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It’s a no to tapping MPLT funds
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Posted on May 29 2006
The Fitial administration has dismissed a suggestion to tap funds held by the Marianas Public Land Trust, rather than sticking with the NMI Retirement Fund option, to inject capital to the Commonwealth Utilities Corp.
While the $40-million CUC loan proposal represents only 10 percent of the Retirement Fund’s portfolio assets, the relief amount covers almost 90 percent of MPLT funds, press secretary Charles P. Reyes Jr. noted.
“The government lacks financial resources and the only available funding source for CUC capital infusion is the NMIRF,” Reyes said.
“MPLT may lack requisite funds and is constitutionally restricted to remitting only interest earnings to general fund for legislative appropriation. [The former Marianas Public Lands Authority] also did not remit much, if anything, to MPLT for 10 years,” he added.
The suggestion to tap MPLT funds came from former House Speaker Heinz Hofschneider, who joined retirees in expressing their opposition to the Defined Benefit Plan Rescue and Recovery Act.
The bill pending in the Legislature would force the Retirement Fund to forgive the government’s $123 million debt and to issue a new $40 million loan to CUC.
Commenting on a concern that the government may not afford to pay the CUC loan, Reyes maintained that the Retirement Fund’s money would be even safer with the CNMI government than in the stock market.
“What we are asking for is to pay a debt obligation and secure a debt security from NMIRF for CUC. The obligation will be secured or collateralized by a sinking fund and identified streams of CUC income with the full faith and credit of the CNMI government.
“We will ensure that, through full cost recovery and rate adjustments, CUC will have the capacity to pay NMIRF in full with 7.5 percent interest the expected market rate for NMIRF equity returns without the added risk and market volatility. The NMIRF right now could lose 10 percent of its investment portfolio on any given day, if we suffer a bear market, as we did in 2001 and 2002, when NMIRF assets went down to some $300 million,” he explained.
