TO EXPEDITE CIP PROJECTS CDA eyes $30M loan

In another attempt to stir the island’s slumping economy, the Commonwealth Development Authority says it plans to borrow up to $30 million from Bank of Guam to fast-track the implementation of Capital Improvement Projects.

The $30 million interim financing was decided by the CDA board to help stimulate the economy with the construction of various infrastructure projects listed under the 702 CIP Plan while waiting for the $60 million bond float, according to Board Chairman Juan S. Tenorio.

“In less than 15 days, the money will be released by the bank to get the projects going. We are doing this because we don’t want to lose the federal funds which have remained untapped due to lack of funds,” Tenorio said.

CDA has already chosen Paine Webber to handle the tax-exempt $60 million municipal bond float from a list of reputable underwriters that have submitted proposals to the authority.

Other agencies that were considered by the board were Lehman Brothers, Stone & Youngberg and Solomon Smith Barney.

However, the CDA board chose Paine Webber because of its knowledge and understanding of the CNMI economy since it was the underwriter in the $16 million bond float of the Public School System. Aside from this, Tenorio said, Paine Webber gave a good interest rate which he expects to be reduced later.

“It was a difficult task deciding which company will underwrite the bonds because they are all well-known companies. But in the end, we have to choose Pain Webber because of its record in the PSS bond,” he said.

Within six to eight months, the bond float would be carried out, and Paine Webber would immediately pay Bank of Guam, Tenorio said. A total of $120 million worth of projects will be undertaken by the CNMI government with the availability of $60 million in matching funds.

The Bank of Guam was chosen for the interim financing because of its reasonable interest rate pegged at 7.25 percent. Another company that submitted a proposal was Gilbert E. Jaca & Company, Inc.

“We need to stimulate the economy now because times are really bad. We want to get some projects going which have been lined up for a long time,” said Tenorio.

Gov. Pedro P. Tenorio signed last month into law the $60 million bond float to generate the badly needed funds for various construction projects.

Due to the decline in the economy, Tenorio noted that the CNMI government does not have sufficient funds to match the federal Covenant under CIP Section 702 of the grant portion without resorting to financing.

Based on the US-CNMI financial assistance agreement in 1996, the federal government has provided some $154 million in CIP funds from FY 1996 to FY 2002.