House OKs non-general obligation bond issuance bill

After a heated debate that went on even during a short session break, the House of Representatives passed late Thursday afternoon a bill amending the Commonwealth Development Authority Act of 1984 to allow issuance of bonds other than general obligation bonds at a time when the CNMI is preparing to float a pension obligation bond of $60 million to $80 million. This is much lower than the $300 million limit allowed by law.

House Bill 18-170 passed by a vote of 13-4 at 4:57pm Thursday.

This was among the major pieces of legislation passed that day, besides a legislative initiative extending leases of public lands from the current maximum 40 years to 99 years for persons of Northern Marianas descent, as well as a revenue-generating bill cutting income tax rebate from 90 percent to 70 percent at the highest level of rebate with proportional reduction at the lower levels.

Those who voted “no” to HB 18-170 or the CDA bond bill were Reps. Antonio Benavente (Ind-Saipan), Janet Maratita (Ind-Saipan), Ralph Yumul (Ind-Saipan), and George Camacho (R-Saipan).

Absent were Reps. Ray Tebuteb (Ind-Saipan), John Paul Sablan (Cov-Saipan) and vice speaker Frank Dela Cruz (Ind-Saipan), who left the session early. Tebuteb and Sablan were in Palau that day.

The members debated Rep. Mario Taitano’s (Ind-Saipan) bill after hearing from CDA’s Manny Sablan and Oscar Camacho, along with CDA counsel Vicente Salas.

But the debate also included HB 18-71, also by Taitano, amending the pension obligation bond law or Public Law 18-12, “to provide for the issuance of bonds other than general obligation bonds and acknowledge the existence of an actuarial determination of the unfunded liability of the Commonwealth government to the Retirement Fund.”

House members debated whether the government can afford to float a bond, how much it can afford to float at this time, and whether the bill they are discussing would contradict the pension obligation bond bill they passed and became law authorizing up to $300 million in pension obligation bond to pay Retirement Fund obligations.

Rep. Roman Benavente (Ind-Saipan) expressed concern about floating a bond, saying that Finance Secretary Larrisa Larson was earlier quoted as saying that the government cannot afford to float another bond. But Benavente voted “yes” to the bill later.

House Speaker Joseph Deleon Guerrero (Ind-Saipan) said the Finance secretary’s statement was taken out of context, because she was only responding to a question about whether the government can float a bond to pay for land compensation, which has nothing to do with the pension obligation bond or the bills being discussed.

At one point, Yumul said the bills as proposed could allow for the use of bond proceeds to pay for land compensation, which he said is not the purpose of the POB bill passed and signed last year.

The speaker said Yumul’s statements may be misleading but after the debate got heated, the speaker called for a short recess.

When the speaker and other members went back to the chamber—but still off air—the speaker apologized to Yumul. The speaker also apologized to other members he may have offended.

Rep. Tony Sablan (Ind-Saipan), however, summed it up when he said HB 18-170 is only to amend a section of the CDA law “to try to get the best bond deal for the CNMI” and it does not have to do with how much will be floated later.

“At some point in the process, after working with bond underwriters, they would come up with a bond amount that would be affordable to the CNMI. And at that point, the administration and Legislature would be afforded the opportunity to sit down with CDA and say ‘okay these are the options.’ At that point I think a decision would be made how much we can afford, how much we can pledge,” Sablan said.

The House Ways and Means Committee chairman said it is obvious that the CNMI cannot afford to float a $300 million pension obligation bond “so I think this is just to try to help CDA do its work to get to the point where [there’s] determination how much we can afford to float.”

Gov. Eloy S. Inos earlier asked lawmakers to amend both the pension obligation bond law and the CDA Act before the CNMI could proceed with floating a bond worth “anywhere between $60 million and $80 million.”

The House, however, didn’t act on HB 18-71 before adjourning the session at past 5pm Thursday.

Other bills passed

The House also passed on Thursday the speaker’s HB 18-69, House Substitute 1, reducing income tax rebate. It passed by a vote of 14-3 with one voting “present” and two absences.

Deleon Guerrero’s bill cuts income tax rebate from 90 percent to 70 percent at the highest level of rebate with proportional reduction at the lower levels.

It then appropriates the revenues from Chapter 7 tax to the NMI Retirement Fund’s defined benefit plan members. The Ways and Means Committee, which reviewed and recommended the amended bill’s passage, said reducing the 90 percent rebate will provide the CNMI with instant revenue for two fiscal years.

The Ways and Means Committee said funds collected under this proposal will directly assist in the payment of the 25 percent deferred retiree pension under the Retirement Fund settlement agreement.

Under the bill, the reduction in the rebate will take effect on Jan. 1, 2014, and be in effect for two years.

If the bill does not become law prior to Jan. 1, 2014, the Act will take effect on Jan. 1, 2015.

The House also passed on Thursday Senate Bill 18-4, to require all commercial wireless service providers to produce wireless service coverage maps readily available for consumers. The bill passed by a vote of 17-0 and now goes to the governor for action.

House members also passed by a vote of 17-0 SB 18-30 Senate Substitute 1, reducing utilities reconnection fee from $60 to $25 for residential consumers and $75 for commercial consumers, among other things.