NMHC cagey about funding new Koblerville middle school

The Northern Marianas Housing Corp. is opposed to the idea of using the loan guarantee provision of the Community Development Block Grant to build a new middle school for the Public School System, saying this option is “not going to work” and will jeopardize future community projects in the CNMI.

During its meeting on Tuesday, the Housing board tasked corporate director Joshua Sasamoto and planner and grant writer Jeannie Mafnas to prepare a cost analysis report that would forecast the amount of CDBG funds that the Commonwealth will receive in the next five years.

The five-year grant projection will be based on Housing’s historical data or the amount of CDBG monies it received within the last five program years.

Section 108 of the CDBG program of the U.S. Department of Housing and Urban Development allows local governments to transform a small portion of their CDBG funds into federally guaranteed loans large enough to pursue physical and economic revitalization projects.

This provision allows public housing agencies to borrow up to five times the CDBG funding they receive every program year, with a repayment period of up to 20 years.

Sasamoto and board chair Marcie Tomokane both noted that should the CNMI avail of Section 108, it would take more than five years to repay the loan.

For program year 2010, Housing received $824,363 in CDBG funds, 20 percent of which is subtracted for administrative fees. This would equate to about $3.5 million in Section 108 loan for the CNMI.

Interest rate, on the other hand, is about 6 percent as of May 2010, according to Sasamoto.

“Repayment term could be longer [than five years],” he said. “I’m sure it’s going to be longer. It’s not dollar per dollar match because of the interest. [It would] probably take at least six years [to repay.]”

Tomokane instructed Sasamoto and Mafnas to include in the report computations of the loan repayment based on 6 percent and 7 percent interest rates.

She will review the report before Housing gives a copy to the governor and PSS.

The board came up with the decision after Sasamoto informed them about a “last minute” meeting with Gov. Benigno R. Fitial, staff and board members of PSS on Dec. 20.

“The governor made it very clear. NMHC, do the project at Koblerville. Advance five years of CDBG funds and use future CDBG funds to pay that back.He said that since the beginning,” said Sasamoto.

He disclosed that it was HUD field director Mark Chandler who informed the governor that he can avail of Section 108 for the construction of the third middle school in Koblerville. Estimated cost of PSS for the project is at $8 million.

But board members expressed many concerns, including who will pay the difference of the loan and in what form, since Housing does not have the money to do it.

Tomokane said the report would allow the governor to “see a clear picture” of the situation. “We all have to understand that the governor has a full plate.Someone has to be responsible [for the loan] but I, for one, cannot commit NMHC because I don’t know whether we would have that money.”

Board member Tom Glenn G. Quitugua pointed out that there is a risk each year for CDBG funds “to be zeroed out” given that the amount has diminished over the years.

Another board member, Edwin P. Aldan, also asked Housing staff to clarify as to who will be responsible for the repayment of the loan balance.