Wednesday, January 23, 2013

Northern Marianas governor says floating POB's is not feasible

CNMI Governor: Pension obligation fund not feasible
By Alexie Villegas Zotomayor
Variety News Staff

TINIAN — Floating a pension obligation bond at this time is not the solution to pension agency’s underfunding crisis, according to Gov. Benigno R. Fitial

“It’s expensive and will require public debt,” he told Variety on Saturday.

“Public debt at this time is not feasible. We should not be looking at POB. We should be looking at new investments,” he said.

For the governor, the only way to obtain economic recovery is to allow new investments to come to the CNMI.

He mentioned to Variety the efforts of the E-Land Group to expand hotel facilities in the islands, including the plan to acquire Aqua Resort Club hotel in San Roque.

Such new investments, the governor said, will bring the needed revenues to shore up the government’s dwindling resources and to help sustain the Fund.

“That is why we need to bring in new revenue. We cannot rely on old revenues. We know that the old revenues are not enough to sustain the life span of the Fund,” he said.

Asked if he believes that the Fund assets will be depleted by next year as predicted by experts, the governor said, “The assets Retirement Fund will never be depleted because if they implement P.L. 17-82 allowing those current government employees to withdraw their portion of the contributions to the Retirement Fund, that will extend the life span of the Fund.”

He said that based on his figures, “if they start allowing the current government workers to withdraw their contributions, their portion not incuding the employer contributions, that will extend the life span of the Fund.”

“I don’t understand why they are saying things that are not accurate,” he said referring to the projections made by the experts on the Fund’s depletion date set for March 1, 2014 next year.

During the Jan. 15 hearing for the trustee ad litem’s report and the motion to dismiss plaintiff Betty Johnson’s second amended complaint, the government counsel Assistant Attorney General Reena Patel insisted that the depletion date as reported by the Fund actuary Dylan Porter are “speculations.”

Porter predicted using the Governmental Accounting Standards Board 67-68 that the Fund would either be depleted by March 1, 2014 or Nov. 1, 2016 depending on whether or not refunds to the active employees would be allowed.

As of Jan. 2013, the Fund’s assets totaled about $200 million. If the Fund disburses $113 million sequestered by the court for the active employees, the Fund would be left with only $87 million.

For fiscal year 2013, the Fund is expected to pay $73 million in pension payouts.

Fund investment consultant Maggie Ralbovsky also reported in court that basically floating pension obligation bond is not a bad thing; however, she indicated that it would be difficult to sell CNMI bonds given the low rating — junk bond — and given the CNMI’s “creditworthiness.”

She suggested that rather than incur a $300 million debt and pay $36 million in interest, why not the government pay in this amount to the Fund and leave the investment corpus untouched to give it time to recover and lengthen the investment horizon.

The $36 million in interest payments a year if it were to issue bonds is three times the amount the government contributes to the pension agency a year.

The governor is pinning his hopes on the new investments coming to the CNMI that will save the Fund.

He said that he recently met with Korean investors interested in raising lambs in the CNMI.

“They are interested to bring in 1,500 lambs. They have a market but they need a sizeable piece of land to grow that type of livestock,” he told Variety.

“If this people are serious about economic recovery, they have to work together with me as I promised I am going to work together with them.”

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