Palacios asks MPLT for $20M line of credit

Marianas Public Land Trust

Gov. Arnold I. Palacios has requested the Marianas Public Land Trust to consider extending a $20-million line of credit for several federally funded capital improvement/infrastructure projects in order to raise revenues.

In his letter to MPLT board of trustees chair Phillip Mendiola-Long on Monday, Palacios also requested MPLT to consider lowering the interest rate on the government’s existing loan with MPLT that was used to fund various typhoon-related expenditures.

The governor said these proposals will provide “safe, local investment opportunities that not only help current beneficiaries of the trust fund but future generations as well.”

Palacios cited the CNMI’s challenging financial situation in making the request, saying the $20-million line of credit for the Commonwealth could be a type of bridge financing or advances to cover the costs of the initial stages of construction of these CIP projects.

Saipan Tribune learned that Mendiola-Long hosted a meeting last June 21 among MPLT trustees, Palacios, Senate President Edith E. DeLeon Guerrero (D-Saipan), and House of Representatives Speaker Edmund S. Villagomez (Ind-Saipan) during which they discussed the twin proposals for the line of credit and lowering of the interest rate.

Arnold I. Palacios

The governor said that, as they discussed during the meeting, the CNMI government is facing significant financial pressures due to a slow economic recovery.

Palacios also blamed the past administration of Ralph DLG Torres for alleged indiscriminate spending of the American Rescue Plan Act funds.

As a consequence, Palacios said, his administration has been forced to cut government programs and operations.

The governor said the Commonwealth has several capital improvement projects throughout Saipan, Tinian, and Rota that are funded on a reimbursable basis by federal grant funds administered by the Economic Administration of the U.S. Department of Commerce, U.S. Environmental Protection Agency, and other federal agencies.

It is expected that these financing or advances will be reimbursed in less than 30 days after the federal agency reimburses the Commonwealth for such costs, Palacios said.

He said they expect this line of credit to be utilized for various projects scheduled to begin simultaneously, which is the reason for the large initial $20-million request.

The governor said the line of credit will be necessary for approximately five to seven years while the infrastructure and other capital improvement projects are under construction.

Palacios requested the MPLT trustees to designate a point of contact so that the administration can provide more information and details on the request that will assist the trustees in making their decision.

On the interest rate matter, the governor said they also discussed at the meeting the possibility of lowering the 7.5% annual interest rate for the government’s existing loan with MPLT, which is backed by a guaranteed repayment source from the trust’s own annual distributions to the general fund.

As of June 5, 2023, the government’s MPLT loan balance is $10.73 million.

Palacios said a lower interest rate would ease the debt service required by the government in this challenging fiscal environment and would still be earning sufficient interest when taking into account the current investment climate and the projected rates of return on alternative investments.

The line of credit request appears to be in line with what Finance Secretary Tracy B. Norita and Reps. Ralph N. Yumul (Ind-Saipan) and Blas Jonathan T. Attao (Ind-Saipan) had disclosed last week about the need to have a “seed money.”

At a hearing for the fiscal year 2024 budget before the Senate Fiscal Affairs Committee, Norita said that some $289 million worth of Capital Infrastructure Project funds are in the pipeline and the CNMI government is planning to look for and set aside at least $25 million that can be tapped to get the projects going, while the administration is still working on drawing down the funds.