CPA exceeds airport, seaport bond ratio requirements

The Commonwealth Ports Authority is now in full compliance with the bond indenture agreements for both airports and seaports, with ratios to be shown in the fiscal year 2010 audit report that is expected to be released soon.

Ports authority executive director Edward Deleon Guerrero and comptroller Derek Sasamoto reported this to the board of directors on Friday following disclosure that the independent auditor Deloitte & Touche is amending the agency’s last fiscal year audit report.

The required debt service ratio for both airport and seaport is 1.25.

The seaport ratio at present is at 1.36 and has been compliant for many years, compared to the airport side, which as of last month stood at only 1.06.

The two ports authority officials said the expected full compliance for debt service ratio came about due to the recent decision of the Federal Aviation Administration to approve CPA’s classification of its passenger facility charge revenues as operations revenue.

The FAA’s PFC program allows the collection of fees of up to $4.50 for every arriving passenger at commercial airports. The fees are used to fund FAA-approved projects that enhance safety and security.

In fiscal year 2010, CPA failed to meet the bond indenture agreement due to a $1.6 million unexpected expenditures that included $103,000 for repair of the baggage handling system; $95,680 for the Allied Pacific Environmental Consulting Inc. soil contamination project; $132,000 paid to the Internal Revenue Service; and $68,000 paid to the U.S. Department of Labor for noncompliance issues.

According to Deleon Guerrero, it was during an FAA conference in California last month that CPA raised the issue about PFC. The formal decision, he said, was received two weeks after the conference.

FAA, he added, even agreed to use CPA as a model agency for its PFC program in other airports.

“FAA agreed that PFC revenues must be considered part of CPA revenue in terms of looking at compliance with bond indentures,” said Deleon Guerrero, adding that the agency is now putting together all information being asked by FAA so other airports could benefit from its findings.

Last Friday, the board adopted a resolution officially designating PFC revenue as CPA operations revenue—a requirement of the independent auditor to release the amended audit report for fiscal year 2010.

Prior to the FAA approval, Sasamoto had reported that CPA will incur a $789,000 shortfall in its audit report. In the amended audit report, the ports authority will realize an excess of $759,000. Because of this, Sasamoto said CPA is expected to be in full compliance with the bond ratio from now on.

Sasamoto, however, said that despite of the financial improvements shown by CPA, the bond rating issued by the Fitch Ratings—a nationally-recognized credit rating agency—is not that easy to be changed.

He cited “external factors” affecting the overall ratings that are beyond the control of the ports authority.

In February this year, Fitch Ratings affirmed a “BB-“ grade for the CNMI seaport bonds which indicates a negative rating outlook for all seaport bonds. CPA has about $33.5 million of outstanding revenue bond obligations under senior series 1998A and 2005A bonds.