Fitial wants loan guarantee for middle school project

Gov. Benigno R. Fitial has asked the Northern Marianas Housing Corp. to look into Section 108 of the Community Development Block Grant program to finance the construction of a new junior high school for the Public School System.

The loan guarantee provision of the CDBG program of the U.S. Department of Housing and Urban Development, Section 108 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.

NMHC planner and grant writer Jeannie Mafnas said at yesterday’s board meeting that the governor is “adamant” about tapping this provision since it will allow the agency to borrow “up to five times” of the CDBG funding they receive every program year which equates to some $4.1 million.

Mafnas said the repayment period for Section 108 is up to 20 years, with “interest rates on interim borrowing priced on a three-month London Interbank Offered Rate” known as Libor, “plus 20 basis points which is 0.2 percent.”

According to Mafnas, NMHC will have to pay back the Section 108 financing using future CDBG funds.

Board chair Marcie Tomokane noted that the source of repayment for Section 108 “will hold all future CDBG program for other projects in the region” possibly up to six years.

With the governor’s request to use the Section 108 provision, Mafnas said NMHC officials are scheduled to meet with Education Commissioner Rita Sablan on Nov. 10 “to finalize things and see what our next approach would be.”

Should a decision to use Section 108 be made, Mafnas said it will take about six months to process the application, given that NMHC would have to follow the citizen participation requirement, which includes conducting public hearings and publishing notices in newspapers. She said the “long process” will take about six months.

Mafnas reported to the board that there is no final cost yet for the construction of the new middle school at a private lot in Koblerville purchased by the NMHC. The site was chosen to allow the new school to share amenities and resources with the nearby Saipan Southern High School.

Tomokane also raised concerns during the meeting that, although NMHC has five years to spend the CDBG funds amounting to $824,363 for the construction project, having the purchased lot sitting idle will not give the agency “a good report card” with Housing and Urban Ddevelopment.

Mafnas, who disclosed that the latest quote they received from PSS and CIP is $8 million for the building construction alone, noted that they can only borrow up to $4 million under Section 108.

Tomokane said the board should know how many classrooms will be built for the new school and its corresponding cost. “We don’t want to borrow that $4 million if we don’t have the full scope of work with the total estimate cost, how much it will take to finish the entire project,” she added.