CPA justifies port fees hike

Amid criticisms on its decision to raise fees, the Commonwealth Ports Authority said the unforeseen effect of Asia’s financial crisis on its operations and the immediate need to raise money to cover debt service were the two main reasons why it had to make the decision on rate adjustment.

In defending the rate increase which will take effect in April 2000, CPA executive director Carlos H. Salas said the airport division incurred a net loss of $4.3 million in fiscal year 1998. In the first quarter of 1999, the division incurred a net loss of $1 million more.

“While debt service is absolutely a central component in our discussions on rate structure, you must realize the unforeseen economic downturn has also become an increasingly important consideration. Over the past year, sharp decreases in visitor arrivals have exponentially impacted our ability to generate revenue,” Salas said in a letter sent to Juan S. Tenorio, chairman of the Commonwealth Development Authority.

The ports authority had dramatically reduced expenditures by 15 percent in fiscal year 1998 and another 11 percent cut in fiscal year 1999. However, this has still failed to arrest the continues plunge in cash reserves amounting to $300,000 every month.

Failure to raise the fees would leave the ports authority bankrupt 10 months from now in January 2000. “Certainly, this is a situation that demands swift and decisive action,” said Salas.

While there are many ways to cut cost, Salas noted that the aviation financial study conducted by Ricondo & Associates revealed that this is the best way to generate the kind of revenue that the ports authority requires to meet its debt service requirement and stay afloat.

Tenorio reminded CPA that during its meetings before the issuance of the 1998 bonds, Salas assured him that there will be no increase in fees as projection was based on the existing rates and the agency’s capability to pay the bond.

“The CDA supported your bond issue and believed that CPA is capable of handling its own matters and whatever mistakes or misrepresentation or for this matter, misleading projections, it will never, never be passed on to the consuming public,” said Tenorio. He added that the public will ultimately bear the cost and not the airlines or industries that uses port facilities.

But CPA, however, believes otherwise. Salas said the continued operation of the airport and seaport division is a fairly substantial benefit to the public not to mention the substantial capital improvements already in place to ensure efficient flow of passengers at the airport and smooth cargo handling at the port of Saipan.

On insinuations that CPA had misled CDA on its real financial situation, Salas said the ports authority failed to anticipate the magnitude of the current rate of the island’s economic decline just like many other agencies of the government. He maintained that CPA believe that its projections were fairly conservative at that time, given the strong growth in the past decade.