THE Commonwealth Ports Authority’s board of directors on Thursday adopted a resolution approving a $13.6 million budget for fiscal year 2024 that includes an eight-hour cut per pay period, the suspension of the airline incentive program, and an increase in public parking fees at the Francisco C. Ada/Saipan International Airport.
All five board members present voted to approve CPA Resolution 2023-5 during an emergency meeting in the CPA conference room at 8 a.m. Present were board chairwoman Kimberlyn King-Hinds, vice chairman Ramon A. Tebuteb, members Pete P. Reyes, Thomas P. Villagomez and Antonio Cabrera.
According to the resolution, the work-hour cut, the suspension of the discount program and the increase in parking fees to $5 from $2 per hour will ensure that CPA complies with its debt service ratio requirements.
CPA legal counsel Robert T. Torres provided a background of CPA’s debt service.
In 1998, CPA and bond trustee, the Bank of Guam, entered into a bond indenture agreement committing the autonomous agency’s revenue to service the bond’s principal interest. The agreement requires CPA to maintain a debt service ratio of 1.25.
Torres said if CPA fails to meet its debt service ratio requirement, CPA would be placed under receivership.
On Tuesday, CPA’s airport consultant, Ricondo & Associates, told the board members that the debt service ratio requirement would not be met unless additional revenue is generated or expenditures are reduced.
The consultancy firm said additional revenue could be generated and expenditures could be reduced through a parking fee hike, the suspension of the Air Carrier Incentive Program and the implementation of austerity measures.
“CPA has exhausted all other means within its reach to reduce costs, increase revenue, and reduce airport rates and fees, including making multiple requests to the United States Department of Transportation and the Federal Aviation Administration for supplemental funding under the American Rescue Plan Act of 2021 and the Coronavirus Aid, Relief, and Economic Security Act,” the CPA resolution stated.
“CPA deeply regrets the painful necessity of implementing any measure that adversely affects any of its employees, and only does so with great reservation and empathy for its employees,” the resolution added.
It stated that if CPA doesn’t meet its debt service ratio requirements, “the health, safety and welfare of the CNMI citizens would be placed in imminent peril due to the acceleration of the balance under the Bond Indenture Agreement.”
CPA Comptroller Skye Lynn Hofschneider said the suspension of the air carrier incentive program will result in additional revenue of $300,000 to $400,000.
With the suspension of the discount program that will take effect on Oct. 1, 2023, the terminal rental rate at Saipan airport’s main terminal will go up to $34.92 from $19.49 or a 79% increase. The terminal rental at the commuter terminal to Rota and Tinian will increase to $13.97 from $7.79, also a 79% increase. The landing fee at the Saipan airport will increase to $15.25 from $8.01 or a 90% increase, and the landing fee at the commuter terminal will increase to $9.15 from $4.81, likewise a 90% increase.
King-Hinds, in an interview after the meeting, said the airline incentive program is a two-year program that gives discounts to the airlines that will add new routes or flight destinations.
Right now, she said the only airline availing itself of the incentive is United Airlines because of its Narita-NMI route. The discount program has been going on for a year now, which means that United Airlines should have one more year to benefit from it if not for the proposed suspension that will take effect on Oct. 1.
In her report to the board, Hofschneider said CPA’s FY 2024 budget that includes an eight-hour cut, shows an overall 5% decrease in expenses compared to the current spending measure.
The personnel expenses in FY 2024 budget, she said, were reduced to reflect a decrease of eight hours per pay period. Personnel expenses are expected to decrease by 3%, she added.
Reyes said everyone on the board supports the idea of preventing a receivership.
For her part, King-Hinds said, “I think we all need to bear the burden.”
Commonwealth Ports Authority Board Chairwoman Kimberlyn King-Hinds speaks during a board meeting on Tuesday.
Commonwealth Ports Authority board member Pete P. Reyes
