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    Thursday, February 22, 2018-6:03:29P.M.

     

     

     

     

     

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HANMI seeks expeditious passage of measure extending lease up to 75 years

THE Hotel Association of the Northern Mariana Islands is urging the expeditious passage of Senate Bill 20-35 which proposes to extend the public-land-lease term up to 75 years.

The bill has been passed by the Senate and is now with the House Committee on Natural Resources

In a letter to Gov. Ralph Torres, Senate President Arnold Palacios, Speaker Ralph Demapan and the committee chairwoman, Rep. Alice Igitol, HANMI chair Gloria Cavanagh noted the ongoing reductions in the foreign labor workforce under the federal CW program and the reduction of air service to the commonwealth.

She said the hotel industry sees an impending impact on investor confidence affecting several of the largest hotels in the CNMI.

Cavanagh said they are hopeful for the passage in the U.S. Congress of S.2325, also known as the Northern Mariana Islands U.S. Workforce Act. But if the federal government cannot offer a reprieve from a further reduction in the workforce by April 2018, she said it is likely that investors will think twice before venturing to invest in the CNMI without an adequate workforce.

“It is already difficult and will become increasingly more so and extremely expensive for any developer and hotel to build, renovate or expand without a sufficient construction workforce. This may be the deciding factor for owners of hotel properties and new investors to commit to a new lease,” Cavanagh said.

She said Eastar Jet’s suspension of its daily Seoul-Saipan service in Oct. 2017 caused arrivals from Korea to decrease. Then there’s Jin Air’s seasonal suspension of its five weekly Seoul-Saipan flights beginning March 25, and Delta’s decision to discontinue its daily Tokyo-Saipan flights in May of this year which she said will leave the CNMI without any flights to Japan, formerly the islands’ primary market.

Cavanagh said visitor arrivals from Japan in calendar year 2017 comprised only 10 percent of the total number.

“So the impact on revenue generated by this source market will be significant. Furthermore, whenever a source market is lost, it requires a tremendous amount of funding and time to regain that market, so we are gravely concerned about this news,” she added.

Cavanagh said due to these factors, time is of the essence for the CNMI government to act within its own authority and help secure economic stability by acting on existing hotel lease extensions.

“Negotiations may have to be made under much less favorable conditions in just two or three months,” she said.

Introduced by Senate President Arnold Palacios, Senate Bill 20-35 will increase the term of public land leases up to 40 years plus an extension of up to 35 years for a total of 75 years. It will also authorize existing public land leases to be amended to extend the existing lease term up to 75 years.

Cavanagh said HANMI wants the bill amended to allow a ten-year negotiation period for the land leases.

She said the current bill limits the Department of Public Lands negotiation period to within five years of the lease expiration.

Cavanagh said five years is a very short planning period for large developers. But a 10-year period would provide sufficient time for lessees to plan for property improvements and continuity of service, she added.

“So that qualifying lessees can consider long-term renovation and construction on the leased property, we would also recommend that this legislation add an alternative option for qualifying lessees to pursue a new 40 year lease plus an additional 15 year extension,” she said.

“We understand that the extension price must be based on at least two new appraisal reports, including improvements thereon. However, because the extension may only be given with five years or less remaining on the lease, S.B. 20-35 will likely serve as a disincentive to qualifying lessees from making any additional investments in the leased property prior to negotiating new terms for the extension,” Cavanagh said.

Currently, private land may be leased for up to 55 years while public land may be leased for only 25 years, but an investor may extend it for an additional 15 years with the approval of the CNMI Legislature.

The Department of Public Lands has said that the land-lease agreement with Kan Pacific/Mariana Resort & Spa will end in April 2018 while the Hyatt and the Fiesta Resort have a couple of years left on their leases.