CO M~IO",l L:ALJ J I or the NQlrJ III.R..",,{ MARlAi."L\ ISI.ANHS OFFICE OF THE GOVERNOR

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1 RALPH DlG. TORR S Goycmor CO M~IO",l L:ALJ J I or the NQlrJ III.R..",,{ MARlAi."L\ ISI.ANHS OFFICE OF THE GOVERNOR VICTOR B. HOCOG Lieutenant Gm'emor 31 DEC 018 The Hono able Arnold r. Palacios President The Senat Twentieth Northern Marianas Common ealth Legislature Capitol Hi I Saipan, M The Hono able Rafael S. Demapan Speaker House of ~~presentatives TwentiethJ"orthern Marianas Common ealth Legislature Capitol Hi I Saipan, M Dear Sena e President Palacios and Speaker Demapan: Th s is to inform you that I have signed Senate Bill No , 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found that the entirety 0 5 of Article Xl, including the provision granting legislative authority to approve leases, w no longer in effect when the MPLC's functions were transferred to the executive branch.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 Saipan. MP Telephone: (670) Facsimile: (670) ~ Ralph DLG. Torres 1 ~ CNMI orncc or the Governor

2 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 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 Saipan. MP Telephone: (670) Facsimile: (670) Ralph DLG. Torres 1 11 CNMl omce of the Governor

3 THE SENATE Twentieth Northern Marianas Commonwealth Legislature P. O. Box Saipan, MP Public Law No 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 , 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.

4 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.: Adopted on 8/17/17 First and Final Reading: December 6, 2018 I HOUSE AC110JV I Referred to: Committee on Natural Resources Standing Committee Report No.: Adopted on 5/22/18 First and Final Reading: June 12, 2018 DOLORES S. BE RMVDES SENA ~E CI ERK v -

5 THE SENATE WENTlETH NORTHERN MARIANAS COMMONWEALTH LEGISLATURE Fr ST REGULAR SESSION, 2017 S. B. NO , 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

6 SENA TE BILL NO , SD3, HD2 Pub ic Law The Legislature, however, finds that based on the case DPL v. CNMJ, 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 ~ 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 Page 2

7 SENATE BILL NO 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 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 Page 3

8 SENATE BILL NO , 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 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 Page 4

9 SENATE BILL NO , 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 Page 5

10 SENATE BILL NO , 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 Page 6

11 SENATE BlLL NO , 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 ATTESTED BY:. ITUGUA IVE SECRETARY Commonwealth overnor e Northern Ma Page 7