LACK Of Real and Meaningful NMD Participation in Decisions About Their Land

The Northern Marianas Descent Corporation or NMDC has repeatedly, over the last two years, asked the Department of Public Lands for information about the expiring leases and for an opportunity for open and honest discussion and meaningful participation with DPL in deciding how our public lands are managed. In general, DLP’s response has been a consistent, “We are in negotiations, all communications and discussions are private between DPL and interested parties, and we will let you know when the negotiations are complete.”

This is not acceptable. While DPL has a responsibility to carry out the management of public land for the benefit of the owners of these lands, who are the NMDs, that responsibility does not give DPL the right to deny NMDs meaningful participation in how their lands are managed. It does not give DPL the exclusive right to decide, in secrecy, what lease terms will be, and to only reveal the lease terms after the fact, when all of the meaningful negotiations are done and before NMDs have had any chance to provide input.

DPL’s decision to allow a 15-day public comment period in which only written comments regarding the lease will be accepted does not invite meaningful discussion. It does not inform. There is no in-person public presentation by DPL with an opportunity for the public to ask questions. Instead, it is an authoritarian act that basically says, “we do not have to talk with you, but if you want you can write us a letter that we may or may not read, but rest assured, we are in charge of all decisions regarding your land and your input is not welcome.”

Prior to DPL’s announcement of the 15-day comment period, NMDC wrote a letter to acting DPL Secretary Sixto Igisomar requesting that DPL provide one or more public hearings with at least 30 days advance notice so that all interested persons have a reasonable opportunity to review and submit comments in regards to any and all public land leases, including the proposed lease by Saipan Portopia Hotel Corporation. The intent of our request was so that the public could be informed, ask questions, and provide well-considered comments. Our request was denied without explanation.

Lack of Transparency and Accountability in the Management of Public Lands

DPL does not provide the public with ready access to information on land leases and lessee performance and payments. Any member of the public, especially NMDs, should have easy access to audit reports, lease agreements and amendments, the status of lease payments, the disposition of lease payments and other income from public land, and fair market value estimates including evaluation basis information on land assets that are up for new leases or renewal.

This is particularly important because of DPLs pattern of lack of transparency, accountability, failure to respond to requests for information, and unwillingness to engage the public in any kind of meaningful discussion that informs their policies and administration of public land.

The manner in which DPL manages both new and expiring leases is problematic and not limited to the Saipan Portopia Hotel Corporation lease proposal under consideration. Other good-faith investors have been negatively impacted by DPLs pattern of management that includes late-stage reactive, rather than early proactive management of expiring leases, creating stress, risk, and uncertainty for investors that disrupts ongoing operations and management of properties, causes delays in maintenance, results in loss of revenue for the investor, and delays planning and continued investment in the properties.

Request for Annual Audit Reports and a Public Hearing with a Subsequent Comment Period

Because of the lack of information provided by DPL that will allow the public to understand and evaluate the effectiveness and value of the proposed lease by Saipan Portopia Hotel Corporation, we hereby request that DPL immediately provide us with annual audit reports for the Hyatt lease for the past 25 years. Summaries should be adequate — we will let you know if we need the full audits.

Because the 15-day comment period for written-only comments is completely unacceptable, we also request for a real public hearing on the Saipan Portopia Hotel Corporation lease proposal. This public hearing is to include a presentation by DPL followed by an opportunity for questions and answers. A reasonable period of time must be allowed for subsequent public comment and for DPL to potentially make changes to the proposed lease agreement in response to public comment.

Please understand that the above requests are demands. Failure to immediately confirm that DPL will provide the audit summaries and provide a proper public hearing will result in legal action. We will not allow the Department of Public Lands to ignore the NMDs and the public that it serves and to continue to operate with neither transparency nor accountability.

Concerns regarding the DPL "Notice of Intent to Lease Public Land":

“The Department of Public Lands has received no alternative proposals to lease the subject public land in Lower Base, Saipan.”

What is this referring to? What does public land in Lower Base, Saipan have to do with the Saipan Portopia Hotel Corporation's proposed lease?

Concerns regarding the Lease Agreement:

Article 4: Extensions

An extension of up to fifteen years may be granted with the approval of the Legislature in accordance with 1 CMC § 2806(c)(1). Consistent with its fiduciary duty to manage the use and disposition of public lands for the benefit of the collective owners, the DPL will entertain requests for extensions no sooner than two (2) years after completion of all development contemplated hereunder, and no later than two (2) years from expiration of the Term.  The DPL will make its determination to seek legislative approval or to decline to seek such approval based upon Lessee’s actual performance of the terms of the lease.

This section is unclear. Does “and no later than two (2) years from expiration of the Term” mean that the extension must be negotiated by 2 years before expiration, or 2 years after expiration of the term? If before, fine, this is reasonable. If after, why? That would set the stage for a last-minute negotiation that may result in no lease, a disorderly shut-down of the hotel, the potential to have no new lessee in place and therefore loss of lease revenue, the potential deterioration of the property while it sits unused, DPL expenses in protecting and maintaining an abandoned property, and a weak negotiating position for DPL.

Why is there no deadline for DPL to decide whether or not to seek legislative approval based upon Lessee’s actual performance of the terms of the lease? Without a deadline there is the potential for delay of the extension as DPL looks at performance issues as well as the time it takes the Legislature to make a decision. Again, a delay can lead to the same negative outcomes outlined in the above paragraph.

Article 5:  Rent

This section refers to “Base Rent” and “Additional Rent,” yet the Rental Schedule that follows uses completely different terms in the column headers. This creates confusion. Also, it is not clear if the 1% of Business Gross Receipt is in addition to BGRT, or is BGRT. If it is BGRT, then it is rent instead of tax. Again, this is confusing. It should be easy for a reader to understand the rental schedule. The terms and headers used should be consistent and clear explanations should be provided.

D. Time and Payment; Interest; Amortization.

…Past due rental payments shall bear interest at one and one half percent (1.5%) per month compounded monthly, from the date it becomes due until paid.

Specifying a fixed 1.5% interest rate for past due rental payments could cause problems if in the next 40 years interest rates skyrocket. In that scenario it may be beneficial for the lessee to delay payment since that would amount to a loan at 1.5% interest per month which may be far lower that bank interest rates. The interest rate should be tied to a current, published interest rate so this won’t happen. It could also be set at 1.5% or higher if the published interest rate is greater.

Article 7:  Security Deposits

Why is it not required that the initial base rental security deposit go into an interest bearing account like the additional security deposit? Is DPL supposed to just put it in the bank and give it back after 40 years? Someone should be getting interest on that money. If not the lessee, whose money it is, then DPL. If DPL, then the interest should be added to the lease revenues that are supposed to benefit the NMDs and not used by DPL for their own purposes.

…If the Lessee defaults or violates any term in this Lease prior to the expiration of this Lease, the DPL may keep all or part of this Security Deposit to cover unpaid rent, administrative costs, attorneys' fees, damage to the property, and/or other expenses.

The  word “cover” should be replaced with “applied toward.” Otherwise, it could be interpreted that the security deposit satisfies all the unpaid rent, etc. Also, whenever “Security Deposit” is mentioned, the interest should be mentioned too, as in “Security Deposit and accrued interest.”

Article 8: Permits, Construction Plans And Specifications

Construction Plans and Specifications

There is no mention of any prior, agreed upon criteria or limits or restrictions to the construction. It is risky for both parties to leave this discussion until after the design and construction plans are done. It could lead to additional expenses and delay.

Article 10:  Construction, Maintenance, Repair, Alteration

There is nothing in this section to require that the lessee take adequate steps to mitigate noise from generators, etc., as well as smells and hot exhaust air, so that adjacent properties and the public are protected. A good example of what happens when this is not addressed is the extremely loud noise from generators, pumps or whatever at Marianas Spa and Resort that can reverberates across the lagoon and as far away as Achugao. The noise is continuous and destroys the peace and tranquility of the beach and nearby areas.

Article 11:  Excused Delay Of Performance

There are apparently no consequences to the lessee for delays not excused in this section. There should be a formula of financial penalties base on the length of delays, and also a time limit to delays that can lead to the cancellation of the lease and loss of deposits.

Article 12:  Annual Reports And Audit

There should be a requirement in this section for financial and operational data protection that includes off-site duplication of data in case of natural disaster or other cause of catastrophic data loss. There should also be occasional audits of data security. DPL relies on this data to determine rent and other payments.

Article 13: Public Benefit Obligation

Public benefit obligation should to not go to the general public, but to the NMDs who are the owners of the land under lease. It should not be up to the lessee or DPL to decide where this money should go, but rather the NMDs should decide or at the very least, be asked how they would like their funds to be used. The funds listed in this section are not well thought out.

Why is half a million dollars of NMD money going to Garapan Revitalization where the vast majority of the residents are not NMDs when there is so much poverty and unemployment among NMDs? Were the NMDs asked? Is this not just another way of getting NMDs to fund government and business infrastructure without their consent?

Why just $5,000 for NMD scholarships per year when it is so little money in comparison with the actual costs of higher education, especially university education, that the potential benefit of this funds is probably just five NMC students per year to pay for books.

A one-time payment of $300,000 to be split between three executive branch offices could easily result in corresponding reduced funding from the government for these offices with the withheld funding being applied elsewhere. A better way to ensure that these funds get to the NMDs is to give them to non-profits that serve NMDs. An even better way is to put all these public benefit funds aside and allow the NMDs to decide how they would like their funds to be used.

The board members of the Northern Marianas Descent Corporation are John O. DLR Gonzales, president; Peter Perez, vice president; Felicidad T. Ogumoro, treasurer; James Arriola, secretary; Liz Diaz Rechebei, Ed.D.; Sophia Perez; and Vinny F. Orsini.

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