Unpaid Yutu obligations: $36M

DOF trying to access $93M FEMA loan
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Posted on Jun 29 2020
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The CNMI has incurred $93 million in losses a year after Super Typhoon Yutu, and is looking to accessing a community disaster loan from the Federal Emergency Management Agency to defray costs and the loss of revenue.

The Department of Finance has appealed to the Legislature to get a bill drafted and passed that would authorize access to FEMA’s community disaster loan worth $93 million, which the CNMI is qualified for.

While House Joint Resolution 21-9, HD1, Disaster Loan Authorization, is currently with the Senate, an actual legislation is still needed to get the funds. Moreover, FEMA is currently only authorized to give up to $5 million and, without a congressional legislation to authorize it to give more, the CNMI would not be able to access the full funding.

The CDL is a deferred loan, payable up to five years, with an interest rate pegged at .079%. However, there is a chance that the CNMI could have the loan forgiven, provided the government shows three years of deficit or loss of revenue for three consecutive years after the disaster.

Finance Secretary David Atalig informed the senators of the CNMI’s predicament at the Senate Fiscal Affairs Committee meeting last week, and sought their aid in crafting the bill.

Atalig added that the CNMI is using the same model as what was authorized for Puerto Rico, as well as the U.S. Virgin Islands, through Hurricane Maria and other disasters.

“We’re using the same model requesting for authorization for the first $5 million right away, and up to a total of $93 million [that] we are qualified to receive from FEMA. But the action needs to satisfy the attorney general’s approval, as well as FEMA’s review of our laws and our constitutional mandate for operational funds. It must be a legislative action, not a joint resolution,” he said.

How will the $93M be used?

According to Atalig, the CNMI still has accounts payables of more than $20 million for vendors from Super Typhoon Yutu. The first $5 million that the CNMI could access following the passage of a legislation will be used to pay the vendors.

“Should we be successful in getting the U.S. Congress’ authorization for up to $93 million, we are finalizing our spending plan for that amount we plan to use the funds for. It’s going to go to repayment of our Marianas Public Land Trust loans. It will go to pay for obviously all the vendors that are due for services rendered during Super Typhoon Yutu,” he said.

There is a list of about over 40 vendors that the government still owes. Atalig said that he has been doing his best to try to make partial payments, to assist the vendors, but still has not been able to pay them all. “We’re still waiting for funds from FEMA reimbursements,” he said.

“We still owe several million dollars in cleanup debris, earthmoving contracts. We have large vendor payments still due to power source that helped install a lot of the concrete poles that we have here on Saipan and Tinian. And then we do have several different vendors, whether they’re vehicle rentals or equipment rentals.

“We still have vendor payments for rooms that were used at some of the hotels. We still have some have some payments due to hotels we had first responder stay at coming in from the FEMA side,” he added.

Aside from vendor payments, the CNMI also submitted about $16 million of request for reimbursement for overtime, labor during Yutu, and was only approved, to date, up to $8.2 million.

Atalig added that there are different categories of looking at the spending plan should access to $93 million be approved. The secretary acknowledged that the CNMI “don’t have to go for that much” but wants the flexibility to have that amount be available for the administration.

He added too that the Department of Finance will have to work on how to service this debt should five years come and the loan is not forgiven—should the CNMI not show any deficits within three years.

“I got to be prepared, or at least, plan for the repayment of this loan in the future for up to $93 million,” he said.

‘The government keeps borrowing’

Senate floor leader Sen. Justo Quitugua (R-Saipan) is strongly concerned about this loan. “The government keeps borrowing, he said. “This is a big loan, and I really hate to leave this Senate knowing that I left my [children] and the other future residents of the CNMI to sacrifice more so that our actions—borrowing and borrowing—will put them in a situation where they have to sacrifice more so that they can pay [for] our actions today.”

Quitugua said he wants to know exactly how the funds will be used and where the money is going to go, which was echoed by Sen. Sixto Igisomar (R-Saipan), who demanded a “very detailed” accounting of the CNMI government revenues, expenses, debts, and future obligations, including all land compensation transaction listing from Department of Public Lands that must be paid.

Igisomar also stressed that legislators need a complete assessment of the CNMI’s revenue, expenses, and debts.

“This [resolution] is asking us to jump on board and loan this money out without actually knowing whether we know what we’re going to do with the money. The House and the Senate must be very, very clear on what the checkbook looks like. We’ve seen all the disaster coming to the CNMI, and there are expenditures that are not reimbursed,” he added.

Lessons learned from Yutu

The CNMI has too many chiefs during Super Typhoon Yutu, Atalig said, that there are a lot of lessons learned during Yutu, including the unchecked procurements and the lack of documentations.

“We had many chiefs at the time procuring things without getting pre-approved or getting knowledge if this is reimbursable, or an authorized reimbursable procurement,” he said. “There’s been people ordering heavy equipment and they just get them here, but the requirements of FEMA is you need to log in, you need to have documentation, saying where did you get this equipment? What are the hours they work? What part of the island they work at, and so forth,” he added.

This lack of documentation has been delaying the government from getting reimbursements. Without the documentations, the CNMI would not be able to get reimbursed. “In the absence of a contract, and when people at the time authorized it, it is an obligation of the CNMI government to pay it…,” he said.

Atalig said that, while he cannot answer for the decisions made at the time, since he was not at Finance at that time, in preparing for future disasters, he has directed the Procurement Office to work with Homeland Security, to get pre-approved contracts prior to a total disaster, to get a list of qualified vendors.

“If we need earthmoving equipment for debris cleanup, I need a list of up to five vendors that can provide the service and at what rate and negotiate the rate today, not after the typhoon,” he said.

Senate President Victor Hocog (R-Rota) said, “We need to have only one caretaker of the Commonwealth financial resources. We don’t need two or three. One can do, and one can direct.”

Iva Maurin | Author
Iva Maurin is a communications specialist with environment and community outreach experience in the Philippines and in California. She has a background in graphic arts and is the Saipan Tribune’s community and environment reporter. Contact her at iva_maurin@saipantribune.com
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