CDA board member Merced Tomokane said, “I don’t understand the Legislature. In all jurisdictions right now, they are looking for investors. The QC is a good program for new investments — new investors that were never here in the first place. What have you got to lose?”
Tomokane told the CDA board and other officials of the agency last week during their board meeting that the CNMI gains in having investors bring in money, build infrastructure and hire employees.
The agency reacted to two proposed bills in the Legislature: H.B. 17-168 intends to repeal the Investment Incentive Act while H.B .17-216 proposes to suspend it.
Tomokane asked CDA economic development analyst Carline Sablan of the lawmakers’ concern with the program.
Sablan told Tomakane that the lawmakers expect a higher local workforce requirement from the investors.
For Sablan, it all boils down to understanding the multipliers.
She said since early this year, the CDA has been trying to explain the benefits of the program to the lawmakers.
Despite sitting and talking to them at length about the program early this year, “they apparently have issues that were not brought to our attention.”
She also reported that she has been asking the Department of Finance to provide CDA annually the amount of tax benefits that it provides to each of the beneficiaries in order to show the costs and benefits of having the program.
But to no avail.
“We need these numbers to show the impact of this program. Without these, I don’t know how else we can demonstrate that this program has been, in fact, beneficial to our economy,” she said.
She also said the lawmakers seem to have the expectation that QC beneficiaries employ mostly local workers.
“Right now we are requiring 30 percent as mandated by local law,” she said.
With the implementation of the program, Sablan said, “CDA is caught in the middle.”
In the face of economic austerity, the CDA is trying woo investors to promote economic development by way of tax relief.
“We provide tax benefits for the project to materialize, but we also expect local purchases, job creation and the like,” she said.
CDA board chairman Pedro Itibus asked Sablan if she asked the bill’s author whether they have statistics that would show that CDA is making progress with the program and whether the lawmakers have statistics to back up their decision.
CDA executive director Manuel Sablan said, “I am having problems in knowing essentially what is the concern.”
For Sablan the qualifying certificate program, from an economic perspective, was supposed to induce a new investment and for it to have multiplier effects.
“We provided a QC to a firm to undertake a new investment. Everybody is trying to attract new investment, preferably foreign capital,” he said.
He cited the case of Laolao Golf Resort Hotel.
“There was no $54 million then. Because of the QC they invested $54 million minimum,” he said.
If you don’t have an investment today, you don’t lose anything with respect to any tax revenue. By attracting new companies to come in and invest, it creates a multiplier. It should generate positive aspects to you,” he said.
Under the QC program, CDA does not provide relief to a company that is already existing.
Despite the bills, Sablan is looking forward to continuing the program. He said, “Particularly now when we are trying to promote investment, it is very important that we maintain stability.”
He also asked Carline Sablan to find ways to explain the program to the lawmakers “in a little more simplistic manner so they can appreciate this thing.”
Tomokane told Sablan to present before lawmakers whatever data that CDA has and tell them that the Rev&Tax will provide the other portion of the report “to give them a global picture of this program.”
P.L. 12-32 or the Investment Incentive Act of 2000 created the qualifying certificate program, an economic development tool that provides tax breaks for the development of desirable facilities or projects.
Based on the CDA report in 2010, the program has created $94.6 million of capital investment since its inception in 2000.
