Marianas Variety

Last updateSat, 19 Oct 2019 12am

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    Friday, October 18, 2019-4:36:59P.M.

     

     

     

     

     

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NMI government considering pension obligation bond options

THE CNMI government is considering pension obligation bond options so it can meet its obligation to the Settlement Fund at least for fiscal year 2020 which starts on Oct. 1, 2019.

On Wednesday, the Commonwealth Development Authority led by Executive Director Manny A. Sablan presented to House members a proposal to amend the Pension Obligation Authorization Act as amended by Public Law 18-45.

Manuel Sablan

The proposed amendment would “allow for special revenue bonds to be used to refund general obligation bonds.”

It would also “clarify that a pledge of the gross revenue tax to those bonds may be senior to all other uses” notwithstanding P.L. 20-33 that established the Settlement Fund revolving fund and the bond payment revolving fund

Variety was told that the CDA board, the Attorney General’s Office and the Department of Finance have also been discussing the possibility of a pension obligation bond.

Sablan said Finance Secretary David Atalig estimated that the CNMI government needs over $60 million to pay its Settlement Fund obligation for FY 2020 amounting to $44 million and $17 million in arrears.

Attorney General Edward Manibusan has notified Settlement Fund Trustee Joyce Tang of the ongoing discussions.

In his letter to Tang, Manibusan said that “given the Commonwealth’s current fiscal condition and uncertainty as to when the economy will fully recover to pre-disaster levels, the option of floating pension obligation bond is being fully explored.”

The Commonwealth, he added, has been in discussion with bond advisors, and the plan is to transfer to transfer all of the bond’s net proceeds to the Settlement Fund.

In July 2013, then-Gov. Eloy S. Inos signed Public Law 18-12 which authorized CDA to issue “pension obligation bonds on behalf of the Commonwealth in an amount up to $300 million to pay the Commonwealth government’s obligation” to the NMI Retirement Fund.

In April 2014, Inos signed P.L. 18-45 to reflect the settlement agreement signed by the government with retiree Betty Johnson.

In June 2014, Inos said he would no longer push through with the pension obligation bond because of the projected cash flow from a new major investment — the Saipan casino project.

In March 2018, the casino investor, Imperial Pacific International, reported a net loss of nearly $378 million on falling revenue and uncollectable VIP gambling debts.

The local economy has slowed down due to declining tourist arrivals that were compounded by the devastation caused on the three major islands by Typhoons Mangkhut and Yutu in September and October 2018.

This has resulted in a significant drop in government revenues.