READ THE SAIPAN CASINO ACT CAREFULLY

Commentary

By Tina Sablan and Glen Hunter

SAIPAN, CNMI (Marianas Variety, Nov. 1) – Many of us have received letters, pamphlets, e-mails, phone calls, and house visits from individuals urging us to vote "yes" on the Saipan Casino Act. We have watched interviews with the proponents on television, and listened to them on the radio. We have read their letters to the editor and their paid advertisements. The propaganda in favor of the Saipan Casino Act has been carefully crafted to target people’s sense of desperation, and to distract citizens as much as possible from reading and understanding the Saipan Casino Act itself.

How many of us have actually read the Saipan Casino Act in its entirety?

We have compiled here both a list of the misleading claims that have been made by Saipan Casino Act proponents, as well as a section-by-section analysis of the Saipan Casino Act to help voters understand the serious ramifications of this initiative.

We urge all Saipan voters, however, to make it a point to read and understand the entire Act before going to the polls on November 3. A copy of the Act is available at the Joeten Kiyu Public Library, and also online at the Election Commission Web site, www.votecnmi.gov.mp. We would also be happy to provide a hard copy of the initiative to anyone who requests one; please call 483-3935.

Regardless of our positions on casino gambling, our focus in evaluating this initiative must be on the Saipan Casino Act itself.

Saipan Casino Act Claims

"The Saipan Casino Act is the only economic solution being proposed right now; opponents aren’t offering any solutions." Citizens who read and understand the Saipan Casino Act will see that it is not a solution to our economic problems. Rather, it proposes more problems at enormous cost to taxpayers.

"The Saipan Casino Act will save government jobs." The Saipan Casino Act proposes to drain scarce taxpayer dollars from other agencies and public services in the creation of an expensive Casino Commission and Saipan Municipal Treasury. Rather than save government jobs, the Saipan Casino Act may result in more job losses.

"The Saipan Casino Act does not create a monopoly because there could be multiple casinos operating on Saipan." The Saipan Casino Act creates a Casino Commission that is allowed to issue only one exclusive perpetual license to one for-profit corporation, the Northern Marianas Descent Investment Corp. This is a monopoly. And yes, there may be multiple casinos on Saipan. There could also be no casinos. Or too many casinos. The Saipan Casino Act sets no limits whatsoever, and forces prospective casino investors to go through one monopolistic corporation, the Northern Marianas Descent Investment Corporation, in order to do business on Saipan.

"The Saipan Casino Act creates a ‘regulatory monopoly’ to ensure that some of the revenues generated from casinos will remain on island." Monopolies by their very nature do not regulate themselves or other businesses well. Regulation is the job of the government, not a for-profit corporation. Moreover, because of the way the Act is written, it is unlikely that there will be any casino investors willing to partner with Northern Marianas Descent Investment Corporation, and therefore little likelihood that there will even be any casino revenue to keep on island.

"The Saipan Casino Act provides for independent regulation of casinos on Saipan." The Saipan Casino Act does not prohibit Casino Commissioners, the Executive Director of the Casino Commission, the Saipan Municipal Treasurer, or any of their staff from owning shares in Northern Marianas Descent Investment Corporation, the sole casino licensee. The Commissioners, the Executive Director, the Treasurer, and their staff are the people who would be responsible for regulating casino operations on Saipan. This is a direct conflict of interest. This is not independent regulation.

"The Saipan Casino Act will eliminate poker." There is nothing in the Saipan Casino Act that relates to the elimination of poker. In fact, the Saipan Casino Act, if it becomes law, is likely to increase the number of poker machines on Saipan. Poker machines are a common feature for any casino – including the casino on Tinian, and casinos in Las Vegas, Reno, and many other gambling centers around the world.

"Opponents to the Saipan Casino Act are financed by the poker industry or the Tinian Dynasty… They are lying … They fear change… They are not from here and don’t understand the suffering of the people." These are personal and groundless attacks on all citizens who have read and understood the serious and harmful implications of the Saipan Casino Act, and have made an informed decision to oppose the Act.

"The Saipan Casino Act will quickly bring a much-needed infusion of cash into the economy from tourists and gamblers." There is no guarantee that the Saipan Casino Act will generate any revenue for the Commonwealth of the Northern Mariana Islands, and zero likelihood that it will happen quickly even if it does. It will certainly not happen quickly enough to prevent any job losses projected for the end of this year, as some Saipan Casino Act proponents have suggested.

"A ‘no’ vote means ‘yes’ to the Saipan Casino Act." This is a fairly common tactic that has been used in other jurisdictions to deliberately confuse voters. A "no" vote means that you do not approve of the initiative.

Analysis Of The Saipan Casino Act

Administration of the Saipan Casino Commission and Treasury

Article II, Section 1. Saipan Casino Commission. There is hereby established a Saipan Casino Commission with all the rights to sue and be sued. The Mayor shall within thirty (30) days after the effective date of this Act, appoint seven (7) members of the Commission. At least two (2) members shall be of Carolinian Descent. At least four (4) members shall be of Chamorro Descent. At least one member of the seven (7) Commissioners shall be a woman.

The Saipan Casino Act does not explain why the Casino Commission must specifically require two Carolinian members, four Chamorro members, and one woman. The Saipan Casino Act also does not define "Carolinian Descent" and "Chamorro Descent." It does require that all members of the Casino Commission be of Northern Marianas Descent as defined under Article XII of the Commonwealth of the Northern Mariana Islands Constitution. Article XII, however, does not make a distinction between Chamorro Descent or Carolinian Descent; it treats the two cultural groups as one classification, "Northern Marianas Descent."

Also, there are no explicit guidelines that would establish the independence of this Commission from any casino operations. The Act does not restrict members of the Commission from owning shares in the Northern Marianas Descent Investment Corporation.

Article II, Section 1. Executive Director. The Commission shall hire an Executive Director… Qualifications of the Executive Director. The Executive Director shall... [h]ave no interest, directly or indirectly, or equity in any of the Casino Operator business, other than owning shares in the Northern Marianas Descent Investment Corporation.

The Saipan Casino Act requires the Casino Commission to hire an Executive Director.

Although the Act states on the one hand that the Executive Director shall not have any interest or equity in the casino operator’s business, it also states on the other hand that the Executive Director would be allowed to own shares in the Northern Marianas Descent Investment Corporation, the sole corporation licensed by the Casino Commission to operate casinos on Saipan. This is a direct conflict of interest.

Article II, Section 6. Treasury. There is hereby established within the Office of the Mayor a "Saipan Municipal Treasury"… The Mayor, within 30 days after the approval of this Act, shall appoint a Treasurer to be confirmed by the [Saipan and Northern Islands] Delegation… Qualification of the Treasurer. The Treasurer shall … possess the same qualifications required of the Executive Director...

Like the Casino Commissioners and the Executive Director, the Saipan Municipal Treasurer would also be allowed to own shares in the Northern Marianas Descent Investment Corporation under this Act. This is another direct conflict of interest.

Costs of the Saipan Casino Act

Article II, Section 1. Compensation – Commission. The Commission members shall meet at least fifteen (15) days a month or as often as necessary to perform its duties and responsibilities pursuant to this Act and be compensated monthly not to exceed US$4,000.00 per month. The Commission, subject to the approval of the Delegation, may alter the compensation of the Commission after 5 years from inception of the Commission.

The Act provides for 7 (seven) members to be appointed to the Saipan Casino Commission, each of whom will be paid a salary of up to US$4000 per month, for working as little as fifteen (15) days a month. After five years, with the approval of the Saipan and Northern Islands Delegation, the commissioners may opt to raise their salaries. Commission members’ salaries alone will cost Commonwealth of the Northern Mariana Islands taxpayers US$366,000 a year for the first five years – and the salaries may go up even higher after that.

Article II, Section 1. Saipan Casino Commission – Compensation. The Commission shall establish a pay scale for the Commission personnel, including the Executive Director, subject to the approval of the [Saipan and Northern Islands] Delegation... Commission – Initial Funding. The [Saipan and Northern Islands] Delegation shall provide the initial funding for the operations and activities of the Commission…

Article II, Section 1. Administrative Expenditures. Subject to the budget authority, the Executive Director may hire and terminate such staff, obtain such equipment, rent or build such additional office space, and generally make such regular office expenditures and acquisitions as necessary to establish and maintain a working office suitable for the Commission to effectively function pursuant to this Act.

Article I, Section 6. Compensation of the Treasurer. The Treasurer shall have the same compensation established for the Executive Director of the Commission... Treasury — Initial Funding. The [Saipan and Northern Islands] Delegation shall provide the initial funding for the operations and activities of the Saipan Municipal Treasury.

Article X, Section 7. Initial Operating Cost. In the event the [Saipan and Northern Islands] Delegation is not able to provide funding for the initial operating costs, the Commission and the Treasurer may incur debt from any government agency or private entity to fund the initial cost of operation. The debt is not public debt, but shall be repaid.

The Saipan Casino Act clearly states that the initial operating costs for the Casino Commission and the Municipal Treasury shall be drawn from taxpayers, but it does not set any limits on the budget for the Casino Commission or the Municipal Treasury, or any caps on salaries paid to the Executive Director and the Treasurer.

The Act also allows the Commission and the Treasurer to incur debt from other government or private entities, but it doesn’t say how much debt, or how soon it shall be repaid.

Finally, although the Act does not provide any budget breakdown for the Commission, Executive Director, Saipan Municipal Treasury, related staff, and operating costs, we can arrive at a reasonable estimate for just how much the Saipan Casino Act may cost in taxpayer dollars per year, with no guarantee of a return:

• Commission (7 members) - US$366,000

• Commission Staff and Consultants - US$180,000

• Municipal Treasurer - US$ 85,000

• Treasury Staff - US$105,000

• Executive Director - US$ 85,000

• Director’s Staff - US$105,000

• Travel Expenses (for all above) - US$ 60,000

• Attorney Fees - US$200,000

• Operating Expenses (equipment, vehicles, etc) - US$250,000

• Anticipated Legal Fees (fend off legal challenges) - US$200,000

The total approximate cost of the Casino Commission, Executive Director, Saipan Municipal Treasury, staff, and operations per year is US$1,636,000.

The Saipan Casino Monopoly License

Article III, Section 1. Casino License. There shall be one casino license issued in the Third Senatorial District…

Article III, Section 2. Grant of Casino License. The Commission, upon this Act becoming law, shall issue one casino license to the Northern Marianas Descent Investment Corporation. The license shall be perpetual. The Northern Marianas Descent Investment Corporation shall be a profit corporation established in accordance with the laws of the Commonwealth of the Northern Mariana Islands.

The Saipan Casino Act grants an exclusive and perpetual license to one for-profit corporation, the Northern Marianas Descent Investment Corporation. In essence, the Saipan Casino Act authorizes a monopoly. Furthermore, though the Act specifically requires that the Casino Commission shall grant a monopoly license to Northern Marianas Descent Investment Corporation, there are no provisions in place that would allow the Commission a basic regulatory control: the ability to revoke or suspend this license, should Northern Marianas Descent Investment Corporation abuse it.

Northern Marianas Descent Investment Corporation will have the authority to decide how many (if any) casinos would be allowed to do business in Saipan. The Saipan Casino Act does not provide for a cap on the maximum number of casinos that would be allowed; Northern Marianas Descent Investment Corporation can team up with as many or as few operators as they please. The Saipan Casino Act forces all potential casino investors to go through Northern Marianas Descent Investment Corporation in order to establish operations on Saipan.

Race-based hiring and appropriations under the Saipan Casino Act

Article II, Section 1. Qualification of Commission Members. A member must be Northern Marianas Descent [Northern Marianas Descent] …

Article II, Section 8. Hiring. When hiring executive, administrative, or professional staff, the Commission and the Treasurer shall give first preference to Northern Marianas Descent residents in the Commonwealth…

Article III, Section 2. Grant of Casino License. The incorporators, directors, officers, and shareholders of the Northern Marianas Descent Investment Corporation shall be persons of Northern Marianas Descent...

Article III, Section 4. Casino Management Agreement. The minimum conditions for approving a casino management agreement or casino establishment operation agreement are: a) Employment. Give first preference to Northern Marianas Descent residents in the Commonwealth…

Article VI, Section 1 . Fees and Taxes – Local Purpose. An appropriation for local purposes shall be limited to … assistance for Northern Marianas Descent who are residents of the Third Senatorial District ….

If it becomes law, the Saipan Casino Act will trigger litigation because it is discriminatory and violates the 14th Amendment of the U.S. Constitution, the Commonwealth of the Northern Mariana Islands’s equal protection clause, and the Equal Employment Opportunity Act. Challenges to the race-based requirements for Casino Commission membership and employment, race-based discrimination in casino employment, and for publicly funded race-based benefits, are all likely to be raised in court.

Public lands at risk under the Saipan Casino Act

Article III, Section 8. Public Land. The Department of Public Land or any future entity responsible for the administration of public lands in the Commonwealth, upon this Act becoming law at the request of Northern Marianas Descent Investment Corporation shall issue public land to Northern Marianas Descent Investment Corporation. Northern Marianas Descent Investment Corporation shall hold leasehold interest to all public land issue [sic] by Department of Public Lands and pay one dollar (US$1.00) per year for the land or lands issue [sic] by Department of Public Lands for as long as Northern Marianas Descent Investment Corporation is in business…

Should this Saipan Casino Act become law, Northern Marianas Descent Investment Corporation will have the authority to request any and all public land from the Department of Public Lands for only one dollar a year. The Act does not specify which public lands may or may not be requested; even public lands that are currently in use (i.e., public parks, the fishing base, public schools, sites of historical and cultural value, etc.) may be fair game. The Saipan Casino Act does not even specify that Northern Marianas Descent Investment Corporation may only request public lands on Saipan – this for-profit corporation may request public land on Rota, Tinian, and the Northern Islands. Furthermore, the Act does not restrict the uses of public land given to Northern Marianas Descent Investment Corporation to only casinos, or limit how much land can be taken, nor does it explicitly recognize Department of Public Lands’s authority to deny requests for public land. No safeguards are in place within the Saipan Casino Act to protect public lands from potential abuse by Northern Marianas Descent Investment Corporation.

Minimum wage employment under the Saipan Casino Act

Article III, Section 4. Minimum wage. The U.S. minimum wage shall be applicable to employees of the casino operator, and will govern the hourly pay rate.

This section of the Saipan Casino Act has been interpreted by some readers to mean that the U.S. mainland wage of US$7.25 an hour will apply to casino employees. However, now that the U.S. federal minimum wage law applies to the Commonwealth of the Northern Mariana Islands, the U.S. minimum wage for the Commonwealth of the Northern Mariana Islands is currently US$3.55. Which U.S. minimum wage law shall apply for casino employees? The U.S. mainland wage, or the U.S. Commonwealth of the Northern Mariana Islands wage? The Saipan Casino Act does not say.

Amending the Saipan Casino Act

Article X, Section 8. General – Amendment. Any proposed amendment to the "Saipan Casino Act" shall be approved or disapproved by the Northern Marianas Descent registered voters only in the Third Senatorial District through local initiative.

In order for the Saipan Casino Act to become law, 2/3 of the qualified voters on Saipan, or approximately 8000 people, must vote "yes" on the initiative. If the Act requires amendments for any reason, these amendments can only be made through local initiative. This means that any errors that exist in the Act now will be extremely difficult to correct in the future. Furthermore, although the Saipan Casino Act gives the opportunity to all registered voters of Saipan to decide whether or not to approve this initiative this year, future initiatives to amend the Saipan Casino Act can only be approved by a fraction of Saipan’s voters – that is, only Northern Marianas Descent voters. Non-Northern Marianas Descent voters who endorse the Saipan Casino Act in this election will not have a say in any changes that are proposed to the Saipan Casino Act in future elections.

The constitutionality of restricting voting to Northern Marianas Descent residents in future initiatives to amend the Saipan Casino Act is likely to be challenged. Moreover, the Commonwealth Election Commission currently does not have a database of Northern Marianas Descent registered voters. The Saipan Casino Act, if it becomes law, will incur additional costs in the preparation of this database that will be required should initiatives to amend the law arise.

Fees and taxes under the Saipan Casino Act

Article VI, Section 1. Fees and Taxes — Casino license fee and annual fees payable to the Saipan Municipal Treasury. The Licensee shall pay non-refundable casino license fee of U.S. US$300,000 to the Commission upon commencement of its casino gaming activities or within one year after commencement of operations, whichever is later… A casino operator shall pay a non-refundable casino operator’s permit fee of U.S. 250,000 to the Commission upon the Commission’s approval of the casino operator’s agreement with the Licensee… An annual license fee of U.S. US$300,000 for the Licensee and US$250,000 for the casino operator shall be paid each year thereafter…

Assuming that there would be casino operators willing to pay an initial US$250,000 permit fee and share profits with Northern Marianas Descent Investment Corporation, there is no guarantee that the casino establishment will be successful enough for a) Northern Marianas Descent Investment Corporation to be able to afford the required licensing fee within one year of opening the casino and every year after that; and b) that the casino operator will be able to afford the annual permit fee. There is no room in the Saipan Casino Act for flexibility on either the licensing fee or the permit fee. The Act does not state what the consequences would be, if any, should Northern Marianas Descent Investment Corporation and/or its partner casino operator fail to pay the fees.

Northern Marianas Descent Investment Corporation: A risky business

Article III, Sections 2 and 3. Grant of the Casino License. The Commission, upon this Act becoming law, shall issue the casino license only to the Northern Marianas Descent Investment Corporation. The license shall be perpetual… License Not Transferable. The Licensee shall not sell, lease, transfer, or assign its license or interest to any other person.

Article III, Section 8. Public Land. The land or lands issue [sic] to Northern Marianas Descent Investment Corporation shall not be transferable. Upon dissolution of Northern Marianas Descent Investment Corporation, the land including all improvements shall revert to back to Department of Public Lands or its future named entity without cost.

The Saipan Casino Act states that a perpetual monopoly license to operate casinos shall be issued to Northern Marianas Descent Investment Corporation, and that the license cannot be sold, leased, transferred, or assigned to anyone other than Northern Marianas Descent Investment Corporation. The Saipan Casino Act also states that any public lands issued to Northern Marianas Descent Investment Corporation must be returned to the Department of Public Lands should Northern Marianas Descent Investment Corporation dissolve.

This means that should Northern Marianas Descent Investment Corporation cease to exist for any reason whatsoever, so too, would casino operations on Saipan. Under the Saipan Casino Act, the Casino Commission cannot seek additional licensees, nor can it take over Northern Marianas Descent Investment Corporation. Saipan’s casino industry would come to a complete halt, except that the Casino Commission and Saipan Municipal Treasury would continue to exist. Another local initiative must be launched to either amend the Saipan Casino Act to permit additional licensees or to abolish the Casino Commission and Saipan Municipal Treasury altogether.

Any prospective casino investor, therefore, would be accepting a significant risk in choosing to do business with Northern Marianas Descent Investment Corporation. Northern Marianas Descent residents would also be accepting a significant risk in choosing to invest in Northern Marianas Descent Investment Corporation.

Other concerns raised by the Saipan Casino Act

Who is Northern Marianas Descent Investment Corporation? Many people do not realize that the Northern Marianas Descent Investment Corporation already exists as a for-profit corporation. Northern Marianas Descent Investment Corporation was formally incorporated on Saipan in December 2006. Its Board Directors are: Pedro R. Guerrero; Paz Younis; Karl T. Reyes; Herman R. Guerrero; Felicidad Ogumoro; David C. Sablan; and Isidro R. Ogarto.

What experience do these individuals have in the casino industry? What experience do they have in business in general? What experience do they have in securing investors who would be willing to share profits with them? Do they have promissory agreements from potential investors? Do they have the financial backing to pay the US$300,000 fee for their monopoly license? What experience do they have in financial management to ensure that Northern Marianas Descent Investment Corporation does not go bankrupt or fall subject to any form of corporate crime that may cause Northern Marianas Descent Investment Corporation to dissolve? Does Northern Marianas Descent Investment Corporation have a business plan, and if so, where is it?

What is a realistic timeframe by which we can expect the casino industry to establish itself on Saipan, if this Saipan Casino Act passes? Proponents of the Saipan Casino Act often describe this initiative as a "quick" way to bring in additional revenue for the Commonwealth of the Northern Mariana Islands. How soon will "quick" be?

The closest example we have is Tinian. The Tinian Gaming Act was passed in 1989. The first casino on Tinian opened its doors in 1998, nine years later. Even 18 years after the Tinian Gaming Act was passed, our neighboring island has yet to see the development of a second casino. It is important to note that the Tinian Gaming Act is even more investor-friendly than the Saipan Casino Act; it does not require that a perpetual monopoly license be issued to corporation. It should also be noted that unlike the Tinian Gaming Act, the Saipan Casino Act contains race-based language that could tie up the Casino Commission and the Northern Marianas Descent Investment Corporation in 14th Amendment litigation for years to come.

Litigation may take years to settle. It may take years, if ever, to identify casino investors willing to partner with the Northern Marianas Descent Investment Corporation, a corporation with no track record in the casino industry. It may take years, if ever, to construct casinos, install games, and attract gamblers to the Commonwealth of the Northern Mariana Islands. It will take years for a single casino, if ever one is established, to be able to pay off initial debts incurred and show a profit. And during this time, the Casino Commission and the Saipan Municipal Treasury (established within 30 days of the Saipan Casino Act becoming law) will continuously draw approximately US$1.6 million per year from local government coffers – without having realized a single penny in returns.

How will the cash-strapped Commonwealth of the Northern Mariana Islands government find the estimated US$1.6 million needed to keep the Casino Commission afloat while awaiting possible (but not guaranteed) income generated from casino investors? Which government agencies will be tapped? Which public services will suffer? And how many jobs will be lost in order to provide the annual US$1.6 million needed to cover operating costs? How will taxpayers bear this burden? Why should we consent to it?

We have only highlighted some of the more disturbing elements that we have identified in the Saipan Casino Act. Once again, we urge all voters to read the entire initiative for themselves at the Joeten Kiyu Public Library or at www.votecnmi.gov.mp, or call (670) 483-3935 for a hard copy of the initiative.

We owe it to ourselves and to future generations to know exactly what we are voting on come November 3.

Tina Sablan is a community activist on Saipan who works for the Commonwealth of the Northern Mariana Islands government; Glen Hunter is the sales manager for Pacific Trading Company

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