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GENERAL PUBLIC AND TO MEET ITS CONSTITUTIONAL OBLIGATIONS. THE EXPENDITURES FOR GOVERNMENT OPERATIONS HAVE INCREASED ONLY SLIGHTLY SINCE THE FIRST FISCAL YEAR OF COMMONWEALTH STATUS IN

1978. BUT THIS INCREASE HAS BEEN FAR LESS THAN THE ACTUAL AND

ANTICIPATED RATE OF ECONOMIC AND POPULATION GROWTH.

MEASURING THE SIZE OF GOVERNMENT BY COMPARING THE COST OF GOVERNMENT TO THE GROSS ISLAND PRODUCT (GIP) DURING FISCAL YEAR

1979, THE FIRST FULL YEAR OF COMMONWEALTH STATUS, THE COST OF

GOVERNMENT WAS 16.4 PERCENT OF GIP.

THE SIZE OF THE CNMI

GOVERNMENT INCREASED TO 23.4 PERCENT OF GIP IN 1985. THIS CAN BE CONTRIBUTED TO INCREASED OUTLAYS FOR HEALTH CARE, WHEN WE

WERE STRIVING FOR CERTIFICATION FOR MEDICAID AND MEDICARE, EXPANDED FUNDING FOR EDUCATION, AND THE IMPLEMENTATION OF A RETIREMENT PLAN THAT WILL PROVIDE ADEQUATE INCOME FOR GOVERNMENT EMPLOYEES DURING THEIR RETIREMENT YEARS. THIS TREND REVERSED IN 1986 AND 1987 WITH THE COST OF GOVERNMENT DECREASING TO 19.2

PERCENT OF GIP. THIS REDUCTION HAS BEEN ACCOMPLISHED THROUGH

GRADUAL PRIVATIZATION OF SOME OF OUR UTILITIES, BETTER TRAINING OF GOVERNMENT EMPLOYEES, AND OTHER IMPROVEMENTS IN THE DELIVERY OF PUBLIC SERVICES.

ALL UTILITY FUNCTIONS PREVIOUSLY RUN BY OUR EXECUTIVE BRANCH DEPARTMENT HAVE BEEN TRANSFERRED TO THE STATUTORILY CREATED COMMONWEALTH UTILITIES CORPORATION (CUC) EFFECTIVE OCTOBER 1,

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AS REQUIRED BY THE GRANT PLEDGE AGREEMENT BETWEEN THE

OFFICE OF TERRITORIAL AND INTERNATIONAL AFFAIRS (OTIA) AND THE

CNMI, CUC WILL BE FURTHER PRIVATIZED BY CONTRACTING THE

OPERATIONS AND MANAGEMENT OF THE FACILITIES TO A PRIVATE SECTOR

THE CUC BOARD OF DIRECTORS HAS SELECTED A FIRM FOR THE

OPERATIONS AND MANAGEMENT OF THE POWER SYSTEM AND A FORMAL

CONTRACT WILL BE EXECUTED WITHIN THE NEXT FEW WEEKS.

FURTHERMORE, THE GRANT PLEDGE AGREEMENT REQUIRES THAT THE

UTILITY FEES BE BASED ON FULL COST RECOVERY INCLUDING LONG-TERM

THESE RATES

HAVE BEEN DEVELOPED AND WILL BE IMPLEMENTED BY CUSTOMER CLASS AS

FULL METERING IS ACCOMPLISHED AND SERVICES IMPROVED. WITH THE

IMPLEMENTATION OF THE NEW FULL COST RECOVERY RATES AS MANDATED BY THE GRANT PLEDGE AGREEMENT, IT IS ESTIMATED THAT THE ANNUAL COST FOR ELECTRICITY FOR THOSE FAMILIES ELIGIBLE UNDER THE LOW

INCOME ENERGY ASSISTANCE PROGRAM (LIEAP) WILL BE APPROXIMATELY

$875,000 OR $831,000 MORE THAN THE FEDERAL ASSISTANCE CURRENTLY

IN THE EVENT NO INCREASE CAN BE OBTAINED FROM THE

APROPRIATE FEDERAL AGENCIES (HUD AND HHS), IT WILL BE NECESSARY

IT IS REQUESTED

THAT THIS COMMITTEE ASSIST THE CNMI IN OBTAINING THE ADDITIONAL

ENERGY ASSISTANCE FUNDING FOR ELIGIBLE AND NEEDY FAMILIES.

THE SEVEN-YEAR CAPITAL DEVELOPMENT PLAN IS PROGRESSING.

WITH

THE ASSISTANCE PROVIDED BY OTIA, WE HAVE ENTERED INTO A CONTRACT

WITH ARTHUR D. LITTLE OF BOSTON, MASSACHUSETTS, A CONSULTING

FIRM, TO ASSIST US TO FINALIZE THE SEVEN YEAR PLAN IN ACCORDANCE

WITH PUBLIC LAW 99-396.

THE FINAL PLAN WILL BE SUBMITTED TO

OTIA FOR REVIEW IN JULY OF THIS YEAR.

PENDING COMPLETION OF THE

PLAN, IN THE INTERIM, OTIA HAS AGREED TO PROVIDE FUNDING OF CIP

PROJECTS TOTALLING $44,000,000, THE NET AMOUNT AVAILABLE FROM

THE SERIES "1" BOND PROCEEDS OF OCTOBER 1, 1987.

OF THIS NET

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SUBMISSION FOR THE CNMI IS IN FULL COMPLIANCE WITH THE BALANCED

BUDGET PROVISION REQUIRED BY THE CNMI CONSTITUTION, THE

APPROPRIATE U.S. LAWS, AND GRANT FUNDS MANAGEMENT RULES AND

REGULATIONS. WE HAVE IDENTIFIED THE CAPITAL IMPROVEMENT

PROJECTS (CIP) THAT WILL BE FUNDED DURING FISCAL YEAR 1989

FOLLOWING PRUDENT AND TIMELY IMPLEMENTATION SCHEDULES FOR

ONGOING PROJECTS, AND ADHERING TO THE CNMI SENATORIAL DISTRICT

CERTIFICATION OF APPROVED PROJECTS.

FISCAL YBAR 1989

THE FEDERAL FINANCIAL ASSISTANCE FOR THE CNMI FOR FISCAL YEAR

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AND EXPENDED IN CRITICAL WATER SYSTEM IMPROVEMENT NEEDS. THE BALANCE OF $10.329 MILLION IS NEEDED FOR DESIGN, ENGINEERING AND CONSTRUCTION OF THE CRITICAL WATER SOURCE DEVELOPMENT, TRANSMISSION AND DISTRIBUTION SYSTEM THROUGHOUT THE CNMI.

WE

REQUEST THAT THIS COMMITTEE CONSIDER, AND SUPPORT OUR REQUEST

FOR THE APPROPRIATIONS OF $10.329 MILLION AS AUTHORIZED BY U.S.

PUBLIC LAW 98-254 AND FURTHER REAUTHORIZED UNDER U.S. PUBLIC LAW

99-662.

ALTHOUGH WE CONTINUE TO DEVELOP ADDITIONAL GROUNDWATER

SOURCES, WATER CONSUMPTION HAS INCREASED AT A GREATER RATE THAN

ANTICIPATED DUE TO THE RAPID CONSTRUCTION OF ADDITIONAL

RESIDENTIAL, HOTELS AND OTHER COMMERCIAL ESTABLISHMENTS.

OUR

WATER PRODUCTION HAS INCREASED BUT IS INSUFFICIENT TO MEET THE DEMAND DUE NOT ONLY TO ACCELERATED ECONOMIC GROWTH, BUT ALSO DUE

TO EXCESSIVE LEAKAGE AND DEFICIENCIES OF THE WATER TRANSMISSION

AND DISTRIBUTION SYSTEMS.

DETAILED PLANS FOR NEW WATER SOURCE

DEVELOPMENT AND PLANS TO REPLACE MAIN TRANSMISSION AND

DISTRIBUTION LINES HAVE BEEN DEVELOPED AND ARE NOW AWAITING

FUNDING FOR CONSTRUCTION.

WE REQUEST THAT THIS COMMITTEE

CONSIDER, AND SUPPORT, OUR REQUEST FOR THE APPROPRIATION OF

$10.329 MILLION AS AUTHORIZED BY U.S. PUBLIC LAW 98-254 FURTHER

REAUTHORIZED UNDER U.S. PUBLIC LAW 99-662.

THE PROPOSED PROJECTS TO BE FUNDED ARE DETAILED IN ATTACHMENT I

OF OUR BUDGET SUBMISSION.

AS IN THE PAST, IT IS RECOMMENDED

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