IPI will pay half of 2020’s license fee if proposed CLA amendment is OK’d

Imperial Pacific International (CNMI) LLC is proposing to split the $15 million casino license fee it owes this year and promises to pay half of that—$7.75 million—within 10 days, and the remaining $7.75 million on Feb. 12, 2021. That is, if the Commonwealth Lottery Commission approves its request to amend the casino license agreement once more.

The Commonwealth Lottery Commission will hear IPI’s proposed 9th amendment to the casino license agreement today, Thursday, at 9am, in the Office of the Governor’s conference room on Capital Hill.

As this developed, Rep. Tina Sablan (D-Saipan) asked CLC chair Mark O. Rabauliman and Attorney General Edward Manibusan yesterday to reconsider the lottery commission’s decision to limit public attendance at the meeting to just 15 people on a first-come, first-served basis.

Sablan said the CLC has also opted not to provide any online access link for other members of the public to attend or participate in the meeting.

Given the magnitude of the subject of the hearing and the high level of public interest, and in the interest of transparency and open government, Sablan urged the CLC to reconsider its venue for the meeting and/or provide an online link so that more than 15 members of the public could participate.

“Online meetings have been conducted at the Governor’s Office before, and I do not understand why this particular meeting would not also be available online,” said Sablan.

She suggested that the Commonwealth Casino Commission’s conference room as the alternative venue as it has enough space and also has the technology and IT capacity to provide online public access.

The casino license agreement provides a graduated increase in the annual casino license fee, starting at $15 million from Years 1 to 5 of the CLA, to $15.5 million in Years 6 to 10. This year is the sixth year of the CLA.

In IPI’s request that was recently submitted to Rabauliman, IPI chief executive officer Donald R. Browne proposed that this year’s license fee be paid in two parts, with the first $7.75 million to be paid within 10 days after the CLC approves the amendments to the CLA, and the remaining $7.75 million to be paid in February 2021.

Another $7.75 million will be paid on Aug. 12, 2021, for the seventh year of the CLA, and the remainder to be paid in the second half of 2021.

In January 2022, payment of the full $15.5 million casino license fee will resume, Browne said.

IPI’s original request to CLC for the 9th amendment was that the $15.5 million casino license fee that it failed to pay last Aug. 12 be postponed and instead paid in the CLA’s 15th year or in 2029.

Citing that IPI may be required to remain closed for the majority of this year due to the government mandated shutdown, Browne also told Gov. Ralph DLG Torres in a letter dated Aug. 26 that they are also asked that the Commonwealth Casino Commission’s $3 million regulatory fee be reduced to $1 million since the cessation of gaming requires less oversight.

In a resubmitted request for the 9th amendment, Browne said IPI will complete 350 rooms in three years for the initial gaming facility, Imperial Palace Resort.

Upon obtaining title to the Marpi lands (including the golf course that was originally part of Mariana Resort & Spa) and the permits/approval by relevant government regulatory agencies for commencement of the development of the Phase 1 (Marpi), a total of 2,000 hotel rooms (including the Imperial Palace Resort rooms) shall be built within five years.

Browne proposed to postpone payment of the community benefit fund in 2020 due to the COVID-19 pandemic.

Browne proposed that any CBF that are past due will be paid back for development of infrastructure such as road, sewer, public schools, and social benefit projects subject to the joint approval of the CNMI government and IPI, provided, however, that the request for the payment of overdue CBF will not be made within three years immediately after the approval of this proposal.

Upon the first full year of operation of the first hotel on the Marpi land, Browne said the annual CBF payments in the amount of $20 million will resume.

Browne said according to the CLA, the CCC only supervises gaming operations.

As for the bad debts that IPI has accrued from its patrons, Browne asked the CCC to be given the ability to sue patrons over debts that date back to 2015. Accordingly, Browne said, they agree that 15% of bad debt recovered through this action will be paid to the CNMI as a tax contribution.

Proposals

Browne said closure of the casino due to “force majeure” events for longer than 30 days should cause future license fees to be reduced proportionally. Force majeure refers to unforeseeable circumstances that prevent someone or business from fulfilling a contract.

Browne proposed that the CCC regulatory fee be reduced from the $3 million to $1.5 million.

IPI also prosed for the legalization of online gambling to offset the impacts of the various unfavorable changes in the economy and the disastrous impact of COVID-19 on the global economy.
The unfavorable changes, Browne said, include the tightening of restrictions on Chinese tourists upon arrival and limiting the duration of their stay to 14 days.

He said with respect to the last four proposals, the government and IPI shall work closely together to form realistic plans and solutions on or before the end of January 2021.

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KEY TAKEAWAYS:
– IPI wants this year’s $15.5M license fee to be split: $7.75M to be paid once CLS is amended and the remaining $7.75M in February 2021.
– IPI will resume payment of full $15.5M license fee by 2022.
– IPI proposes legalization of online gambling.
– Commonwealth Lottery Commission to hear IPI’s proposals today
– Rep. Sablan appeals to hold meeting online so many members in the public can participate.