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Pension obligation bond plan shelved for now
Gov. Eloy S. Inos said Friday that the plan to float a multimillion pension obligation bond is shelved or on hold for now, and will remain as a “last resort,” especially now that the process of awarding a license to exclusively develop a minimum $2 billion integrated casino resort on Saipan is moving forward.
Inos reiterated that floating a pension obligation bond entails “huge interest expense” in addition to the payment of the principal amount.
“Not only will we expect a huge interest expense, the whole principal would have to be repaid and so it’s going to be the future generations that will be [paying] that. So if we can avoid it, I say, let’s put the pension obligation bond project on the shelf for now,” he said in an interview after signing into law a bill that clarifies ambiguities in the Saipan casino law.
Inos said with the casino option moving forward, the CNMI may not even need to float a pension obligation bond.
A 2013 law authorizes the government to float up to $200 million in bonds to address the looming exhaustion of the retirement program’s funds by 2019. But since that law’s passage, casino operation on Saipan has been legalized, although a license has yet to be awarded.
The Inos administration, in collaboration with the Commonwealth Development Authority, had targeted to float bonds of $60 million, $80 million, or $120 million. The POB Act was later amended to allow the use of gross receipt taxes to repay the bonds.
Unlike revenue bonds, POBs are taxable and command higher interest rates. CDA has confirmed that it is aiming for a higher credit rating so the proposed POB float will get a lower interest rate.
