Legislature OKs lease deal for $300M Tinian casino

With a 25-3 vote, the Senate and the House of Representatives approved on Friday the lease agreement for a 300-hectare public land on Tinian for the construction of a $300 million casino and resort by Neo Gold Wings Paradise.

Any lease of public land consisting of more than 5 hectares requires legislative approval.

With the adoption of Joint Session Resolution 16-3, Neo Gold Wings Paradise Saipan Corp.—doing business as NGP Casino and Hotel—can now proceed with the development of a “six-star,” 1,000-room mega hotel resort/golf course and casino.

The legislative approval of Neo Gold Wings’ public land lease came just a few hours after the $60 million to $80 million Flame Sako Resort and Spa broke ground in As Matuis on Friday.

The 32-page land lease agreement between the Department of Public Lands and Neo Gold Wings calls for a 25-year lease, with an option of extending it for an additional term of 15 years.

Neo Gold Wings has decided to exercise the option to extend the lease, saying a longer lease period helps secure financing for the project development.

Of the 29 members of the Senate and the House, only one was absent during Friday’s joint session—Rep. Justo Quitugua.

Those who voted “no” on J.S.R. 16-3 were Sen. Luis Crisostimo, Rep. Tina Sablan, and Rep. Stanley Torres.

“Some members, myself included, were not even aware that we were approving a 25-year lease, as well as the 15-year extension, all in one shot, which has apparently never been done before in the history of the Commonwealth, until the day of the session,” Sablan told Saipan Tribune.

The other 25 lawmakers present at the session voted “yes.”

J.S.R. 16-3 grants approval of a lease deal between DPL and Neo Gold Wings for the leasing of approximately 3 million square meters or 300 hectares of public land in the Pina area on Tinian.

Introduced by House Committee on Natural Resources chair Rep. Ramon A. Tebuteb, Senate Committee on Resources, Economic Development and Programs chair Jude U. Hofschneider and committee members, S.J.R. 16-3 said Neo Gold Wings’ casino and resort project will “contribute substantially to the future economic development” of the CNMI and Tinian by providing more jobs and opening a wide range of service-oriented businesses in these tough economic times.

Two other investors are proposing to build casino and hotel resorts on Tinian, which so far has only one operating casino, the Tinian Dynasty Hotel and Casino.

DPL’s concern on the huge size of the public land to be leased out to the casino investor stalled the signing of the land lease deal and the subsequent joint legislative session to consider the agreement.

Public Lands Secretary John DelRosario said there was initially no justification for leasing 300 hectares, and that DPL wanted the casino investor to start with a smaller scale project, then expand it as needed.

“That’s reality check,” DelRosario told Saipan Tribune.

He said Neo Gold Wings is required by the lease agreement to provide DPL evidence of its sources of financing for the proposed construction within six months from the commencement of the lease.

The lease term commences 15 calendar days from March 6, when the Legislature approved the lease.

DelRosario said Neo Gold Wings also has 30 months to build and complete the construction of the project.

“If it fails to build the project in 30 months, anything that’s not used goes back to DPL,” he said.

Rep. Tina Sablan expressed disappointment over the absence of information in the agreement about the specific terms of the additional 15-year lease, and the Legislature’s apparent lack of interest in debating the issue.

“I think what we did today is completely irresponsible,” Sablan said during the session.

Assistant Attorney General Braddock Huesman, counsel for DPL, said the absence of details about the 15-year extension was just an “oversight.”

The joint session was announced with only a day’s notice.

Sablan also expressed dismay over the distribution of the final lease deal only a day before the session, and the distribution of the committee report and a joint resolution approving the lease deal only minutes before the joint House and Senate session on Friday afternoon, giving lawmakers a short period of time to review the documents.

A copy of the land appraisal report was also not circulated to lawmakers until the day of the session.

“The joint session would not have been called, however, if the required number of votes had not already been secured to approve the lease agreement…There were enough members who did not even feel the need to discuss the proposed lease in any meaningful way, as we saw in the rush to end debate and call for the vote,” Sablan said.

Rep. Stanley Torres, who also voted “no” on the lease deal, questioned the notary and signature on the land lease deal.

Sen. Luis Crisostimo said he would have voted “yes” to the lease agreement if it stated that Neo Gold Wings Paradise’s employees will consist of 80 percent Tinian residents.

Speaker Arnold I. Palacios said the employment issue may be moot once the federalization of CNMI immigration sets in.

Besides DPL and Neo Gold Wings representatives, also present during the session were members of the Tinian Municipal Council and the Tinian Casino Gaming Control Commission.

Sablan said the process in which the public land lease agreement with Neo Gold Wings was approved raises questions about the management and disposition of public lands in general, and the due diligence that is exercised in the review, negotiation and approval of public land leases to private investors.

“After the session, members counseled me to not worry so much about the apparent lack of a marketing plan, financing, and corporate structure of the investors to whom we were signing off 300 hectares of public land for 40 years for a mere 2.4 cents per square meter for the first few years, without knowing the terms of the last 15 years,” Sablan said.

She added, “If the investors do not show proof of adequate financing within six months, they told me the lease will be revoked and the CNMI loses nothing. I disagree with that sentiment. It is not only public land that is at stake here whenever we negotiate such lease agreements, but also the credibility of the government, and our ability to attract legitimate, high-quality investors now and in the future.”

She also described as “grandiose” the conceptual plan offered by Neo Gold Wings.

“A six-star, 1,000-room mega hotel and casino, golf course, international meeting hall, artificial ice stadium, artificial snow stadium, man-made beach, a fountain yard, a ‘Kursaal’ project, a ‘fire balloon game’, a helicab, a ‘yacht orbital way’, and other facilities and amenities,” she said.

Neo Gold Wings’ marketing plans “are unfortunately a bit vague” and its corporate structure is “also unclear,” said Sablan, adding that the casino investor’s financing plan is “ambiguous.”

“They may get backing from ‘a major U.S. bank’, and other ‘fund companies’, and they plan to ‘sell stocks,’” she said.

Sen. Jude Hofschneider, Sen. Paul Manglona and others who voted in favor of the land lease deal said the “bigger picture” is the economic contributions of the casino investment to the CNMI and its residents during these times troubling times.

The Legislature also adopted Joint Standing Committees Report 16-2, which recommends the approval of the lease agreement between DPL and Neo Gold Wings.

Under the lease agreement dated March 4, 2009, Neo Gold Wings would pay DPL $72,000 on the first and second year.

The first rental payment of $72,000 or 2 percent of the fair market value is due and payable on or about April 10, 2009, according to the report of the standing committees.

On the third year, the casino investor would pay DPL $72,000 or 3 percent of the gross receipts, whichever is greater.

On the fourth and fifth year, the payment would go up to $108,000 or 3 percent of the fair market value. The alternative would be to pay 3 percent of the gross receipts, whichever is greater.

Under the lease deal, Neo Gold Wings would pay DPL 4 percent of the fair market value or 3 percent of the gross receipts, whichever is greater, on the sixth and seventh year.

On the eighth year, the payment would be 5 percent of the fair market value or 3 percent of the gross receipts, whichever is greater.

On the ninth and tenth year, the casino investor would pay 6 percent of the fair market value or 3 percent of the gross receipts, again, whichever is greater.

Annual payments on the third five-year period would be 7 percent of the fair market value or 3 percent of the gross receipts, whichever is greater.

On the fourth and fifth five-year periods, DPL would be paid either 8 percent of the fair market value or 3 percent of the gross receipts, whichever is greater.

As pointed out by Rep. Tina Sablan, neither the 32-page lease agreement nor the standing committees report has information about the rental schedule for the additional lease term of 15 years.