Panel asked to study $54M debt for PSS

House members have tasked the House Ways and Means Committee to study a proposal that aims to incur a public debt of $54 million for the Public School System.

Members voted to refer House Joint Resolution 14-44 to the committee, which is headed by Rep. Norman S. Palacios.

The proposal, authored by Rep. Heinz S. Hofschneider, aims to authorize the PSS, on behalf of the CNMI government, “to incur a public debt of up to $54 million for the financing of the new schools, additional classrooms, and other related school capital improvement projects for 2005 to 2012.”

To pass, the measure requires a two-thirds affirmative vote of the members of each chamber.

The resolution said that the PSS’ seven-year (2005-2012) CIP plan identifies the need for three new schools and 139 new classrooms to accommodate the growing student enrollment in the CNMI.

It said the plan also requires 39 replacement classrooms at the existing 20 public schools, “plus several other school facility improvement projects.”

The resolution said it is in the public interest to carry out these projects to enhance the learning opportunities for a growing student enrolment.

There are over 1,200 students currently enrolled at PSS. This number, it said, is expected to increase by at least 2,000 over the next seven school years.

HJR said $4 million of the $54 million proposed debt would be used to pay off the remaining balance of the PSS GEO bond; the $50 million will be used for the classroom construction and other projects.

The resolution provides that interest rate shall not exceed 5 percent per annum simple interest on the principal amount and with repayment not exceeding 40 years for the full amount.

In a recent opinion, the Attorney General’s Office opposed the resolution, saying it “raises several legal and constitutional issues.”

Acting AG Clyde Lemons Jr. said that Article 10 section 4 of the CNMI Constitution provides that public indebtedness may not be authorized in excess of 10 percent of the aggregate assessed valuation of the real property within the CNMI.

“While bonds are exempt from this limitation, there is no indication that the public debt authorized by [this] is in the nature of a bond. As such, the debt authorized…is limited to 10 percent of the assessed valuation of the real property located in the Commonwealth. Furthermore, the resolution does not contain an assessed valuation of Commonwealth property and there is no indication that the resolution complies with Article 10, section 4. As such, this resolution violates the Commonwealth Constitution,” said Lemons.

Further, he said that the constitution provides that the Commonwealth Development Authority is the governmental entity charged with the authority to borrow money.

Lemons also noted that the resolution does not indicate it was reviewed for legal sufficiency by the House legal counsel.