Pohnpei Governor submits Micronesian Tourism Complex Omnibus Development bill to Legislature

By Bill Jaynes

The Kaselehlie Press

June 20, 2018

Pohnpei—On June 8, McGarry Miguel, Floor Leader of the Pohnpei State Legislature introduced a 45 page “by request bill” from Pohnpei’s Executive Branch for a “‘Micronesian Tourism Omnibus Development Statute of 2018’ to provide for and to regulate an integrated resort casino complex for the State of Pohnpei…” (L.B. 332-18)

The bill has merely been introduced and has been assigned to the Standing Committees on Resources and Development, Land, and Finance for hearings.  The bill could undergo substantial changes by the time it hits the floor for first and second readings.

Pohnpei, like most other states in the Federated States of Micronesia is scrambling to develop new sources of revenue to replace U.S. Compact funds that have been on a declining scale to zero in 2023.  At that time, Compact funding will switch to the interest from a trust fund that has not performed up to originally planned expectations.  It won’t be enough unless FSM states can find other revenue sources.

According to the General Provisions section in the tourism bill, the creation of a resort and casino is an important part of an overall strategy to ensure the state’s economic growth.  It says that during the development phase a resort casino would result in significant construction jobs and construction related spending in Pohnpei.  Once constructed, a resort casino would create new jobs for residents of Pohnpei and offer a wide array of employment opportunities for individuals with diverse educational backgrounds and skills.  Revenue generated could be used to fund critical needs in Pohnpei including investments and upgrades to roads and bridges, and other transportation infrastructure.  It claims that the additional revenues could also be used to offset the tax burden on existing businesses.

It says that since addressing the social costs of gaming is an important and necessary part of any comprehensive casino plan, the act envisions a high level of funding for public safety and a rigorous gaming regulatory and enforcement scheme.  “The resort casino must therefore be controlled to protect the public health, safety, and well being of the inhabitants of Pohnpei; to foster the stability and success of gaming and to preserve the competitive economy of Pohnpei.

On January 18, 2018, Senator Stevick Edwin introduced a bill calling on the Governor to submit a draft omnibus bill for a tourism complex that could include a casino.  The bill would have authorized the Director of the Department of Resources and Development to issue a call for submissions of notices of interest to potential investors to develop a casino/resort complex in the state of Pohnpei through a means that the director finds will effectively reach the largest number of potential investors but only after an omnibus bill is considered and passed.

That bill has seen no legislative action and now seems to be moot since the new tourism omnibus bill has incorporated most, if not all of the wording of Edwin’s bill.

Canton Construction Corporation of Guam has expressed interest in developing a resort and casino on land it would reclaim east of the Dekehtik causeway and south of the airport and has been communicating with government leaders about the idea since at least some time last year. 

Their proposal has not yet risen to the level described in the omnibus bill for a full-fledged investment proposal but the basic proposal says that it intends to train locals to be the management team and estimates that the total increase of employment would be 1000 new jobs on Pohnpei.  It says that it would also try to bring in new airlines to the island to support the tourist arrival and local logistics problem.  It roughly estimates that the annual increase of Pohnpei’s tax revenues from the casino would be $20 to $30 million plus the potential for expansion of support businesses not directly related to the resort.

It say it intends to target customers from China, Hong Kong, Taiwan, Korea, Japan, and Europe and has plans to create a sort of fantasy experience for its customers including boat rides, parasailing, water slides, sky diving, and cultural shows.  It would offer excursion tours to Nan Madol, Kepirohi, and Lididuniap waterfalls, as well as to Sokehs Rock.

Though Canton Construction Corporation has made its basic proposals, the proposed omnibus tourism legislation does not necessarily provide that company with any preferential treatment though they will be asked to submit a complete proposal since they have already expressed interest.

If the bill passes in its current form, the Governor would be required to make a public announcement calling for the submission of Notices of Interest by a method that will effectively reach the largest number of potential investors.  It would also authorize him to make contact with parties who have already indicated a specific interest in such a development.  Each submission would require a non-refundable filing fee of $5,000 to be deposited into Pohnpei’s General Fund.

Those who respond with a Notice of Interest will then be given an opportunity to present their proposals.  Each must contain a full description of the proposed development. It must contain a qualified professional environmental impact study covering the entire project.  It must contain a comprehensive business plan broken down by hotel, casino, and related facilities.  Among other things it must cover the proposed amount of the investment broken down into components, the anticipated labor force for the construction phase and the operations phase broken down into resident and non-resident employees, and the anticipated revenues for the first 10 years.

Each potential investor would have one year from the date of the certified letter inviting them to submit a proposal to submit their documents to the Governor.  The Governor would then be charged with hiring a third party consultant to prepare a fully researched report on the feasibility and soundness of each proposal.

Upon receipt of the consultant’s report, the Governor would be charged with transmitting draft legislation which when enacted would implement Title II of the omnibus act.  Title II describes provisions for land for the project.

Title II currently holds in reserve, descriptions of the number of square feet.  It says that any lease issued by the Public Lands Trust Board of Trustees would be for 55 years for land that is currently submerged but would be filled by the investor for development of a Micronesia Tourism Complex of no less than 200 rooms to be constructed in three phases.  The minimum investment should be no less than $50 million.

Pages 9 to 41 of the 45 page bill deals with the details of defining a casino operation, the establishment of a gaming commission, and stringent penalties for violations of gaming laws including any method of cheating by the operator, its employees, or by patrons.

Only hotel guests of the hotel and who possess any country’s passport except a passport issued by the FSM national government, and who are not residents of Pohnpei will be allowed to participate in gambling at the casino.  No member of the Pohnpei Casino Gaming Commission nor any member of the Commission staff nor any official or employee of the Pohnpei Government may qualify as a “hotel guest”, regardless of passport or residency status.

At the discretion of the management of the Micronesian Resort Comply, a person who is a guest at another hotel in Pohnpei and who also meets all other requirements for entry to the casino could apply with the management for a special status to allow them to the casino complex and engage in gambling activities.

The Pohnpei Casino Gaming Commission would be established and would consist of five members appointed by the Governor with the advice and consent of the Legislature.  No head of an administrative department, office, authority, commission, or agency would be allowed to be a Gaming Commissioner.  No Commission member will be approved who has a direct or indirect financial interest in any person that holds or is an applicant for any license under the omnibus act or has a family member that does.

The salary for Commissioners would be $25,000 per year in addition to their regular salaries.

The Commission would establish rules and regulations.  “Such rules and regulations shall take into consideration the social and cultural context of Pohnpei.

Only one casino license will be issued in Pohnpei for a casino to be operated on the grounds of the Micronesian Tourism Complex.  But the Pohnpei Government reserves the right to extend the casino license by a separate Pohnpei law to the operation of gaming devices at the departure lounge of the Pohnpei airport.

Once granted, a license to operate a casino will remain in force for 30 years unless it is revoked for cause or surrendered.  The fee for a casino license would not exceed $100,000 and would be non-refundable.  The local government or jurisdiction where the casino is located could charge an annual business license fee not to exceed $50,000.

In addition to establishing penalties for cheating of any kind, the bill establishes substantial penalties of prison and/or significant fines both for people who do not qualify to gamble in the casino including minors under the age of 18, as well as for employees of the casino who knowingly allow it to occur.  The bill would also prohibit unqualified gamers from gambling through a third person who is qualified to enter the casino.

The bill also defines a daily gaming tax of 5 percent on the sale of all gaming services in Pohnpei.  It says that the Pohnpei State shall have not financial interest in and shall not act in any commercial capacity with respect to the Micronesian Tourism Complex but will at all times act in its governmental, regulatory capacity with respect to the Micronesian Tourism Complex.

Chief of Staff Joseph Saimon said that the Department of Social Affairs “should” be able to provide copies of the proposed legislation but it doesn’t have resources to provide hard copies.

Floor Leader McGarry Miguel urged Pohnpei citizens to participate in standing committee hearings. There is currently no plan to call for a voter referendum on the issue but Miguel said that he wouldn’t be surprised if that idea came up.

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