“The agency doesn’t have the money and will be broke in two to three years if it will not push for collections,” said CDA board member Marcie Tomokane during the board’s meeting last Wednesday.
Comptroller Stuart B. Smith said operating funds are decreasing because operating inflows are exceeded by expenditures.
Smith had earlier sounded the alarm that to stanch the agency’s financial bleeding, more efforts should be done to raise revenue and not just cut expenses.
The Variety reported months ago that Smith had apprised the board of the financial situation that if the agency continues to run deficits of about $500,000 a year then $1.3 million in operating funds will run dry within four years.
He said, “More effort should be spent on revenue. We can’t cut enough. Even if we cut all staff expenses we’d still be in the red,” said Smith in an earlier board meeting.
Based on his financial report presented before the board last Wednesday, the comptroller presented graphs that showed a rising trend in the loan fund as the agency sees a rise in foreclosures.
There’s a decreasing trend in operating funds because operating inflows are exceeded by expenditures, he said.
The uptick in the collections graph represents proceeds from foreclosed properties and the steady black line represents the steady $60,000 to $65,000 in collections a month for the agency.
Tomokane also inquired with Smith on what would happen to the $1.768 million that the agency is anticipating to collect in the coming fiscal year.
Tomokane was referring to $1.768 million in potential properties that can be foreclosed and liquidated — cash that can be used in support of the SBBCI program or be made available for loan disbursements.
Smith said it depends on whether the CDA gets the State Small Business Credit Initiative program or not.
“If we get the SSBCI funding and we do not collect this, the program will be in jeopardy,” he told the board.
He also cited the possibility of drawing on Marianas Public Land Trusts backup credit.
He explained further, “If we don’t get the SSBCI program, then we would have less money available for loan.”
Smith said the agency was $40,000 short of what it projected to collect in FY’11.
Smith told the CDA board, “We are under forecast for FY 2011 loan payments collection.”
In the last fiscal year, loan manager Oscar Camacho said the agency had only three auctions but it is looking to have about 15 in FY’12.
CDA had collected about $760,000.
Camacho said there was a lot of push to move some accounts including properties in As Lito, San Antonio and the Tinian properties.
Asked by Tomokane if the agency foresees improvement in collections in 2012, Smith said it also hinges on staffing especially that one of the staffers who handle collections is gone for a year.
CDA Executive Director Manuel Sablan also confirmed that the agency is looking at getting a temporary replacement for a staffer who will be gone for a year for military leave.
For Smith, he doesn’t anticipate any collection increases in the coming year. He said on a macro basis, he doesn’t see indications that the general economic situation is getting better so that people will have an easier time to make payments.
He also reported on cash balance available for operations will be about $670,000 at the end of fiscal year 2012. “We will have about $3 million in the loan fund, which may or may not be committed for the SSBCI program,” he said.
Camacho, meanwhile, reported that they have made headways in clearing some obstacles with regard to debt relief including probate issues.
“We could push and move in a stipulated or consent judgment where 2 percent is also incorporated. We can have a court-ordered 2 percent rather than 9 percent, stretching it up to 30 years to reduce monthly payments but we cannot set aside accrued interest.”
Camacho said the debt relief program has a different statement compared to accounts under court judgment.
“If they fail to pay in 120 days, it is already a consent judgment then we could move to foreclosures,” he said.
Camacho said four accounts are in this situation.
As collection projection appears bleak for the coming fiscal year, Tomokane said, “We need to look at this seriously. By next year, if we don’t push for collections…then we will have to make a drastic decision sooner or later. We will have to review the agency’s financial portfolio every quarter now.”
Chairman Pedro Itibus inquired on the need to involve the court, to which Camacho responded that some borrowers are reluctant to come in and get into the debt relief program.
“We offered them 2 percent and they are still not willing to go into that,” he said.
But once the court orders them to pay, the borrowers, Camacho said, would start making payments and would do so religiously.
He also said the board had to contend with probate issues.
Revoked
In an email, CDA also confirmed the revocation of Tinian Dynasty’s qualifying certificate.
CDA’s economic development analyst Carline B. Sablan told Variety, “In early September, Acting Governor Eloy S. Inos approved of CDA’s recommendation to revoke Qualifying Certificate No. QC 2002-01 issued to Hong Kong Entertainment (Overseas) Investment, Limited.”
The CDA board, in an executive session during its Aug. 11 board meeting decided to recommend to Gov. Benigno R. Fitial to revoke the hotel-casino’s qualifying certificate that had expired on Aug. 7.
The governor had not acted on a previous recommendation that CDA made to revoke the said QC certificate that kept it active until Aug. 7.
The hotel was cited for non-compliance with tax issues, environmental concerns, and violation of the American Disabilities Act.
In June, the hotel was reported to have amassed $30 million in tax debts to the CNMI government, which will likely increase with the revocation of the certificate.
