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    Friday, July 20, 2018-2:18:11A.M.






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Trustee: Hard to find suitable tenant for former Retirement Fund building

THE second and third floors of the former Retirement Fund building on Capital Hill are available for lease, but it is difficult to find a suitable tenant for the space, according to Settlement Fund trustee Joyce C.H. Tang.

In a report filed with federal court last week, Tang said government agencies that are interested in leasing the space do not have sufficient funding.

According to the report, the second and third floors of the facility, now known as Settlement Fund Building, were previously occupied by FEMA after Typhoon Soudelor in 2015 at the rate of $17,236.50 per month ($1.50 per s.f.), with an additional $5,745.50 per month for utilities.

“The Settlement Fund would like to explore the possibility of obtaining consent to lease space to private tenants so that it can maximize rental revenue,” Tang stated in the report.

However, the “building sustained some damage from Typhoon Soudelor and also requires maintenance work. The damage from Soudelor is below the deductible. The proposals for repair are estimated to be between $76,632.46 and $103,518.19, excluding construction management cost. Because of the labor shortage in Saipan, work that should cost a fraction of this amount is double or triple the normal cost. The Settlement Fund has budgeted $270,000 for the repair and maintenance of the building.”

Judicial building loan

As for the judicial building loan, the report said it matured on March 1, 2015.

“The loan balance as of Sept. 30, 2016 was $4,303,213.80. In FY 2017, the [CNMI] government made payments totaling $942,772.53. The outstanding balance as of Sept. 15, 2017 [was] $3,667,219.28 (including interest).”  

According to the report, the government, with the help of the NMI judiciary, has applied for a U.S. Department of Agriculture loan for $12,000,000 to pay off the judicial building loan and to expand the judiciary building and other facilities.

In Sept. 2016, Public Law 19-67 was signed authorizing the government to borrow from the USDA for these purposes.

“The Settlement Fund was informed that the USDA loan application is being reviewed by the Guam and Hawaii USDA offices, and will be forwarded to the USDA headquarters in Washington, D.C. by Oct. 1, 2017 for final review.”


The report likewise updated the court about NMI Retirement Fund v. Sword and Express Electronics, Civil Action No. 12-0086 filed in the CNMI Superior Court by the NMI Retirement Fund.

“It was not assumed by the Settlement Fund and was not identified as an asset to be transferred to the Settlement Fund in the settlement agreement,” the report said.

“The lawsuit alleged a breach of contract and unjust enrichment claim by the plaintiff, the Retirement Fund, against defendants, Gerhard Sword, individually, and Express Electronics, involving a defective audit software they had supplied to the Retirement Fund.”

The Settlement Fund notified the Office of the AG on March 14, 2016 that the court would be dismissing this lawsuit.

“The lawsuit remained with the Retirement Fund and was dismissed by the court on April 27, 2016.”


The report also mentioned that the CNMI government agreed to reimburse the Settlement Fund for the trustee ad litem fees in the amount of $694,998.30, to be paid in 24 equal monthly installments of $28,958.26 per month. The balance was paid in full on June 15, 2016.

Civille & Tang LLC served as trustee ad litem from Sept. 14, 2012 to Sept. 30, 2013.

For its total personnel expenses, the Settlement Fund budgeted $777,712 in fiscal year 2016, but the actual expenses amounted to $649,719.

In FY 2017, the personnel budget was $751,954 while the actual expenses totaled $680,481.

As for the Settlement Fund’s total professional fees, the FY 2016 budget allotted $824,542 while the actual expenses amounted to $311,446.

In FY 2017, the budget was $671,000 while the actual expenses totaled $286,747.

In the Settlement Fund’s proposed FY 2018 budget, $816,080 was set aside for personnel expenses and $945,000 for total professional fees.

The Settlement Fund has three consultants: Wilshire Investments as its investment consultant; Milliman Inc. as its actuary consultant; and Ernst & Young as its auditor.

Investment accounts

The balance in the Settlement Fund’s investment accounts for FY 2017, as of Aug. 31, 2017, was $72.599 million.

“The Settlement Fund’s current investment policy is very conservative because the Settlement Fund will not be able to take high levels of capital markets risk,” the report stated.

It added that its investment consultant has calculated the amount needed in order for the Settlement Fund to be fully funded.

“Subject to certain assumptions, an infusion of an additional $468 million today is required to fully fund the Settlement Fund. The trustee plans to engage the government in discussions regarding options available to obtain this funding.”

In the past two years, the trustee told the court, the CNMI government has been making weekly payments of $1 million to the Settlement Fund.

These $1 million weekly payments provide the cash flow needed for bi-weekly benefit payments without having to liquidate the Settlement Fund’s investment

The CNMI government is able to make the weekly payments, partly because of increased Saipan casino gross revenue tax collected in 2016 and 2017, the trustee said, adding that the casino gross revenue tax has developed into a primary source of revenue for the government.

But the report also said reliance on the casino GRT is very risky, adding that the continuing payment of the casino GRT to the government at the current rate is, at best, uncertain.

The Settlement Fund was created by the federal court on Sept. 30, 2013 to pay pension benefits to members of the Retirement Fund who opted to become members of the NMI Settlement Fund.

Under the agreement that settled retiree Betty Johnson’s class action against the CNMI, the government must make minimum annual payments each year to pay 75 percent of the full benefits of the class members.

As of Sept. 2017, there are 3,035 settlement class members, 72 of whom are active CNMI government employees.