Resolution vs CPA takeover rued

The Fitial administration is disappointed the Legislature disapproved the governor’s recent takeover of the Commonwealth Ports Authority.

“We regret we are not able to persuade the Legislature to support this executive order,” press secretary Charles P. Reyes Jr. said after the House of Representatives and Senate adopted a resolution rejecting an executive order that placed CPA under the Governor’s Office for 120 days.

It is the Legislature’s intent to invalidate the executive order through the resolution, and consequently require the administration to let the board of directors control CPA. But the lawmakers say the state of emergency declaration may remain in effect until its June 13, 2008 expiration.

Reyes criticized the Legislature for being inconsistent. “They agree with the financial measures we’ve implemented, but they reject the executive order, which authorized the governor to do those very things. It doesn’t make much sense,” he said.

He maintained that the administration had no intention to keep CPA under its wing for long. The takeover was only an interim measure driven by the urgent need to save CPA from a technical default on its airport revenue bond, he said.

“We needed a solution that was practical, quick to implement. The governor thought this [executive order] was the most pragmatic approach to take,” Reyes said.

On May 13, 2008, Gov. Benigno R. Fitial assumed control of CPA. The governor’s action came after the board’s repeated failure to muster a quorum and act on fiscal measures needed to prevent CPA from defaulting on its bond indenture agreement. With the power from the reorganization, the governor has now applied the measures.

The resolution argues that the governor could have averted a financial crisis at CPA by using his power to remove the members of the CPA board of directors for neglect of duty, and to appoint new members to the board.

“The Legislature stands ready to assist the governor in undertaking further action required or necessary to avert a technical default on CPA’s revenue bond indenture within constitutional and statutory boundaries,” the resolution stated.

On March 1, 1998, CPA entered into a $20 million airport revenue bond indenture agreement with Bank of Guam as the bond trustee. This agreement requires CPA to make timely payments and to maintain a 1.25 revenue-to-bond payment ratio at all times during the duration of the bond. CPA, which still owes $17 million, has been making punctual payments. But it has failed to meet the required debt ratio of 1.25.

To help meet the bond requirements, the governor has signed directives raising CPA rates, imposing austerity measures, and ending the incentive program for airlines flying to the Northern Marianas.