CPA, Star Marianas Air agree to resolve dispute

The Commonwealth Ports Authority and the Star Marianas Air Inc. agreed yesterday during a meeting before the Senate to sit down and finally resolve their lease dispute, which first began in 2012 and continues to this day.

With both parties appearing before Tinian and Rota senators yesterday, Sen. Victor B. Hocog (R-Rota) was able to wring a commitment from both SMA president Bob Christian and CPA chair Kimberlyn King-Hinds to sit down and try to resolve their differences.

Hocog said their main concern is the provision of essential air service on Rota and Tinian. “Because if there’s no airplane, what’s going to happen? We’re [going to] swim from Rota to Saipan?” Hocog asked.

Hocog said he called for the meeting to help resolve the problem after Christian told him about the dispute and that he can “turn off the engine and not move it.”

That dispute between CPA and SMA began in 2012 when CPA tried to collect on $2.6 million that it says SMA owes CPA in unpaid passenger facility charges. SMA, on the other hand, alleges that CPA imposes excessive charges that are not based on fair market value, CPA’s operational costs, or the weight of SMA’s aircraft.

Aside from King-Hinds and Christian, others at the Senate meeting were CPA legal counsel Robert T. Torres and SMA counsel Mark Scoggins. On the Senate side were Hocog, Senate President Jude U. Hofschneider (R-Tinian), and Sens. Francisco Dela Cruz (R-Tinian) and Karl King Nabors (R-Tinian).

Scoggins said they are ready to sit down with CPA to resolve their dispute whenever CPA is ready.

“We’re ready to start the process whenever CPA is ready,” Scoggins said. Torres readily answered they are.

Hocog then asked Christian is he is willing to sit down with CPA, to which Christian replied they always have been.

Hocog then asked King-Hinds if she is willing to sit down with SMA. King-Hinds said she stated it already three or five times in a span of 10 minutes.

“So we are good. That’s all,” Hocog said.

According to Torres in his report to the Senate, SMA and CPA executed an Airline Use Agreement and Use of Premises in 2009. The agreement provides the parties’ obligations to multiple areas throughout the airport and addresses how the lease is paid.

Torres said unlike a typical lease agreement that requires a tenant to pay an annual or monthly rent, CPA requires its airlines tenants to pay charges and fees based off of CPA’s cost of the facility or service provided to and used by the airline.

Because air carriers pay charges based off CPA’s cost of the facility, Torres said, it is unknown what those costs actually are until they are accrued.

The agreement addresses this issue by first requiring air carriers to pay an approximated rate based off of CPA’s proposed annual budget.

SMA has also accused CPA of violating the Anti Head Tax Act by charging head taxes on passengers traveling through its airports.

SMA complaints, among other issues, include CPA’s alleged economic discrimination by failing to provide an analysis of its landing fee charges between fiscal years 2009 to 2014.

Torres said Federal Aviation Administration has determined that it is satisfied that CPA is in compliance and that its current rates and methodology is transparent and reasonable.

Torres said U.S. District Court for the NMI and the FAA have repeatedly dismissed SMA’s “unfounded complaints.”

In December 2020, SMA sued CPA in the Superior Court, alleging breach of contract. CPA filed a motion to dismiss and the matter is set to be heard in April 2021.

At the Senate meeting, Christian said CPA recognizes that SMA continues to deliver a good level of service.

“We’re here, we’ve made a commitment to the community,” he said.

Christian said what he is asking is that their contract with CPA to be followed. “What we’re not happy with is a number of violations that we believe are blatant in that contract,” he said.

Christian said that, among other issues, the ports’ security issues haven’t been updated since 1992. “We’d like to help you with those. But in order to help with those, we’ve got to really change the attitude between the way the port treats us as a tenant and our ideas and their role and responsibility as a government entity. We’ve got to rid of the hostilities,” Christian said.

Torres said CPA’s position is Star Marianas owes $2.6 million in fees.

“We have fundamental disagreements but those fees is $2.6 million that we assert are due,” Torres said.

Torres pointed out that this dispute has been on the books for several years and that CPA is committed to good faith resolution.

Christian said CPA mentioned $2.6 million, but they can’t even produce one billing statement that shows it. “Let’s get a third party,” he said.

Torres said if SMA wants the Senate to have an oversight that’s their prerogative. “I don’t think what the Senate is looking for is to oversight everyone. What the Senate is looking for is a resolution,” he said.
Torres said what they represent to SMA is that they are absolutely committed to resolution, with each one of the tenants in every way.

King-Hinds said sitting before the senators and basically Christian rehashing his view “is not trying to win hearts and minds here.” “It’s supposed to be ‘meet me halfway,’ you meet me halfway. But it seems that’s not what’s happening. There are steps and your attorney knows what the steps are,” King-Hinds said.