RALPH DlG . TORR S Goycmor

COM~IO",l L:ALJ J I or the NQlrJ III .R..",,{ MARlAi."L\ ISI.ANHS

OFFICE OF THE GOVERNOR

The Hono able Arnold r. Palacios President The Senat Twentieth Northern Marianas Common ealth Legislature Capitol Hi I Saipan, M 96950

The Hono able Rafael S. Demapan Speaker House of ~~presentatives TwentiethJ"orthern Marianas Common ealth Legislature Capitol Hi I Saipan, M 96950

Dear Sena e President Palacios and Speaker Demapan:

VICTOR B. HOCOG Lieutenant Gm'emor

31 DEC £018

Th s is to inform you that I have signed Senate Bill No. 20-35, SD3, HD2 entitled, "To amend I C § 2806(c) to increase the term of public land leases up to 40 years plus an extension up to 15 y ars for a total of 55 years; to authorize certain existing public land leases to be amended to extend he existing lease term up to 55 years; to amend I CMC §2807 to authorize DPL to negotiate new public land lease with certain existing public land lessees under new terms and considerat on without publishing an RFP; and for other purposes," which was passed by the Senate and the H use of Representatives of the Twentieth Northern Commonwealth Legislature.

AI hough I have approved this proposed legislation, I must gravely urge the Legislature to make crit cal amendments to its existing law in accordance with the Attorney General 's recomme ations regarding the bill's constitutionality concerns, specifically the separation of powers do trine.

S •• 20-35, S03, H02 grants the Legislature the authority to approve public land leases, as was a p wer possessed by its respective body during the existence of the Marianas Public Land Corporati n. Following the dissolution of the MPLC, however, the Supreme Court found that the entirety 0 § 5 of Article Xl, including the provision granting legislative authority to approve leases, w¥ no longer in effect when the MPLC's functions were transferred to the executive branch. Self. Dep 't Pub. Lands v. Commonwealth, 20 I 0 MP 14. Thus, the Legislature's permitting of the req ired legislative approval of public land leases under this legislation would violate the separation of powers doctrine of the CNMI and United States Constitution.

A ordingly, whereas I agree with the intent of this bill and support the legislature's objective f utilizing new and innovative ideas to attract new economic development and investors

CNMI Office or the Governor 1 Juan A. Sablan Memorial Building 1 Capitol Hill, Saipan Calle Box 100071 Saipan. MP 96950 1 Telephone: (670) 237-2200 1 Facsimile: (670) 664-2211 1 www.gov.mp

~ Ralph DLG. Torres 1 ~ CNMI orncc or the Governor

into the C mmonwealth, I appeal to this body to revisit thi s matter and regrant the Department of Public Lan s the approval authority of public land leases in order to adhere to the constitutionality implicatio s of the passage of this legislation as was raised by the Attorney General.

Th s bill becomes Public Law No. 20·84. Copies bearing my signature are forwarded for your refer nce.

Since ely,

cc: Go ernor; Pres cretary; Attorney General's Office; Department of Public Lands; Office of ublic Audit r; Mayor's Office; Special Assistant for Administration; Special Assistant for Programs and Legislative Review

CNMl Office of the Governor 1 Juan A. Sablan Memorial Building 1 Capitol Hill. Saipan Calle Box 10007 1 Saipan. MP 96950 1 Telephone: (670) 237-2200 1 Facsimile: (670) 664-22 11 1 www.gov.mp

11 Ralph DLG. Torres 1 11 CNMl omce of the Governor

Public Law No. 20-84

THE SENATE Twentieth Northern Marianas Commonwealth Legislature

P. O. Box 500129 Saipan, MP 96950

Dec~mb'er 6, 20 IS

onorable Ralph DLG. Torres

of the Northern Mariana Islands

the honor of transmitting herewith for your action Senate Bill No. 20-35, SD3, entitled: "To amend I CMC § 2S06(c) to increase the term of public land leases up years plus an extension up to 15 years for a total 55 years; to authorize certain

public land leases to be amended to extend the existing lease term up to 55 years; I CMC § 2S07 to authorize DPL to negotiate a new public land lease with

existing public land lessees under new tern1S and consideration without publishing and for other purposes" which was passed by the Senate and the House of

Keort~senta.nves of the Twentieth Northern Marianas Commonwealth Legislature.

I

Public Law No. 20-84

TIlE SENATE "I'U1. ......... ~'U NORTHERN MARIANAS COMMONW'£AI.TH L£61SLATUR£

SENATE BIlJ. NO. 20-S5. 5DS. HD2

AN ACT

To amend I CMC § 2806(c) to increase the term of public land leases up to 40 years plus an extension up to 15 years for a total 55 years; to authorize certain existing public land leases to be amended to extend the existing lease term up to 55 years; to amend I CMC § 2807 to authorize DPL to negotiate a new public land lease with certain existing public land lessees under new terms and consideration without publishing an RFP; and for other purposes.

SlINATii AC110JV

Offered by Senator(s): Arnold 1. Palacios

Date: M rch 22, 2017

Referred 0: Committee on Resources, Economic Development and Programs

Standing Committee Report No.: 20-35 Adopted on 8/17/17

First and Final Reading: December 6, 2018

HOUSE AC110JV

Referred to: Committee on Natural Resources

Standing Committee Report No.: 20-125 Adopted on 5/22/18

First and Final Reading: June 12, 2018

DOLORES S. BE RMVDES SENA ~E CI ERK

v

-

I

Public Law No. 20-84

THE SENATE WENTlETH NORTHERN MARIANAS COMMONWEALTH LEGISLATURE

Fr ST REGULAR SESSION, 2017 S. B. NO. 20-35, sm HD2

AN ACT

To amend 1 CMC § 2806(c) to increase the term of public land leases up to 40 years plus an extension up to 15 years for a total 55 years; to authorize certain existing public land leases to be amended to extend the existing lease term up to 55 years; to amend 1 CMC § 2807 to authorize DPL to negotiate a new public land lease with certain existing public land lessees under new terms and consideration without publishing an RFP; and for other purposes.

BE IT ENACTED BY THE TWENTIETH NORTHERN MARIANAS COMMONWEALTH LEGIS LA TURE:

Section 1. Findings and Purpose. The Legislature finds that the Commonwealth's

2 eco omy has been extremely depressed for more than ten years. In the past year or so, the

3 Co onwealth's economy has improved and grown steadil y. However, the driving

4 eco omic forces that propelled the Commonwealth's prosperous economy in the 1990s no

5 Ion er exist today. Therefore, the Legislature must utilize new and innovative ideas to

6 attr ct new economic development and investors to the CNMI.

7 The Legislature finds that extending the term of the lease of public lands up to 40

8 yea s plus an extension up to 15 years for a total 55 years will generate renewed economic

9 est in the Commonwealth among new investors. A longer leasehold term would

10 fu er encourage lending by investment and financial institutions to finance major projects

II will in tum create new job opportunities and stimulate other economic activity in the

12 monwealth.

13 The Legislature finds that public land leases have been governed by the

14 fun amental policies set forth in Section 5 of Article XI of the CNMI Constitution and

Public Law No. 20-84

SENA TE BILL NO. 20-35, SD3, HD2

Pub ic Law 15-2. The Legislature, however, finds that based on the case DPL v. CNMJ,

2 201 MP 14 (Oct. 4, 2010), Section 5 of Article XI of the CNMI Constitution is

3 ino erative and therefore, the Legislative and Executive Branches have the authority to

4 esta lish the fundamental policies governing public lands. Specifically, the Supreme Court

5 hel that "the drafters of the NMI Constitution did not intend for the restrictions contained

6 In rticle XI § 5 to bind the Commonwealth Legislature in perpetuity. We further hold that

7 the egislature possesses the constitutional authority under Article III § IS to redefine the

8 fun tions of executive branch departments- including DPL. The legislature cannot,

9 ho ever, pass a law that infringes upon the functions of another constitutional entity." Jd.

10 at

I I The Supreme Court further opined that "neither the text nor the legislative history

12 of rticle XI support the proposition that the fundamental policies contained in § 5 remain

13 con titutionally operative. The legislature and executive branch are therefore free to set the

14 poli ies for the body tasked with the management and disposition of public lands as they

IS see It, provided that they do so within their constitutional limitations." See Jd. at ~ 23 .

16 The Legislature finds that Public Law 15-2 incorporated the fundamental policies

17 gov rning the disposition of public lands as set forth in Section 5 of Article XI of the NMl

18 Co stitution. The existing fundamental policies governing the disposition of public lands

19 as s t forth in Section 5 of Article XI and Public Law 15-2 has guided the CNMI from its

20 inc ption up to today. The existing public land lease fundamental policies were conducive

21 to t e economic circumstances and investors of the 1980s-1990s. However, the CNMI

22 gov rnment structure has since undergone some changes, the economic circumstances of

23 the CNMI are different, and investors are more diverse today. The Legislature finds that

24 the e factors warrant a change in our public land lease fundamental policies. Moreover,

25 pub ic land leases up to 99 years including renewals are offered by other Pacific Island

26 nat'ons including the Republic of Palau and the Federated States of Micronesia.

27 The Legislature further finds that if public land leases are going to be extended up

28 to 5 years, future public land leases must be strictly scrutinized and be approved by the

29 leg·slature. Additionally, public land lease extensions up to 15 years must also be approved

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Public Law No. 20-84

SENATE BILL NO. 20-35. SD3, HD2

by 3 4 of the members ofthe legislature.

2 The Legislature further finds that the amendment to extend public land leases up to

3 40 ears plus an additional 15 year extension for a total of 55 years does not automatically

4 ext d the tenns of existing public land leases. However, only existing public land leases

5 an existing hotel or golf course may be amended to extend the existing lease tenn up

6 years subject to new tenns and consideration based on at least two new appraisal

7 rep rts. Any amendment to extend the tenn of existing public land leases must comply

8 wit the provisions of the law and be approved the legislature sitting in joint session.

9 The Legislature further finds that I CMC § 2807(b)(I) requires the Department of

10 Pub ic Lands (DPL) to publish a notice for request for proposals to lease public lands

II ber. re executing any public land lease. This requirement allows DPL to review all

12 ava able proposals for the use of public lands. However, this requirement also puts

13 eX1 ing lessees of public land at a disadvantage when the tenn of their lease is near

14 exp ration. The Legislature finds that DPL should be given some flexibility to negotiate a

15 ne public land lease with certain existing public land lessees that have exiting hotels or

16 courses on the leased property with five years or less remaining on the lease in order

17 to ve existing lessees more time to recoup their investments in the CNMI. Many existing

18

19

20

21

22

23

24

25

26

27

28

29

less es have invested tens of millions of dollars on their developments and require many

yea s to recover all their investments. Moreover, many existing lessees of public land are

goot! corporate citizens, served the community generously, and have been doing business

in t~e CNMI since the 1980's and 1990's. Many existing lessees have been in the CNMI

du1 ng the prosperous economic times, but they also weathered the stonn during the

tur ulent economic times.

The Legislature finds , however, that existing lessees negotiating for a new 40 year

put! ic land lease plus a 15 year extension must be subject to new tenns and conditions

inc ding, but not limited to, rental based on at least two new appraisals, new

1m rovements or development on the property to be leased beneficial to the economic

de lopment of the CNMI, creation of public improvements separate from lessee's

ities such as construction or renovation of public facilities , establishment of in-house

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Public Law No. 20-84

SENATE BILL NO. 20-35, SD3, HD2

job raining programs for CNMI residents, financial contribution to an independent job

2 trai ' ng program or scholarship fund , financial contribution to infrastructure improvement

3 or d velopment in the area of the leased property including water, power, waste water,

4 land III and highway infrastructure, and plans to alleviate or lessen traffic or parking

5 con estion at or near the property to be leased.

6 Accordingly, the purpose of this legislation is to amend I CMC § 2806(c) as

7 foil ws: (I) to extend public land leases up to 40 years plus an extension up to 15 years for

8 a to al 55 years in order to attract new investors and to give investors more options for

9 fina cing with a longer lease term; and (2) to authorize certain existing public land leases

10 to I:le amended to extend the existing lease term up to a total of 55 years for leased

II erties with an existing hotel or golf course subject to new terms and consideration.

12 legislation also amends I CMC § 2807 to authorize the Department to first negotiate a

13 ne public land lease with certain existing public land lessees that have existing hotels or

14 gol courses on the leased property under new terms and consideration before publishing a

15 req est for proposal for other interested parties.

16 Section 2. Amendment. I CMC § 2806(c) is hereby amended to read as follows:

17 "(c) The Department may not transfer a leasehold interest in public lands

18 that exceeds forty tweRt)' five years including renewal rights. An extension of not

19 more than fifteen years may be given upon approval of three-fourths of the

20 members ofthe Legislature sitting in joint session.

21 The amendment to extend public land leases up to 40 years does not

22 automatically extend the tenns of existing public land leases. Only existing public

23 land leases with an existing school, religious organization, hotel or golf course on

24 the leased property may be amended to extend the existing lease term up to 40

25 years plus an additional 15-year extension subject to negotiated new terms and

26 consideration based on at least two new appraisals. Any amendment to extend the

27 tem) of existing public land leases up to 40 years must comply with the provisions

28 of this chapter and be approved by the legislature sitting in joint session."

29 Section 3. Amendment. I CMC § 2807(b)(l) is hereby amended to read as

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Public Law No. 20-84

SENATE BILL NO. 20-35, S03, HD2

foil s:

2 "(b) (I) Except as provided in subsection (e) of this section. pPrior to the

3 execution of any lease of public land for use for commercial purposes, the

4 Department shall give at least 15 days public notice of its intended action and shall

5 afford all interested persons reasonable opportunity to submit data, views, or

6 arguments in writing and shall accept from interested persons alternative proposals

7 for lease of the public land which is the subject of the intended action; provided,

8 that the Department need not accept alternative proposals if alternative proposals

9 have previously been solicited by public notice captioned "Request for Proposals to

10 Lease Public Land." Notice shall be by publication at least eight times during two

II consecutive weeks in a newspaper of general circulation in the Commonwealth and

12 by posting in convenient places in the civic center and in local government offices

13 in each senatorial district, and shall be in the English, Chamorro, and Carolinian

14 languages. The notice shall be captioned "Notice of Proposed Lease of Public

15 Land" and shall contain at a minimum the following:

16 (i) - (vi) [Unchanged.]."

17 Section 4. Amendment. I CMC § 2807 IS hereby amended to add a new

18 sub ection (e) as follows:

19 "(e) The Department shall negotiate a new public land lease with existing

20 public land lessees that have an existing school , religious organization, hotel or golf

21 course on the leased property with five years or less remaining on the lease under

22 new tenns and consideration without publishing a request for proposal for

23 interested parties as required by subsection (b)(I) of this section. The Department

24 in negotiating the lease extension shall make a leasing decision prior to the

25 expiration of the lease and after public notice of intent to renew providing for

26 public comment and public hearings. The new public land lease shall be based on

27 the following terms and conditions, including, but not limited to:

28 (I) Rental based on at least two new appraisals of the property to be

29 leased, including but not limited to the improvements thereon. The appraisal

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Public Law No. 20-84

SENATE BILL NO. 20-35, SD3, HD2

shall be perfonned by at least one appraiser who IS a member of the

2 American Society of Appraisers.

3 (2) Possible terms and conditions:

4 (i) New improvements or development on the property to be

5 leased beneficial to the economic development of the CNMI;

6 (ii) Public Benefits and Contributions;

7 (A) Creation of public improvements separate from lessee's

8 activities such as construction or renovation of public facilities ,

9 (B) Establishment of in-house job training programs for

10 CNMI residents, and

I I (C) Financial contribution to an independent job training

12 program or scholarship fund.

13 (iii) Financial contribution to infrastructure improvement or

14 development in the area of the leased property including water,

15 power, waste water, landfill and highway infrastructure.

16 (iv) Plans to alleviate or lessen traffic or parking congestion

17 at or near the property to be leased.

18 (3) If the negotiation under new tenns and consideration fails , the

19 Department may publish a request for proposal for other interested parties."

20 Section 5. Severability. If any provision of this Act or the application of any such

21 pro ision to any person or circumstance should be held invalid by a court of competent

22 juri diction, the remainder of this Act or the application of its provisions to persons or

23 clr mstances other than those to which it is held invalid shall not be affected thereby.

24 Section 6. Savings Clause. This Act and any repealer contained herein shall not

25 be onstrued as affecting any existing right acquired under contract or acquired under

26 sta tes repealed or under any rule, regulation, or order adopted under the statutes.

27 Re ealers contained in this Act shall not affect any proceeding instituted under or pursuant

28 to rior law. The enactment of the Act shall not have the effect of tenninating, or in any

29 wa modifying, any liability, civil or criminal, which shall already be in existence on the

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Public Law No. 20-84

SENATE BlLL NO. 20-35, SD3, HD2

date this Act becomes effective.

2 Section 7. Effective Date. This Act shall take effect upon its approval by

3 the ovemor or becoming law without such approval.

CERTlFrED BY:

-ARNOLD I. PALACIOS PRESIDENT OF THE SENATE

Commonwealth overnor e Northern Ma

Page 7

ATTESTED BY:

. ITUGUA IVE SECRETARY