An investment proposal worth considering
AS in most issues involving economics, there seems to be a misunderstanding about Micronesian Air Connection Services’ QC application, which, if approved, would entitle them to tax breaks for 25 years. Some believe that the CNMI government should not “lose” the tax revenue it could collect from MACS. But that’s the thing. There would be no tax revenue if MACS doesn’t push through with its investment proposal, which is to offer a badly needed interisland flight service to the public. Instead of paying BGRT and other taxes to a government that will, most likely, spend most, if not all of them, on its redundant offices and personnel, MACS would use that money to purchase new aircraft and offer affordable rates to the people of the Marianas, including the manamko’, hospital patients, students and small businesspersons. How can that scenario be considered “detrimental” to the CNMI?
To reiterate: the government will not “lose” money that doesn’t and will not exist unless MACS invests in a new flight service. If it does, the people would benefit immensely from a new air transportation option.
As economists have pointed out, tax incentives can stimulate investment in sectors that might otherwise be deemed too risky or unprofitable, but have substantial social and other benefits. This new investment will also create jobs and benefit other businesses on island. The multiplier effect can be significant.
Those crying over the spilt milk that is the “foregone” tax revenue should be reminded that there is no milk to spill without this investment proposal, which, as MACS has pointed out, is not economically viable without tax incentives.
CEDA, the Legislature and the governor should look into MACS’ proposal, and verify the math, among other details. They should share what they have learned with the public, and make a decision that, for once, is good for the people of the CNMI.
More money to misspend
IT continues to boggle the mind that those who complain about the government’s inefficiency and extravagance are usually the same folks who want the same government to have more money to misspend.
Consider this. Amid the much publicized funding woes of the Legislative Bureau, the judiciary, CHCC, CUC and DPS, the first thing the administration did when it (supposedly) collected more than it projected was to spend it on personnel. And then they tell us “we’re not out of the woods yet.” No kidding.
The administration also told us that the lifting of the austerity measure during the early-voting period and before Election Day had nothing to do with politics. Sure. Although the governor’s disavowal would have been more believable if he made the announcement after the election.
The designated scapegoat
WE need less demagoguery and more reliable information whenever CUC is discussed. We must also not conflate CUC’s need to pay for fuel with personnel and management issues.
If we want to complain about FAC or the power rate we should, first of all, find out what the rates are in other similar jurisdictions. Last year, it was reported that “a comparison of utility rates in 21 major Pacific areas showed that the Commonwealth Utilities Corp. charges one of the lowest amounts for electricity.” Any update on that?
Two years ago, CUC’s then-deputy executive director provided House members a clear explanation regarding the Fuel Adjustment Charge: it is the rate CUC has to pay to its fuel supplier so it can run the power plants that generate electricity for its customers. The then-CUC official also noted that the FAC “is not even a full cost recovery. CUC is actually losing on that. The amount of money we are charged for fuel exceeds the amount of money we collect from FAC. There are additional charges on top of the FAC that CUC has to come up with.”
Someone has to pay the FAC. If not ratepayers, then who? This flat broke government? The feds?
Incidentally, CUC has to comply with federal stipulated orders, and based on the documents filed in federal court, the U.S. government believes that CUC should charge rates that reflect the actual costs of its services. That doesn’t sound like a recommendation to reduce rates.
In any case, we should remind ourselves that CUC is not a government entity that has “gone rogue.” It remains a public corporation governed by a board, and is under the regulatory authority of CPUC. CUC and CPUC board members are gubernatorial appointees confirmed by lawmakers.
Lawmakers — and the governor — cannot wash their hands of CUC issues. They cannot use CUC as a scapegoat for problems that are, for the most part, the direct results of their incessant politicking and meddling.
