA executive director Manuel Sablan] to expedite this process and I hope that we can…close it by the end of the fiscal year or the first quarter of next year,” Torres said before he signed the legislation.
It was not immediately clarified if Torres means that floating a bond is a distinct possibility but, as stated by Attao, “This [legislation] will at least give the CNMI options on the types of bond if it does decide to go into a bond.
“It will give them options on the types of bond it can negotiate into besides the general obligation bond,” Attao said. “…With our credit ratings being good right now, we might as well take advantage of the types of bonds that are available to the CNMI should we decide to go into a bond.”
In a separate interview, Sablan explained, “This amendment provides for the gross business revenue to be pledged as a first pledge against a bond.
“In other words…the bondholders will have the first lean on the tax receipts to meet the annual payments of the bond. By doing that, it allows the bond to be floated at a higher rating,” he said, adding that the higher rating allows for a lower interest rate and fewer expenses.