the economic impact of a proposed mariana trench marine .../media/legacy/uploadedfiles/...mariana...

The Economic Impact of a proposed

Mariana Trench Marine National Monument An Exploratory Study

June 30, 2008Thomas Iverson, Ph D.Tom Iverson & Associates

M A R I A N A T R E N C H M A R I N E N AT I O N A L M O N U M E N T 2 0 0 8 E C O N O M I C I M PA C T S T U D Y

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T A B L E O F C O N T E N T SAbbrev�at�ons and Acronyms ............................................................... ��

Acknowledgments ............................................................................... ��

Execut�ve Summary .............................................................................. �v

Preface ................................................................................................. v�

Introduct�on .......................................................................................... 1

Assumpt�ons ......................................................................................... 4

Method ................................................................................................. 5

Compar�son w�th the Papahanaumokuakea Mar�ne Nat�onal Monument (PMNM) and NOAA’s Sanctuary Program .................... 6

The “Value” of the MTMNM ................................................................ 8

Benefits to the CNMI of the MTMNM................................................. 10

Costs to the CNMI of the MTMNM..................................................... 13

D�scuss�on and Recommendat�ons ...................................................... 17

Postscr�pt ............................................................................................. 18

References ............................................................................................ 20


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A B B R E V I AT I O N S A N D A C R O N Y M S

AG—CNMIAttorneyGeneral’soffice

AMP—AmericanMemorialPark(Saipan,CommonwealthoftheNorthernMarianaIslands)

CBA—CostBenefitAnalysis

CNMI—CommonwealthoftheNorthernMarianaIslands

DFW—CNMIDepartmentofFishandWildlife

EEZ—ExclusiveEconomicZone

FY—FiscalYear

MTMNM—MarianaTrenchMarineNationalMonument

MVA—MarianasVisitorsAuthority

NOAA—NationalOceanicandAtmosphericAdministration

PMNM—PapahanaumokuakeaMarineNationalMonument

TEV—TotalEconomicValue

USFWS—USFishandWildlifeService

WPA—WillingnesstoAccept

WTP — WillingnesstoPay


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A C K N O W L E D G E M E N T S

ThisstudywasfundedbyThePewCharitableTrusts’OceanLegacyProgram.TheanalysesandopinionshereindonotnecessarilyrepresenttheopinionsofThePewCharitableTrusts,butaresolelytheview-pointsoftheauthor.

TheauthorwouldliketothankJayNelson,AngeloVillagomez,LauriePeterkaandotherrepresentativesofthePewEnvironmentGroupfortheirassistanceindatacollectionandprovidingopenaccesstotheirwealthofinformation.FrankdiscussionswithacademicleadersattheNorthernMarianaCollegewerehelpful,andIappreciatedtheinsightsofCarmenFernandezandSamuelMcPhetresandtheprobingquestionsofEricPlinske.RepresentativesoftheCNMIdepartmentsofCommerceandFinancewerequicktoprovidecur-rentdataandreports.KenKramerandRuthTigheprovidedhelpfulcommentsonthefinaldraft.

WhilethiswasnotanofficialUniversityofGuamproject,IwouldliketothankDr.AnitaEnriquez,directoroftheSchoolofBusinessandPublicAdministration,forheraggressivesupportoffacultyconsultingwithinthepropercontext,particularlywhenitenrichesourteachingandinvolvesourstudents.Thepublicpresen-tationofthedraftreportwasgreatlyenhancedbytheinvolvementofmycolleague,Dr.JohnSalas.


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E X E C U T I V E S U M M A R Y

• Adecisionwillbemade,in2008,regardingwhetherornotPresidentGeorgeW.Bushwillconsiderdesignat-ingavastoceanarea,inthenorthernmostpartoftheCNMIarchipelago,asaU.S.NationalMonument.Forthepurposesofthisreport,theproposednameoftheareaistheMarianaTrenchMarineNationalMonument(MTMNM).

• TheareaoftheMTMNMisaboutthesizeofthestateofArizona.TheislandssurroundedbythewatersoftheMonumentarecurrentlyuninhabitedandareprotectedundertheCNMIconstitution.WhilethelandmassofthethreeislandsiswithintheCNMIjurisdiction,currentcaselawplacestheEEZsurroundingtheislandsinfederaljurisdiction.AnyeconomicactivitywithintheEEZ,therefore,wouldbesubjecttofederallawbutcouldpotentiallybesharedwiththeCNMIthroughnegotiatedagreements.

• ThisstudywascommissionedinAprilof2008toascertain,quickly,aprofileoftheeconomicbenefitsandcostsoftheMTMNMinrelationtotheeconomyoftheCNMI.Asmostfederalmonumentsareland-based,therecentdesignationofthePapahanaumokuakeaMarineNationalMonument(PMNM)providesthebestbaseofcomparison,particularlysincethePMNMisadministered,alongwithoveradozenmarinesanctuaries,bytheNationalOceanicandAtmosphericAdministration(NOAA).ThesesanctuariesrangefromasinglebayinAmericanSamoa,whichisfundedatapproximatelyhalfamilliondollarseachyear,tothePMNM,whichattractsalmost$10millioninbasicannualfunding.Asthelargestofthesesanctuaries,thePMNMattractedglobalmediaattentionwhenitwasannouncedin2006.

• TheMTMNMwouldbethesecond-largestmarinepreserveintheworldandwouldattractsubstantialmediaattentionifdesignatedbyPresidentBush.Thisisbecauseamoniker,the“BlueLegacy,”wouldbepromotedinrecognitionofseveraleffortsbyPresidentBush topreserveoceanresources.ThesubsequentpublicitywouldinstantlycreateanimagefortheCNMIasoneoftheworldleadersinoceanicenvironmentalprotection.Withinthiscontext,theOceanLegacyprogram,aconsortiumledbythePewEnvironmentGroup,commis-sionedthecurrentstudytoprovidesubstantiveeconomicanalysistothecitizensoftheCNMI.

• EconomicbenefitsaccruingtotheCNMIwereestimatedfromthecontributionsofa)federalfundingtosup-portthemonumentactivities(enforcement,education,etc.),b)theincreaseinvisitorarrivalsduetotheim-mediateandcontinuedmediaattention,andc)thenaturalincreaseinfederalandNGOfundingthattypicallyfollowssuchadesignation.RelativelyconservativeassumptionsweremaderegardingthescaleofthefederaloperationoftheMTMNMandthegrowthinvisitorarrivals.Forexample,thebasebudgetfortheMTMNMwasestimatedatabout25percentoftheFY2007budgetforthePMNM.Duetotimeconstraints,estimateswerenotseparatelycalculatedforthelikelyspendingofresearchscientistsandhigh-endnaturetouristswhomightactuallyvisitthesite,perhapsthroughastagingareaonPaganorotherCNMIislandsclosertothesite(Saipanisapproximately300milesfromtheMTMNM).Still,byassumingfederalfundingbelowtheaverageofNOAA-administeredsanctuariesanda2percentincreaseinvisitorarrivals,theMTMNMwouldgenerateinexcessof$10millioninspending,over$14millioninsales(viathesalesmultiplier),almost$5millionintaxrevenuesandaccountforalmost400jobs.

• EstimatingtheopportunitycostsoftheMTMNMismoredifficult.Sincetherecurrentlyisnoeconomicac-tivityinthearea,onemustspeculateaboutfuturepotential.Somepotentialprojectswouldnotbecompat-iblewiththecurrentconstitutionalprotectionortheMTMNMdesignation,suchasmineralextractiveleases.


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Th�s study was comm�ss�oned �n Apr�l of 2008 to ascerta�n, qu�ckly, a profile of the econom�c benefits and costs of the MTMNM �n relat�on to the economy of the CNMI.

Fishingleasescouldpossiblybenegotiatedwithforeignfleets,butwouldnotbeallowedinthemonumentareaunderthetypicalmanagementregulationsforsanctuaries,sothesemustviewedasopportunitycosts.Otherpo-tentialrevenuescouldpossiblycomefromactivitiesthatmightbecompatiblewiththeMTMNMregulations,suchaspharmaceuticalbio-prospecting.Jobanalysisisalsoawkwardhere,asforegonejobsduetoafishingbanintheMTMNMwaterswouldbeoffsetbyadditionaljobsnecessarytoco-managethemonument.

• Understandingthatsomeofthebenefitsandcostscouldnotbeestimated,thosethatremainwouldlikelyresultinannualbenefitsofapproximately$10millioninspendingincomparisonwithannualcostsofperhaps$1million.IfoneassumesthatfishingoperationswouldbesustainableandtheMonumentwouldcontinuetoattractnaturetourists,thesebenefitsandcostswouldcontinue,muchthesameasannuities.Discountingtheseflowsintothepresent,witha3percentcostofcapital,wouldresultinpresentvalues for thebenefits in theareaof$333millionandthecosts,perhaps$33million.

• A different perspective was generated by asking thequestion:Whatvalueofleasesfornon-compatibleac-tivitieswouldbenecessarytoshiftthebalance?Inotherwords,howmuchmoneywouldhavetoaccruethroughextractivemineralleasestocompensatethepeopleoftheCNMIforgivinguptheiroptionvalueforfuturegenerationsandexploitingthearea?Usingthesameassump-tionsasthepriormodels,avalueofjustover$7millioninleaseswithanaggressivegrowthrateof10percentoverfifteenyearswouldberequiredtoequaltheperceivedbenefitsofthemonumentdesignation.Tobeclear,whatisconsideredhereistheabandonmentoftheconstitutionalprotectionofthethreeislandsandsellingofftheresourcestomineralorbio-prospectors.Tocomparewiththerevenuestreamofaworkingmonument,theleasesfortheseextractiveactivitieswouldhavetobeintheneighborhoodof$7millionoverfifteenyears,witha10percentgrowthrateeachyear.Butatthatpointtheresourcemaybedepletedandrevenueswouldstop.TheMTMNMbenefits,incontrast,wouldbeprovidedinperpetuity.

• Alleconomicanalysesrequireassumptionsandincorporateuncertainty,andtheestimatesinthisreportarepar-ticularlysensitivetoassumptions.Themodelsremainquitesimpleinstructureandmaybeeasilymodifiedbysubstitutingone’sownassumptions.

• SomeoftheissuesraisedintheCNMIregardingthisproposalareconcernsaboutthetimingandintentionsofthefederalgovernment.Understandingtheseconcernsisonething,butmodelingthemineconomicanalysisisverydifficult.Itwouldrequireextensivesurveysthatwouldbequiteexpensiveandwouldproduceresultssubjecttoawiderangeofinterpretation.Inaqualitativesense,though,theseconcernsshouldbeconsideredascosts.

• TheeconomicbenefitstotheCNMIhaveawiderangeofpossibilitiesandaredependentontheabilityoftherelevantinstitutionstomakethemostoftheprospect.TheMarianasVisitorsAuthoritycouldconsiderthere-brandingoftheCNMI,ortheneedtopromoteoutsidetraditionalmarketsegmentstomaximizethetourismpo-tential.Governmentagencieswouldwanttoensurethattheyhadaseatatthetableinaco-managementscheme.Theexecutiveand legislativebrancheswouldneedtoseewhatresources theycoulddevoteto leveragingthisstatusintoeconomicopportunitiesforlocalpeople–thestaffwhocouldearnfederalsalariesandbenefits,thebusdriversandtouroperatorswhowouldbringbothtouristsandlocalschoolchildrentotheeducationaldisplaysatthevisitorscenter,thesupportstaffandnewtourismbusinessesthatwouldcatertotheresearchscientistsandhigh-endtourists,andsoforth.TheultimateeconomicimpacttotheCNMIwoulddependontheabilityoftheseactorstosupportandleveragetheopportunity.


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P R E F A C EIn1995,ablue-ribbonpanelofeconomistsfromMIT,Harvard,andothermajoruniversitiesandinstitutions,ledbythedistinguishedKennethArrow(thenatStan-ford),mettodiscusstheroleofeconomicanalysis inthe field of environmental, health, and safety regula-tion.Liketheproposednationaloceanmonument intheCNMI, the impact of regulations cannot be pre-dicted with any certainty. Nonetheless, benefit-costanalysis “…can help illustrate the tradeoffs that areinherentinpublicpolicymakingaswellasmakethosetradeoffsmoretransparent”(Arrowet.al,1996,p.1).However,theynotethat:

“Notallbenefitsorcostscanbeeasilyquantified,muchlesstranslatedintodollarterms.Neverthe-less,evenqualitativedescriptionsoftheprosandconsassociatedwithacontemplatedactioncanbehelpful.”(Ibid,p.2).

Itisthusimportanttolistandspecifyimportantfactorswhich,forvariousreasons,maynotbemeasurablebutstill importanttoadecision. Theseeconomistswereemphasizingtherealitythateconomicsisbothartandscience,andoneshouldnotexpectcertainty:

“In many cases, benefit-cost analysis cannot beusedtoprovethattheeconomicbenefitsofade-cisionwillexceedorfallshortofthecosts.Thereissimplytoomuchuncertaintyinsomeofthees-timatesofbenefitsandcoststomakesuchstate-mentswithahighdegreeofconfidence.”

(Ibid,p.3,emphasisadded).

But this does not diminish the role of benefit-costanalysis:

“Theestimationofbenefitsandcostsofaproposedregulationcanprovide illuminatingevidence foradecision, even if precision cannotbe achieved

becauseoflimitationsontime,resources,ortheavailabilityofinformation.”

(Ibid,pp.3-4).

Properly viewed, then, benefit-cost analysis is a toolthataidsdecision-making.Thegroupofscholarswentontoaddressthescaleofsuchastudy:

“A full-blown benefit-cost analysis, however, canbecostly.Therefore,theagencyshouldnotper-formtheanalysisunlessthereissomelikelihoodthat doing sowill actually inform the regulatorydecision.”

(Ibid,p.5).

Also,indiscussingapreliminarybenefit-costanalysis(suchasthisreport),theyargue:

“Suchabenefit-costanalysiswill,ofnecessity,bequiteroughsinceitisdifficulttoestimatetheeco-nomicimpactofaproposedlawbeforetheregula-tionsbasedonthelawarewritten.Althoughafull-blownbenefit-costanalysismaynotbewarrantedinmanycases, a roughbenefit-cost analysiswilloftenbequiteuseful.”

(Ibid,p.6).

Thiswasthespiritinwhichthisworkwasundertaken.Timewas limited, but secondary analysis of existingdatacouldprovidea framework fordiscussionof theeconomic impacts of the proposed Mariana TrenchMarineNationalMonument.


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I N T R O D U C T I O N

F�gure 1. Reg�onal v�ew of the CNMI, wh�ch �s about 1,400 m�les south of Japan.

Mostofthe96nationalmonumentsdesignatedunderU.S.lawareon land.Themajority aremanagedby theNationalParkService,thoughsomeareadministeredbytheBureauofLandManagement and other agencies. At this point neither thenameoftheproposedMarianaTrenchMarineNationalMonu-ment(MTMNM)northemanagementstructurehasbeende-termined.Forguidanceonecould review theprocessof therecently designated Papahanaumokuakea Marine NationalMonument(PMNM),whichisplacedwithinthepurviewoftheNationalOceanic andAtmospheric Administration (NOAA)forbudgetarypurposes.

While disconcerting to many, the administra-tive details of a monument are not completelyworked out prior to designation. In the case ofthePMNMandaNOAA-administeredsanctuaryprograminAmericanSamoa,aMemorandumofAgreement (about10pages)wascreated toes-tablishco-managementprocedures.ForPMNM,theU.S.Fish andWildlife Service (USFWS) isalso a co-manager, along with the State of Ha-waii.ThejurisdictionoftheproposedmonumentwouldlikelybesharedtosomedegreeamongtheDepartmentofCommerce’sNOAA,theDepart-mentof Interior’sUSFWS,and theCNMI.Forbudgetary purposes Hawaii’s PMNM falls intotheNOAA-administeredSanctuaryProgram, sothatframeworkwillbeusedinthisreport.

Theobjectiveofthisstudyistooutlinetheeco-nomic impact of a proposed marine nationalmonument, consistingof thewaters around thethree northernmost islands of the archipelagoknown as the Commonwealth of the NorthernMarianaIslands(CNMI).Thethreeislands,Far-allondePajaros (also known asUracas),Maug,andAsuncion,belongtotheCNMIandarecur-rentlyprotectedbytheCNMIconstitution.Theyareuninhabited,and landingonthemwithoutapermitisprohibited.

Figure1showsaregionalviewoftheCNMI,whichisabout1,400milessouthofJapan.Theproposedmonumentwouldbeapproximately115,000squaremiles,makingitthesec-ond-largestmarinesanctuaryintheworld.TheareaissimilartothatofthestateofArizonaandgreaterthantheareaofNe-vadaorColorado.

Uracas,MaugandAsuncionareuninhabitedandmorethan300milesawayfromthepopulationcentersofSaipan,Rota,andTinian.Thereisnocommerce,transshipment,orotheruse of these islands; instead, they are preserved under theCNMIconstitution:

“ The islands of Maug, Uracas, Asuncion, Guguan, andother islands specified by law shall be maintained as un-inhabited places and used only for the preservation and protection of natural resources, including but not limited to bird, wildlife, and plant species” (CNMI Constitution, Article XIV, Section 2).


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A Pres�dent�al declarat�onof a new nat�onal monument would rece�ve worldw�deattent�on.

Med�a coverage from the des�gnat�on of the Mar�ne Nat�onal Monument �n the northwestern Hawa��an Islands.

The economic impact of the “Monument” designationwould primarily occur in Saipan and to a lesser extent inRotaandTinian,assumingfutureexpansionofvisitorscen-ters in those locations. Each of the NOAA-administeredmarine sanctuaries conducts visitor education activities,sometimes in cooperationwith other agencies.Consider-

ing the remote nature ofthe MTMNM (300-400miles from Saipan), thevisitors center would bethe primary interface for

those interested in learning more about the Monument.TherecouldalsobeanimpactonPagan,oranotheroftheislandsclosertotheproposedmonument,whichcouldbeused as a “staging area” to bring scientists and high-endtouriststoviewtheoceanmonument.

Themainbodyofthisreportbeginswithbriefsectionsthatdescribetheassumptionsmadeinconductingthestudyandthemethodsusedintheanalyses.Thensomecomparisonswithexistingmarinesanctuariesaremade.Theseexisting

modelsarethenusedtoestimateanappropriatescale fortheproposedMarianaTrenchMarineNationalMonument(MTMNM).Administrativeofficesandavisitoreducationcenter would constitute the primary infrastructure. ThispermitsanestimateoftheAnnualFederalCommitmenttotheMTMNM,whichisoneofthecomponentsoftheeco-nomicimpact.

A Presidential declaration of a new national monu-ment would receive worldwide attention. When thePapahanaumokuakeaMarineNationalMonumentwasdes-ignated,allmajornewsservicesaroundtheglobepickedupthestory.WhiletheMTMNMwouldbethesecond-largestpreserve,theconnectiontothewell-knownMarianaTrenchandglobalinterestinPresidentBush’srolemayaddtotheallure.Theestimationoftheeconomicimpactofthisme-diaexposureiserror-prone,asitisverydifficulttoforecasttheimpactofuniqueevents.Nonetheless,therearesomemeasuresthatcanresultinanapproximatevaluationofthemediaexposure.


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Mediaexposuredoesnothaveeconomicimpact,though,unless it is acted upon. “Conversion studies” attemptto identify those who have been targeted by advertisingprogramstoseewhatportionofthemactuallyactontheadvertisingmessage.Suchastudyisnotveryaccurate,apriori,butassumptionsmaybemadeaboutpotential in-creasesinvisitorarrivalstotheCNMIduetothepublicityassociated with theMonument and, with some specula-tion,infutureyearsduetotheannouncementofscientificdiscoveries.Readilyavailabledataonvisitor spending intheCNMImaybeusedtoapproximatetheIncreasedVisi-torSpendingimpact.

Whilesomeofthevisitorswouldberesearchers,theeco-nomicimpactofthescientificcomponentoftheMTMNMisdiscussedseparately,alongwiththehigh-endtourism.These are quite speculative, as early discoveries couldspur a growth in activities.Current grants and researcharequite small, and it is nothard to imagine substantialincreasesinfundingfromfederalagenciesandNGOs.Anestimate of new research funds coming to the CNMI isprovidedasScientificandEcotourismSpending.

Costs of the proposed MTMNM generally fall into twoareas.Foregoneopportunities,whileminimalduetotheexistingconstitutionalprotectionofthethreeislands,aremainlyseeninthepossiblelossoffishingleaserevenues.Othercostswouldoccurasaby-productoftheeconomicexpansion,includinggovernmentofficialsto“sitattheta-ble”inco-management,additionalhealthandpublicsafetyofficers,andsoforth.Itmustbenotedthatthissiteisveryunusualinthatthereisnoeconomicactivityto“tradeoff”againsttheMTMNMproposal.Thereisnohabitation,noindustry,nocommerce,andlittlevisitation.Thus,whereother jurisdictions have had to weigh, say, the loss of atimberindustrytopreserveaforest,thereisnoeconomicactivityofanynature to lose if the islandsaredeclaredamonument.Where some studieswould attempt tomea-surethe“bequestvalue”oftheislands,eventhisismootsincetheyarebeingpreservedforfuturegenerations.

While some studies attempt tomeasure the“TotalEco-nomicValue”ofnaturalresources(e.g.,reefs),themorecommonapproachforparksandmonumentsistomeasurespendingandtheconsequentmultipliereffectswithintheeconomy.AftersummarizingthebenefitsandcostsoftheMTMNM,somerecommendationsaremadeformaximiz-ingthepotentialtotheCNMI.

Caveat

Secondaryanalysisreliesonpriorstudiesandcurrenteco-nomic data.While all states have econometric models ofsome degree, and many have regional economic models,theterritorieshavebeensomewhatneglectedinthefundingandtheprioritizationofeconomicmodeling.Areasonablesummarystatement,writtenearlierthisyear,demonstratesthecaveatrequiredwheninterpretingCNMIdata:

Summary of Current Economic Conditionsin CNMI

TheCNMIdoesnot yet have in placemacroeconomicdata collection and accounting systems technology ca-pableofgeneratinginformationontotaloutputanditscomponentsonamonthlyorquarterlybasis.Asaresult,thereisnotawaytoprovideobjectivemeasuresofpro-ductivecapacity,capacityutilization,employment,wag-esorunemploymentrates.TheCensusBureau’sInter-nationalProgramsCenter,withtheparticipationofstafffromtheCNMIDepartmentofCommerce,worksones-timatesofGPDfortheCNMI;however,theseestimateshavenotyetbeenreleased.Intheabsenceofcompleteandaccuratemacroeconomicdata,thereisnoobjectivemethodtogaugethelevelofaggregateeconomicactivity,thelevelofemploymentitsupports,orotherimportantmeasuressuchas totalpersonal income,consumption,savingsandothermetricsthatexplainthewell-beingofthepopulationandtheaveragecitizen.Theinformationvacuumcontinuestobeanobstacletoanobjectiveandcomprehensiveassessmentoftheeconomyanditspro-ductivecapacity.The lackof suchdataareespeciallyabarriertoassessingthecurrentandfutureimpactoftherecentandscheduledincreasesintheminimumwage.”

Impact of Increased Minimum Wages on the Economies of American Samoa and the Commonwealth of the Northern Mariana Islands, prepared by theOffice of theAssistantSecretary for Policy,U.S.Department of Labor, January,2008,p.35.


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A S S U M P T I O N S “ It �s very �mportant �n conduct�ng a

benefit-cost analys�s that agenc�es spell out all key assumpt�ons clearly and h�ghl�ght uncerta�nt�es.”

(Arrow et. al, 1996, p. 10).

Forecasting the future is subject to errors due to uniqueevents,suchasnaturaldisasters,andcomplicatedbynon-linear growth and decay patterns. Economic projectionsmustbebasedonassumptionsregardingvariousstatesofbeing.Otherwiseonewouldengage inendless“what if?”gamesandendup inaquagmire.Anadvantageofexplic-itlystatingtheassumptionsforthisreportisthatonemightadjust thefigures if thingschange.Theprimarybenefit isto forestallarguments forcostsorbenefits thatarepurelyspeculativeinnature.

1. Revenues from extract�ve act�v�t�es (m�n�ng, leas�ng r�ghts to pharmaceut�cal compan�es) are not est�mated �n th�s study.

These issues have been raised, however, and should beincludedinthediscussioninaqualitativesense.Thetech-nologyofseaminingisstillquiteprimitivebutatleastonecompany(NautilisMinerals)willbetestingthemarketplacewith an extractive operation in Papua New Guinea, withsomeevidenceofcommercial successby,perhaps,2010.U.S.waterswouldprobablynotbethefirsttargetsforthistypeofoperation,other thingsequal,dueto themorere-strictiveregulatoryburdenincomparisonwithdevelopingcountries. Assuming this technology would be commer-cially viable, there is the potential for theCNMI to forgothis potential revenue source in the waters around thesethreeremoteislands.ExtractiveactivitiesintheseabedinthesewaterswouldnotbecompatiblewiththepreservationconceptoftheMTMNM,sothispossibilitymustbeconsid-eredasanopportunitycostoftheMTMNMdesignationinaqualitativesense.SomeestimatesoftheleasevaluerequiredtooffsetpotentialMTMNMbenefitsarepossibleandwillbediscussedlater.

Bio-prospecting isnot as clear in the senseof conflictingwiththepreservationprovisionsandconceivablycouldbeconductedwithintheframeworkofamanagementschemefortheMonument.Ownershipremainsanissue,asthecur-rent legal statusplaces theseassets in theportfolioof theU.S.government.

Thesethingschange,sothereissomeprobabilitythatdis-coveries could be made, that sustainable practices couldextract wealth from the MTMNM, and that CNMI couldnegotiateforaportionofthatincome.Thisishighlyspecu-lativebutwillbeaddressedinthebenefit-costsummaryinaqualitativesense.

2. The CNMI has no jur�sd�ct�on over the EEZ surround�ng the proposed monument, thus fish�ng leases would have to be negot�ated w�th the U.S. government.

ThisisbasedonUnitedStates(U.S.)DistrictCourtfortheNorthernMarianaIslands:CommonwealthoftheNorthernMarianaIslandsv.UnitedStatesofAmerica,No.99-0028(Aug.7,2003).Thisisanimportantassumptionbecauseoftheconcernthatsomeimportantpropertyrightsmaybe“lost”iftheMTMNMisputintoplace.

Forthepurposesofthestudy,theassumptionisthatare-newableresource,suchasthefishery,mightbeleasedout,in accordance with the Magnuson-Stevens Fishery Con-servationandManagementAct,andasomewhatarbitrarypercentageofthatleasewouldaccruetotheCNMIthroughgood-faithnegotiationwiththeU.S.government:

“ItisrecommendedthattheCNMIpursuefullexploita-tionofpelagicresourceswithin theCNMI’sExclusiveEconomicZone(EEZ)uponresolvingitsjurisdictionaldispute with the federal government...to allow Japa-nese longline and pole-and-line vessels access to theEEZ…inreturnforregularannualpaymentsamountingtoapproximately$500,000.Howeveraccessshouldbelimited to theEEZ seawardof50miles to ensure thepreservation of somepelagic resources for use by thedomestic commercial, charter boat, recreational, andsubsistencefishers.”

An Economic Study for the Commonwealth of the North-ern Mariana Islands(1999),p.8

Notethatifa3-mileor12-milezonewereestablishedforCNMI,thiswouldnotaffecttheanalysisforafishinglease,astherecommendationistoconfinethisto“seawardof50miles.”

3. Inflat�on and l�near�ty.

Precise studieswould take into account the effectsof in-flationand thenon-linearityofmost spendingflows.Theestimatesinthisstudyarequitespeculative,so‘finetuning’them in this regard is not very productive. For example,economic models of fisheries show cycles of overfishingwithconsequentbansthatallowthestocktorebuild,andsoforth.ThesecomplexmodelsmaynotbefittedwithCNMIdata,asitdoesnotexist,solinearityisgenerallyassumed.


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M E T H O D S

Maug Island. Photo courtesy of NOAA, Pac�fic Islands F�sher�es Sc�ence Center, Coral Reef Ecosystem D�v�s�on. Photographer: Russell Moffitt.

L�terature Rev�ew A wide range of literaturewas reviewed, including documents from the existingsanctuaries, publicly available data from the CNMI, andbooksandarticlesspecifictomarineresourcevaluation.

Desk Rev�ew Thedesk reviewwasquite expedited,while thorough, and completed in threeweeks. It shouldbenoted,though,thattheresearcherhasrecentlyreviewedbooksinthisareaandhasacomprehensivesetofeconomicmodelingliteraturespecifictotheMicronesianregion.

Internet Search The Internet was used to capturecommondefinitionsandtoobtainevaluationmethodologiesspecifictoparksandmonuments.ThespecializedlistserverTRINETwasusedtopolltheleadingtourismresearchersintheworld.

Secondary Data Analys�s Therewasnoprimarydatacollectionforthisproject.Secondarydataanalysiswasconducted on CNMI government documents and recenteconomic reports. In the case of economic multipliers,some adjustments were made to what were consideredoverly optimistic or poorly constructed measures of themultipliereffect.

Model Bu�ld�ng and Refinement Simplemodelswereconstructedtoexaminethedirect,indirect,and induced effects of the potential spending. Someadjustments to existingmodels weremade where theyappearedtooverstatethebenefitstotheCNMIofvisitorandother“outside”spending.

Ex�st�ng Plans and Econom�c Env�ronmentTotheextentfeasible,themodelsdevelopedwereviewedinrelationtocurrenteconomicplansfortheCNMI,suchas the Strategic Initiatives for 2006-2010 (StrategicEconomicDevelopmentCouncil–May2006).CurrentdataonthestructureoftheCNMNIeconomywereusedto ensure that future activities were in concert withcurrentlaborconditionsandoveralleconomictrends.


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C O M PA R I S O N S w�th the

Papahanaumokuakea Mar�neNat�onal Monument (PMNM)and NOAA’s Sanctuary Program

Papahanaumokuakea MTMNM

139,000 square m�les 115,000 square m�les

7,000 spec�es ? (Mar�ana Trench)

S�ze of Cal�forn�a S�ze of Ar�zona (Th�rd largest US state) (S�xth largest US state)

TABLE 1

Comparison of PMNM and MTMNM

Med�a Coverage for the second largest mar�ne preserve?

The area was named by the U.S. telev�s�on show Good Morn�ng Amer�ca and newspaper USA Today as one of the “New Seven Wonders of the World.”

Ausefulstartingpoint,topositiontheMTMNM,istocom-paretheproposedmonumentwithexistingmarinesanctu-aries and monuments. The Papahanaumokuakea MarineNationalMonument (PMNM),designated amonumentbyPresident Bush in 2006, is the largest protected marinearea in the world. It is administered in a co-managementoperationwithtwofederalagenciesandtheStateofHawaii.TheMTMNMwould be the second-largest protectedma-rineareaintheworldand,ifdesignatedbyPresidentBush,wouldattractsignificantmediaattentionforCNMI.

TheNorthwesternHawaiian Islandswere first designatedanecosystemreservebyPresidentClintonin2000.WhenPresident Bush declared the area to be a monument, in2006,MSNBCNewsreportedthat:

“Nationalmonument statuswouldprovidemuchstron-ger,andnearlypermanent,protection.Unlikethearea’scurrent ecosystem reserve status, monument statuscomes with permanent funding and cannot be eas-ilychangedorrevokedbyanewpresident.”(emphasisadded).

AcomparisonofthetwomonumentsisprovidedinTable1.Iftheseoceanpreserveswerecomparedtothefiftystates,bothwould be in the top10 in terms of area.While thewatersoftheMTMNMarerelativelyunexplored,therehasbeenconsiderableresearchconductedinthePMNM.TheMonumentsupportsmorethan7,000marinespecies,andatleastaquarteroftheseareuniquetoHawaii.Researchershave identified importanthabitat forendangered species,includingHawaiianmonksealsandhawksbill,leatherback,andgreenseaturtles.ItisanestingareaandfeedingareaforanestimatedfourteenmillionPacificseabirds.

Withanareafour-fifthsthesizeofPMNM,onewouldex-pectthatuniquespeciesandnewdiscoverieswillbehigh-lightedintheearlyscientificexplorationofMTMNM.Moreimportant, though, may be the location of the MTMNMalongtheMarianasTrench, famous forbeingthedeepestpartoftheoceanandthedeepestlocationonthesurfaceoftheEarth’scrust.

Comparison is tricky, in this sense. “Number 2” neverseemstohavethestatusof“Number1,”butthescientificdiscoveriesalongtheMarianaTrenchmaybemorenews-worthyand,inthelongrun,attractmorescientificatten-tionthanthePMNM.

Administratively, one would place the MTMNM in theframework of sanctuarymanagement as administered bytheDepartmentofCommerce’sNationalOceanicandAt-mosphericAdministration (NOAA).While thePMNMisco-managedbyNOAA,theU.S.DepartmentofInterior’sFish and Wildlife Service (USFWS), and the State ofHawaii,forbudgetarypurposesthePMNMisincludedin


7

REGIONS/FIELD SITES FY 2008

Northeast & Great Lakes Reg�on $ 492,000 Thunder Bay 2,473,000 Stellwagen Bank 1,820,000 Mon�tor 981,000

Southeast & Gulf of Mex�co Reg�on 631,000 Gray’s Reef 1,171,000 Flor�da Keys 5,480,000 Flower Garden Banks 1,902,000

West Coast Reg�on 1,007,000 Channel Islands 2,342,000 Monterey Bay 5,420,000 Gulf of Farallones 2,636,000 Cordell Bank 1,427,000 Olymp�c Coast 1,747,000

Pac�fic Islands Reg�on 564,000 Fagetele Bay 410,000 HI Humpback Whale 3,325,000 Papahanaumokuakea Mar�ne Nat’l Monument 7,050,000

Average of all field sites $2,727,429

Mar�ana Trench Mar�ne (proposed) $1,670,000

Nat�onal Monument

TABLE 2

Regional Budgets for theNOAA-administered Sanctuary Program*

* Exclud�ng headquarter fund�ng (tra�n�ng, techn�cal ass�stance, etc.)

theNOAA-administeredSanctuaryProgram.Table2showstheexistingsanctuaries,plusPMNMandtheaverageofthefieldsitebudgets.

The MTMNM would be administratively within thePacificIslandsRegionoftheNationalMarineSanctuaryProgram, which currently includes one sanctuary andonemonumentinHawaiiandonesanctuaryinAmeri-canSamoa.AdministrationoftheMTMNMwouldbeintheCNMI,mostlikelyonSaipan.NotethatthePacificregional office inHawaii has its ownbudget; someofthesefundswouldmostlikelybespentintheCNMI.

Where would the budget for theMTMNM fall withinthis framework?Someareof theopinionthat thesec-ond-largestsanctuaryshouldreceiveatleast50percentofthebudgetofthePMNM.However,eventhoughthebudgetfortheseprogramshasbeenincreasinginrecentyears,thepoliticalsituationmayputadamperontheseexpectations.

WiththedualpressuresoftheIraqWarandtherisingcostoffuelandbasiccommodities,thereisquiteabitofpressureonthefederalbudget.CNMI,incomparisontoHawaiiandtheothersanctuaries,hasmuchlesspoliti-cal“clout”whenfundingisonthetable.Thus,whileitisajudgmentcall,theestimatehereisforaconservativeplacinginthebottomhalfofthelist,withinitialfundingof$1,670,000.Itmustbenoted,though,thattheFY08budgetallocationdoesnotrepresentthetotalfund-ingof the sanctuaries.Other funds fromco-managersandotherfederalbudgetsarelikelytobringthetotalto$3,000,000 or so. This budget and projected futureannualbudgetstosupporttheMTMNMaresummarizedastheAnnualFederalCommitment.Beforeturningtobenefitsandcosts, though, it isuseful todiscusswhatsometermthe“economicvalue”oftheMTMNM.


8

T H E “ V A L U E ” O F T H E M T M N MSomeeconomistswouldmeasurethetotalvalueofanaturalresourceinthisframework:

The economic value of Guam’s coral reefs(Beukeringet.al2007)

Underwater hab�tat of Maug Island. Photo courtesy of NOAA, Pac�fic Islands F�sher�es Sc�ence Center, Coral Reef Ecosystem D�v�s�on. Photographer: Russell Moffitt.

Notethatusevaluesincludeextractiveactivities.Fisher-ies,oceanmining,andbio-prospectingwouldalsofallintothiscategory.Ifoceanminingbecomesmoreeconomicallyfeasibleinthefuture,theremotelocationoftheMTMNMandtheU.S.federalregulatoryagencieswouldlikelydeterpotentialminingoperations.However,bothmining andpharmaceutical“options”havesomevalue.Bio-prospect-

ing for unique and/or highly valuable species would bemorecompatiblewiththedesignoftheMTMNMandnotnecessarilyprohibited.Theimprovedaccesstothewatersof theMTMNMcould leadto importantnewdiscoveriesinthisarea.Ownershipisanimpedimentstill,asthecur-rentlegalstatusplacesthisundiscoveredwealthwithinthepropertyrightsoftheUnitedStatesgovernment.

Non-extractiveusesmaybevaluedbycomparisonwiththePMNM,whichallowslimitedresearchunderastrictper-mittingsystemandtightlycontrolledtourism.Itisimpor-tanttonotethattheeducationaluseofthemonumentdoesnotrequirevisitation,andinsteadcouldbeconstructedonSaipan,Rota,andTinianintheformofvisitoreducationcenters. Unfortunately, the PMNM is still evolving andformal studies of the spending or discoveries by on-siteresearcherstherehavenotbeenpublished.

Indirect uses aremore difficult tomeasure, but there isevidence that deep sea fisheries, for example, requiremoretimetoregenerate:“Asaresultoftheirslowgrowthandlowreproductiverates,deep-seafisharethemostvul-nerableofallfishtoover-fishing”(Gordonet.al,1995).ThereisavalueassociatedwithafishingbanintheMonu-


9

Green sea turtle. Photo courtesy of NOAA.

Close-up of bubbles at the Champagne vent s�te located more than a m�le below sea level �n the Northern Mar�ana Arc. It �s one of the few places �n the world known to vent bubbles of l�qu�d carbon d�ox�de. Image courtesy of the NOAA Submar�ne R�ng of F�re 2006 Explorat�on and the NOAA Vents Program.

mentarea.Sanctuaries,inotherwords,supportfisheriesbyofferingarefugethatincreasesthefishstock,whichmightthenmigrateintoareasthatallowextractiveactivities.Whileimportant,thesevaluesaredifficulttomeasure.

The framework abovewas designed for coral reef evalua-tion,thusphysicalprotectionofcoastalassetswasincluded.TheMTMNMhasnocoastalassets(buildings)andnotverymuchreef,sothisitemisnotrelevant.

Thevalueoftheverydeepwatersinthe115,000-square-mileareaintermsofcarbonstoragecouldcertainlybesig-nificant,butthevaluationofthisassetisbeyondthescopeof this report.One could imagine some sort of valuationthroughcontributionstotheMonumentascarbonoffsetforsomeotheractivity,sothiscouldbeawaytoraiserevenueforthemonument,butthisisspeculative.

Thenon-usevalueswereclearlyinthemindsofthedraftersoftheCNMIconstitutionwhenArticleXIVwasformulated.Whiledifficult tomeasure, it is thisbequest value,or thevalueofkeepingone’soptionsopen,thatisatthecoreofmuchofthepreservationdemonstratedbythedesignationofparks,sanctuaries,andmonuments.InthePMNM,therewasaconsciouseffortbyindigenousHawaiianstotradeoffsome limited revenues fromfishing for the futurepreser-

vationofthespecieswithintheirmonument.Thissacrifice(ofthefishingrevenuesandlivelihoodsofeightfishermen,some indigenousHawaiians) provides at least aminimumvaluationofthebequestvalueheldcollectivelybythebroad-erHawaiianpopulation.

Severalmethodshavebeenusedtovaluenaturalresourc-es, eachwith their critics and shortcomings. Surveys ofcitizensmayattempttomeasuretheir“WillingnesstoAc-cept”(WTA)compensationforthedestructionofnaturalresources.Similarly,somesurveyswillmeasure“Willing-nesstoPay”(WTP)togeneratethefundstopreserveanarea.

TheseWTPmeasuresarenotrelevanttotheMTMNMbe-causeitisassumedthatthecitizensoftheCNMI,forthemostpart,willnothavetopayfortheoperationandman-agementoftheMonument,asthefederalgovernmentwillassumethisresponsibilityinthesamemannerthatithasbudgeted for theother sanctuaries.Likewise, theWTAmeasuresarenot relevantbecause there isnoproposeddamageordeteriorationofthenaturalresourceundertheproposal.Instead,itisassumedthattheresourcemayac-tuallyimprove(forexample,thePMNMprogramremovesdebrisasoneofitsactivities).

Thus the “value”of theMTMNM isnot the cruxof theissueregardingeconomicimpact.Instead,theeconomicbenefitsandcostswillmainlyaccruetoSaipanand, toalesser degree, Rota and Tinian, since the expenditureswilltakeplaceinthoselocations.


10

B E N E F I T S T O T H E C N M IO F T H E M T M N M

Personnel + Equ�pment $1,500,000

Office Space (2400 sq.ft) $50,000

Annual Operat�ng Costs $120,000

Annual Total $1,670,000

Sales Mult�pl�er 1.34

Total Sales (Revenue) $2,237,800

Tax Revenue* $843,478

Number of D�rect Jobs 14

Average Salary $40,000

Labor Income $560,000

Labor Income Mult�pl�er 2.1

Total Income Generated $1,176,000

(Ind�rect and Induced port�on) $559,986

Employment Mult�pl�er 1.79

Total Jobs (�nclud�ng MTMNM) 25

TABLE 3

MTMNM Annual Budget Estimate*

* Strateg�c In�t�at�ves (2006)

ThebenefitstotheCNMIwouldinclude,butnotbelimitedto:1)theannualfederalcommitmenttothemonument,asevidencedbyothermonumentsandsanctuaries,2)theme-diaattentionandconsequentincreasesinvisitorarrivals,3)thevisitsby researchscientistsandhigh-end touristswhomightenterthemonumentwatersand4)NGOandfederalfunds that will be attracted to “piggyback” on themonu-mentdesignation,particularlyintheareasofenvironmentaleducationanddiscovery.

1. The annual federal comm�tment would perhaps start at $1.67 m�ll�on or so for an an-nual operat�ng budget. Additional appropriationsaretypicallymadeforone-offprojects,suchastheconstruc-tionofanewvisitorscenteror therenovationofanexist-ingbuilding.Theinitialactivitiesofmonumentstaffwouldincludeenforcement,advisingresearchscientistsregardingpermitting processes and logistics, providing a discoverycenteroreducationalexhibits,andgeneraladministration.

Initiallyaleasedbuildingmightaccommodatethestart-upstaff.Insomelocationssynergyiscreatedwithhistoricpres-ervation objectives by renovating an historic building foraninterpretativecenter.Constructionofanewbuildingistypicallydoneintheearlygrowthperiod,withinthefirstfewyears;alternativelythisisdonewhenacenterbecomesmoreestablished.ThefocusforthisreportwillbeontheAnnualFederalCommitment.

Theinjectionofnewfundsinthismannercreatesthreeim-pacts.Thedirectimpact(e.g.,wagesandsalariesofemploy-ees),theindirectimpact(astheMonumentbudgetisusedto purchase locally-sourced products), and the inducedimpact,asworkersspendtheirmoneyintheeconomyandcreateadditionalincome.The1999EconomicStudypro-ducedanoutputmultiplierof1.34forthevisitorindustryandanincomemultiplierof2.10(usingaratherunorthodoxdefinitionof“totallaborincomegeneratedintheeconomyperdollaroflaborincomeintheindustry”).AconservativeestimateofthelaborcomponentoftheMTMNMwasmadeat(14staffxaveragesalaryof$40,000).

Table 3 shows an example budget of $1,670,000 in an-nual funding. These funds would generate total sales of$2,237,800andtotaltaxrevenuesof$843,478;pluscre-atetotalincomeintheCNMIeconomyof$1,176,000andcreating total of25 jobs.Thesemultipliers and revenuesarebasedontheratiosestablished in theStrategicInitia-tivesplan(2006).Theseareeconomy-widevaluesanddonotaddressdistributionalissues.TherewouldbelocalizedimpactssuchastheinitialcharterofvesselstovisittheareaandsomesynergieswitheffortstodeveloptheislandsnorthofSaipan.Inotherwords,travelthatcurrentlyisnoteco-nomicallyviablemightbesoifitwerecombinedwithMT-MNMeffortsinthenorthernwaters.Suchbenefitsarenotaddressedinthisreport,astherewasnotsufficientdata.

2. The Med�a Attent�on and the Consequent Increase �n V�s�tor Arr�vals

Economists generally recognize that it is not possible tocloselymeasuretheimpactofmediaexposure,thoughitispossibletolearnquiteabitintheeffort.Itisactuallyeasiertomeasurethenegativeeffectsofmedia(theBaliBombing,SARS,andsoforth).

TheadvertisingmeasuresoftheCPM(costperthousand)andCPP(costperpoint)maybeusedtomeasuretheexpo-suretothousandsofviewers(listeners)ortomeasurethecostof reachingonepercentagepointof the target audi-ence.“Conversionstudies”arethenconductedtomeasuretheresponseoftheaudiencetothemessage(e.g.,DidtheycometoSaipanafterseeingthead?).


11

Percent V�s�tors Add�t�onal Average D�rect Total Tax Total Increase per year V�s�tors ($)* Spend�ng ($) Sales Revenues* Jobs**

(base) 400,000 (mult�pl�er 1.34)

1 404,000 4,000 650 2,600,000 $ 3,484,000 $ 980,000 87

2 408,000 8,000 650 5,200,000 $ 6,968,000 $ 1,960,000 174

5 420,000 20,000 650 13,000,000 $ 17,420,000 $ 4,900,000 436

10 440,000 40,000 650 26,000,000 $ 34,840,000 $ 9,800,000 871

TABLE 4

Increased Visitor Expenditures Due to the MTMNM Publicity

* adapted from Strateg�c In�t�at�ves (2006)** rat�os from 1999 Econom�c Impact Study

Congress appropr�ated $1,786,000 �n the fiscal year 2008 for the Hawa��an Islands Humpback Whale Nat�onal Mar�ne Sanc-tuary K�he� Fac�l�t�es Project �n Mau�, Hawa��.

OnegoodexampleofthissortofstudywasconductedbyAn-gelouEconomics,astheymeasuredtheeconomicimpactofamajorfilmandmusicfestivalinAustin,Texas.Withtheluxuryofactuallymeasuringtheparticipationattheevents,thefirmfounddirectexpendituresofabout$12milliondollarsandatotalimpactontheeconomyofabout$18milliondollars.

Anotherstudywasconductedinthesameregion,estimatingtheeconomic impactof theproposedGeorgeWalkerBushPresidentialLibrary.Ignoringtheconstructioncosts(whicharesignificant),theoperatingbudgetisprojectedtobeabout$5millionperyear.CentralTexashasamuchhighermul-tiplier thanCNMI, resulting ina total impactofabout$14millionperyear.Afactorconsideredimportantinestimatingtheir attendancewas the“remoteness”of the location; thisisanimportantconsiderationfortheMTMNM.Theprimaryeconomiccontribution(aftertheinitialconstruction)ofthislibrary, similar to theMTMNM, is thevisitorspending thatwillresult.

TheSaipanTribune(May22,2008)reportedthatGolfDigestmagazinewouldbeproducingastoryaboutSaipanfortheirJapanesereaders.Thevalueofthisadvertisingwasestimatedto be $140,000. Amajor announcement by the President

of theUnited States concerning an ocean preservewouldlikelyappealtothesizeable“dive”marketinJapanandtheinbound tourism markets. Put differently, the monumentdesignationwould “putCNMI on themap” tomanywhomightknowoftheMarianaTrenchbuthadnotconsideredvisitingCNMI.TheuniquenatureoftheCNMIpoliticalsta-tuscouldattractmorecuriosityandattention thanHawaiididwith thePMNM.Thisbroadappeal tonature tourists,adventuretourists,scientists,andfamilygroupscouldprob-ablybevaluedinthemillionsofdollarsin“mediaattention.”Thisvalue,though,isnotthesameastheeconomicimpact.Thequestionremains:Whatportionofthispublicitywouldbeconvertedintovisitationandnewspending?

While this is obviously speculative, it is common for asharpgrowthstage tobe followedbya“settlingdown” toastablesteadystateof increasedvisitationwhenanewat-tractionisprovided.Areasonableestimatemightbea2-5percentincreaseinvisitorarrivalsinthefirstyear,spikingto10percentinthesecondyearthroughasnowballeffectofwordofmouth,andareversiontoasteadystateincreaseof5percentovercurrentarrivals.Sincethecurrentvisitorarrivalsareabout400,000peryear,amodelofthismightlookasfollows(1percentand10percentfiguresprovidedforreference).

A2-5 percent increasewould add8-20 thousand visitorswithdirectspendingof$5-13million.Throughthemulti-pliereffectthiswouldcreatesalesof$7-17millionandtaxrevenuesof$2-5million.Usingajobs/$millionratiocalcu-latedfromthe1999EconomicStudy,thisincreasedvisita-tionwouldcreateabout174-436jobs.

Somewouldarguethatthisisaconservativeestimate,thatatleast40,000additionalvisitorswouldcomewhootherwisewouldnothavecome.Thisfigureislessthanannualvisita-tionatsomeofthelargersanctuariesbutseemsextremeforasmallislandlikeSaipan.Table4showsdifferentrangesforcomparison.


12

TosummarizethepotentialbenefitsoftheproposedMTMNM,thefollowingcategorieshavebeendiscussed(note:selectingthe2percentgrowthfigureforvisitorarrivals):

Annual Total $4,000,000

Sales Mult�pl�er 1.34

Total Sales (Revenue) $5,360,000

Tax Revenue* $2,020,308

Number of D�rect Jobs 100

Employment Mult�pl�er 1.79

Total Jobs (�nclud�ng MTMNM) 179

TABLE 5

MTMNM Research & High-end Tourism

* adapted from Strateg�c In�t�at�ves (2006)

TABLE 6

Category Direct Spending Total Sales Tax Revenues Total Jobs

Annual Federal Fund�ng $ 1,670,000 $ 2,237,800 $ 843,478 25

Increase �n Tour�sm (2%) $ 5,200,000 $ 6,968,000 $1,960,000 174

Research and H�gh-end Tour�sm $ 4,000,000 $ 5,360,000 $2,020,308 179

Totals (w�th 2% v�s�tor growth) $10,870,000 $14,565,800 $4,823,786 378

Summary of Benefits

3. V�s�ts by research sc�ent�sts and h�gh-end tour�sts are also d�fficult to est�mate. ThePMNMapprovedapproximately38permitsin2007.Infor-mationonexpendituresandaveragepartysizeisnotavail-able.SmallgroupsoftouristsarecurrentlypermittedwithinthePMNMatMidwayisland.Agroupof15peopleattheircurrentprice($5,000/head)wouldgenerate$75,000insales.Ideally,muchofthiscouldbelocallyprovisionedandthusgeneratearelativelyhighmultipliereffect.

There is some evidence that divers and nature touristswould love to take a submersible into the Monument. Astudy byWood and Zeppel (2008) found that, ignoringcosts, 58 percent of the respondents would like to ridein a submersible. These high-end excursions cost in theneighborhoodof$5-10,000perperson.Agooddemandestimate,though,isbeyondthescopeofthisreport,sothiscategoryisincludedintothenext.

4. NGO and federal funds w�ll be attracted to “p�ggyback” on the monument des�gna-t�on, part�cularly �n the areas of env�ronmen-tal educat�on and d�scovery. There is already aconsiderable amount of research interest in the reefs of

Saipan, for example. The value of this was estimated at$788,722(REEF,p.26).Ifthisisthecurrentinterest,itmightmakesensetoconservativelyestimateafive-foldin-creaseinfundingforthesecond-largestmarinesanctuaryintheworld.Thiswouldamounttoabout$4millionperyear.Thisvaluewouldalsoincludeexpeditionsandhigh-endtourism.Theseactivitiesareoftencombinedandhavevariationssuchastrainingandleisurecomponents.ThesefundswouldgothroughthesamemultiplierprocessandresultinsalesandjobsasindicatedinTable5.


13

C O S T S T O T H E C N M IO F T H E M T M N M

Uracus Island. Photo courtesy of NOAA, Pac�fic Islands F�sher�es Sc�ence Center, Coral Reef Ecosystem D�v�s�on. Photographer: Russell Moffitt.

Threeareasofcostareconsideredhere:potentialfishingleas-es,thepossibilityofvolunteertimebeingdivertedtoMTMNMactivities,andgovernmentemployeesnecessarytoco-managethesite.Apotentialfishingleasewillbediscussedfirst.

The 1999 Economic Impact Study recommended that theCNMI government should implement the provisions of theMagnuson-StevensActwhichallowPacificInsularAreaFish-ingAgreements (PIAFAs). Thesewould charge fees for theestablishmentofaWesternPacificSustainableFisheriesFundto be used for managing the program and for conservationandmanagementobjectivesinthewesternPacific.Thefigureof$500,000wasrecommendedby theauthorsof the1999study.

The question remains:What portion of the CNMI fishingleasewouldbe attributed to theMTMNM?Pelagic surveysactuallyshowthatthefishstockisquitesparseintheMonu-ment area. Since there are transshipment possibilities inSaipan, one could imagine a Japanese fleet off-loading inSaipan, which would provide additional economic impact

forlocalstevedores,etc.Ofcourse,shipsbasedinSaipanwouldfinditlesscost-effectivetotravelasfarastheMT-MNMduetothecostoffuelandthesmallerfrequencyoffishfoundthere.StudiesinHawaiifoundthattheremotePMNMwatersdidhaveafewpermittedfishingoperations,butthequalityoftheproductwassuspectduetothetimeittooktobringitintoOahu.InestimatingtheeffectofthePMNMbanonfishing(totakeeffectin2011),research-ers found that restaurants andother retailersof thefishwouldberelativelyunaffected,as thesebusinesseswereused to substitutingother freshfishor frozen importedfish,sincethePMNMsupplieswerenotconsistent.KimandCoffman(2008)foundthat“…theNWHIbottomfishamountstoabout0.001percentofthestate’seconomy.Other commercial fishing, about sixty times larger thanthe NWHI fishery, is still only about 0.062 percent ofthestate’seconomy.”Still,thisresultedinaboutalossofabout$1.14milliontothestateeconomyandabout36(mostlypart-time)jobs.

Tosummarize thevalueof thefishingrights to theMT-MNM:1.Take the $500,000 recommendation of the 1999

EconomicStudy.2.Consider that possibly one-third of this could come

from theMTMNMwaters and thatCNMIcould suc-cessfullynegotiateforalloftheserevenues.

3.AddpotentialtransshipmentvaluetotheCNMI(jobsandtaxrevenue)

It is understood that the decision United States (U.S.)District Court for the NorthernMariana Islands: Com-monwealth of the Northern Mariana Islands v. UnitedStatesofAmerica,No.99-0028(Aug.7,2003)heldthattheU.S.governmentcontrolstheentireEEZ.Thus,anyfishingrightsleasewouldhavetobenegotiatedwiththeU.S.government.

Costs of enforcement, co-management

ItishelpfultoreviewtheactivitiescarriedoutbyMonu-mentstaffinotherareastogainanideaoftheeffectsonthejobmarketandthesupplyoflabor.Thesedutiesmightbecharacterizedas1)enforcement,includingmonitoringdevices;2)education,includingorganizingvolunteers;3)technicalassistance,includingpermittingforeco-tourismandscientificresearch;and4)generaladministration.

1.Regardingenforcement,ifviolatorsarecaughtbreak-ing the law in theMTMNM, this would result in in-


14

TABLE 7

Category Salaries Tax Revenues Lost Jobs Jobs Gained

Annual F�sh�ng Lease $ 166,667 4

Transsh�pment Opportun�ty $ 100,000 $ 12,000 10

Add�t�onal Government Staff $ 360,000 12

Opt�on Value, m�n�ng pharmaceut�cals (not est�mated)

Volunteer T�me sh�fted from other act�v�t�es (not est�mated)

Totals $ 460,000 $178,667 14 12

Summary of Costs

creased costs of legal proceedings and court time.These are difficult tomeasure at this stage, and in-steadtherecommendationistoensurethatappropri-atefinescouldbeleviedtorecoverthesecosts.

2. AstheMTMNMrecruitsvolunteers,onemightfindthatthevolunteerpoolwillbedivertedsomewhattoMTMNM activities; this could result in reductionsin volunteer activities for other worthwhile causes.Again,thisisdifficulttomeasureandcouldbeobvi-atedwithanincreasedwillingnessofcitizenstosup-portthenewMonument.

3.Theexactnatureof thepermits isnotyetclear,butthe PMNMprocess requires co-managers to reviewpermits for appropriateness and cultural concerns.ThiswouldrequireassistancefromtheCNMIDFWor other agencies with the technical expertise, ifthey have co-management responsibilities. Modestrequestscouldbeabsorbed intocurrentduties,butexpansionof theMTMNMwouldrequireadditionalpersonnelatsomepoint.

4.While general administrators would be federallyfunded, co-management agreements, such as in thePMNM,would requireCNMI officials to “sit at thetable.”Onecould imaginean impacton thestaffofDFW,AG,andotheragenciestoprovide inputandtoparticipate indecision-making. Initially these ac-tivitiesmightbeabsorbedintoexistingpositions,butexpansionofmonument activitiesmightnecessitateadding staff across the board. Fortunately for theCNMI,muchofthesecostsmaybereimbursedbytheregionaladministrators.

To summarize these costs, theywouldbeproportionaltothescaleoftheeducationalcenterandthenumberof

permitapplications.Forarelativelysmallscaleoperation,most agencies could most likely absorb the additionalworkwithexisting staff. If high-endestimatesof visitorarrivals, researchpermits, and so forthwere actualized,additionalgovernment fundingwouldbenecessary,butthese additional activitieswould also generate tax reve-nuesand,asinthecaseofthePMNM,thefederalgovern-mentcompensateslocalgovernmentfortheextracosts.

Wouldtherebeothercosts?AnotherviewoftheMTM-NMdeclarationisthatitwouldrepresentanopportunitytore-imagetheCNMI.TheglobalcoverageoftheMonu-mentmightbeaugmentedwithaclevermarketingcam-paignbytheMVA.Asvisitorsarrive,theywanttohavetheconveniences of (broadband) Internet, cable television,stablepowerandwater,andsoforth.Theconversionofthepublicitytosatisfiedvisitorsisnotaccomplishedsim-ply,butrequiresacoordinatedeffortifsustainablerepeatvisitation is to be achieved. Repeat visitation is widelyviewedasastrongindicatorofcompetitivenessanddes-tinationquality.Maui,forexample,attractsover60per-centrepeatvisitors,whileonGuamthefigureislessthan30percent.

Theseissuesarenottied(solely)totheMTMNMbutareactually broader tourism issues, and sustainable devel-opmentissues.Thepurposeofnotingthemhereisthatthese infrastructure,healthandsafety,andsocial issueswouldaffectthesmallincreaseinMTMNMvisitorsalongwithallothervisitors.

Quantitativeestimatesofthesecostsarebeyondthescopeofthisstudy,butitisimportanttorecognizethemwithintheframeworkoftheCNMIeconomy.Whileincomplete,in that some costs are simply listed,Table7 shows thecostsummary.


15

The Present Value of the benefit stream would appear as:PV = B/�

Where PV = present value of benefit streamB = annual benefits, and � = d�scount rate

The present value of the benefits would then be:PV = $10,000,000 / .03 = $333,000,000

S�m�larly, the present value of the costs would be:PV = C/�

Where C = annual value of the opportun�ty costs of the MTMNM

Aga�n, us�ng the rather loose est�mate of $1 m�ll�on, one would find:

PV = $1,000,000 / .03 = $33,000,000

TABLE 8

MTMNM Fishing Extractive Spending Discounted Year Spending Lease* Lease** Minus Leases Value

Benefits Net Costs with $1 million Extractive Lease at 10 growth for 15 years

2008 0 0 0

2009 10,000,000 166,700 0 9,833,300 9,546,893

2010 10,300,000 171,701 0 10,128,299 9,546,893

2011 10,609,000 176,852 1,000,000 9,432,148 8,631,752

2012 10,927,270 182,158 1,100,000 9,645,112 8,569,557

2013 11,255,088 187,622 1,210,000 9,857,466 8,503,137

2014 11,592,741 193,251 1,331,000 10,068,490 8,432,202

2015 11,940,523 199,049 1,464,100 10,277,374 8,356,446

2016 12,298,739 205,020 1,610,510 10,483,209 8,275,542

2017 12,667,701 211,171 1,771,561 10,684,969 8,189,139

2018 13,047,732 217,506 1,948,717 10,881,509 8,096,865

2019 13,439,164 224,031 2,143,589 11,071,544 7,998,319

2020 13,842,339 230,752 2,357,948 11,253,639 7,893,076

2021 14,257,609 237,674 2,593,742 11,426,192 7,780,681

2022 14,685,337 244,805 2,853,117 11,587,416 7,660,647

2023 15,125,897 252,149 3,138,428 11,735,320 7,532,455

2024 15,579,674 259,713 3,452,271 11,867,690 7,395,552

2025 16,047,064 267,505 3,797,498 11,982,061 7,249,344

Present Value of the Net Benefits (@3%) 139,658,500

* assum�ng 3% �nflat�on ** assum�ng a growth rate of 10% each year

Comparingthebenefitsandcostsshowsaquitefavorableben-efit/costratio.Approximately$10,000,000indirectspend-ing could be attributed to theMTMNMon an annual basis,while the explicit costs arewell under$1,000,000.Addingvolunteer timeandotherunforeseencosts, thesecould totalover$300,000andtherestillwouldbelessthan$1millionintotalcosts.$1millionwillbeusedforcomparisonpurposes.

Thebenefitscouldbeconsideredlikeanannuity.Asimplefor-mulaforcomputingthepresentvalueofthesebenefitswouldadjustforinflationbyusingarelativelylowdiscountrate(i.e.itisnotnecessarytoadjustthebenefitsforinflationifthedis-countratedoesnotincludeaninflationpremium).

AnotherwaytoviewthisdifferenceistospecifyhowmuchthepotentialmineralorpharmaceuticalleaseswouldneedtobetogiveuptheMTMNMstatusfortheoptionvaluetopursuetheseextractiveactivities.Simplyput,afirmwouldhave to offer more than $333 million to the CNMI toforgotheopportunityoftheMTMNM.Inpracticalterms,though,onemightimaginea15-yearcontracttoleasetheseabedsandwaterresourcesforextractiveactivities.

Table8showsamodelthatwoulddiscountfuturebenefitsandcostsforthetimevalueofmoneyandassumesthataleasecouldbenegotiated formineralorpharmaceuticalproducts.Inflationfor thebenefitstreamisestimatedat3percent,buttheleasevalueisinflatedatamoreaggres-sive10percentperyear.Thisoptimisticgrowthratear-guesforcontinueddiscoveriesandexpandedproductionthroughthefifteen-yearperiod,afterwhichitisassumedthatthevalueisdepleted.

In this scenario, a lease that begins in2011 at $1mil-lionandgrowstoalmost$4millionoverthefifteenyearswouldstillfallshortoftheexpectedbenefitsofpreservingtheareaintheMTMNM.

Whatifmorevaluablediscoveriesweremade?Usingthesamemodel, one could image a$5-million initial lease,


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TABLE 9

MTMNM Fishing Extractive Spending Discounted Year Spending Lease* Lease** Minus Leases Value

Benefits Net Costs with Extractive Lease Equal to Benefit Stream

2008 0 0 0

2009 10,000,000 166,700 0 9,833,300 9,546,893

2010 10,300,000 171,701 0 10,128,299 9,546,893

2011 10,609,000 176,852 7,169,000 3,263,148 2,986,243

2012 10,927,270 182,158 7,885,900 2,859,212 2,540,373

2013 11,255,088 187,622 8,674,490 2,392,976 2,064,202

2014 11,592,741 193,251 9,541,939 1,857,551 1,555,670

2015 11,940,523 199,049 10,496,133 1,245,342 1,012,577

2016 12,298,739 205,020 11,545,746 547,972 432,575

2017 12,667,701 211,171 12,700,321 -243,791 -186,845

2018 13,047,732 217,506 13,970,353 -1,140,127 -848,361

2019 13,439,164 224,031 15,367,388 -2,152,255 -1,554,835

2020 13,842,339 230,752 16,904,127 -3,292,540 -2,309,321

2021 14,257,609 237,674 18,594,540 -4,574,605 -3,115,084

2022 14,685,337 244,805 20,453,994 -6,013,461 -3,975,606

2023 15,125,897 252,149 22,499,393 -7,625,644 -4,894,611

2024 15,579,674 259,713 24,749,332 -9,429,371 -5,876,072

2025 16,047,064 267,505 27,224,266 -11,444,706 -6,924,235

Present Value of the Net Benefits (@3%) 454

* assum�ng 3% �nflat�on ** assum�ng a growth rate of 10% each year

growingatthesameaggressive10percentperyearoverfif-teenyears;thiswouldstillnotcreateenoughrevenuetoout-weightheestimatedMTMNMspending(detailnotshown).

Usingthismodelin“whatif”scenarios,onecouldcalculatethe value of the initial lease thatwould result in a “breakeven”situation.Thevalueundertheseassumptionsisjustover $7,169,000, as shown in Table 9. To clarify, theamountwasselectedtodrivetheDiscountedValueclosetozero,sotheleaseswouldapproximatelycancelouttheMT-MNMspendingbenefits.

Insummary,unlessoneimaginesaveryselectiveandsus-tainablebio-prospectingmodelthatwouldbecompatiblewith theMTMNMpreservationobjectives,extractiveop-tionswouldbeconsideredasa“tradeoff”withthemonu-ment designation. It would take a fifteen-year lease inexcessof$7millionwithagrowth rateof10percent tosecurerevenuesroughlyequaltotheperceivedbenefitsofthesanctuarystatusoftheMTMNM.However,itisimpor-tanttonotethattheresourcemaythenbedepleted,whiletheMTMNMwouldyieldbenefitsinperpetuity.


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D I S C U S S I O N A N D R E C O M M E N D AT I O N S

Estimating the benefits and costs of a proposal is quitecomplex,particularlywhendecisionsaremadeinadvanceofamanagementagreement.Thisisalsothecasewithnewgovernment regulations so thecommentsprovided in thePrefaceareparticularlyworthemphasizing.

FromthebeginningofthisstudyitwasclearthatthecostsofdesignatingthewatersaroundtheislandsofMaug,Uracas,andAsuncionasanewU.S.NationalMonumentcouldonlybethosecostsforegonethroughsomeotheruse.Thereisnodevelopment,nohabitation,noindustryintheexistinglandarea.Thisisquiteunlikemostsites,wheresometrade-offsexist,e.g.,losingatimberindustrytosaveaforest.

Theoptionvalueoffutureuseoftheislandsisfraughtwithspeculation.Theexistinglegalframeworkplacesthethreeislands in constitutional protection as reserves, and therecentcourtdecisionplacesthe200-mileEEZwithinthejurisdiction of the federal government. This would seemtolimitthecurrentoptionstosignificantlyimpacttherev-enuesoftheCNMIanditspeople.

Prior studies estimate that the fishing industry, currentlyprovidingwellunder1percentof theCNMIgross islandproduct,couldbeexploitedthroughaleasewithaforeignfishingfleet.However,itisunlikelythattherevenuewouldbeadramaticnewsourceofrevenueabovethatcurrentlyen-joyed.Possiblemineraldepositscouldultimatelybeminedintheseabed.Pharmaceuticalcompaniescouldbio-pros-pectandprovidepaymentsfornewmedicaldiscoveries.

Ofthese,theonlyestimatefoundfortheCNMIwasarec-ommendationtoestablishafishinglease.ConsideringtheremotenatureoftheproposedMTMNM,itisnotlikelythatlocal(Saipan-based)fishermencouldbringbackqualityfishatareasonableprice(particularlywithfuelasamajorinputcost).AfishingleaseoutsideoftheMonumentwaters,butwithinthe200-mileEEZ,couldbenegotiatedtoproduceamodestamountofrevenue.ThelossoftheMonumentpor-tionofthatleasewouldbeperhapsone-thirdofthevalue.

ThebenefitsofanewMonumentarestillspeculative,butestimationisfacilitatedbytheexistingSanctuaryProgramadministeredbyNOAA.It isreasonabletoestimatethatcloseto$2,000,000inannualsupportfundingwouldbeprovided by the federal government. Administrative of-ficeswouldbe leasedorbuiltonSaipan,andsome typeofpublicvisitoreducationcenterwouldbelikely.Theseactivities would, in turn, probably attract considerableincreasesinotherfederalfundingandgrantsorprojectsfundedbyNGOs.

ByputtingCNMIonthemap,sotospeak,thepublicityofthisdesignationcouldleadtosignificantincreasesinvisi-torarrivals.Thiswouldincludeageneralincreaseinthemass touristmarket, as those curiouswould investigatecurrentpackagetrips,andinthenewmarketsofresearchscientists and high-end nature tourists. An establishedvisitorscenterwouldprovideanotherattraction tocatertothefamily-travelsegment.Evenconservativeestimatesof2percent visitorgrowthproduce sizeablebenefits inspendingandtaxrevenues.

Finally, a “what if” scenario was created that sought tomeasurethevalueofextractiveleasesnecessarytocoun-teracttherevenuesoftheproposedMTMNM.Inadditiontothepossibilityofafishinglease,otherleaseswouldhavetototalatleast$7milliondollarsandgrowata10percentrateforfifteenyears.However,theresultwouldbedeplet-edresourcesversustheMTMNMbenefitsinperpetuity.

DoubtswillmostlikelyremainformanyintheCNMI,asthespeculationinthisreportiscenteredonthosethingsthatmaybequantified.Somewillfeelthatthisisauniqueopportunitytore-brandthevisitorindustryandcapitalizeon theMarianaTrench themeand thepublicity.Otherswillfindthistobejustspeculation.Somemaybeintriguedbythepossibilityofsellingor leasingpotentialassets intheproposed area, evengiven the current legal impedi-mentstodoingso.

Theperspectiveofthisreportisthateconomicanalysisisadecisionaid;itcanonlysupportdecisionsthataremadeinabroaderpoliticalandsocialcontext.Allattemptshavebeenmadetobeopentosuggestion(particularlyregard-ing costs) and to avoid extremeevaluations, in termsofdiscount rates,growthpotential, inflation, and so forth.Moreimportantly,themodelsprovidedareeasilyadaptedto alternative assumptions so that it is not necessary toagreewiththeonesstated.


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P O S T S C R I P TThe draft report was presented on June 17-18, 2008, to the Saipan Chamber of Commerce, the Saipan Rotary Club, Samuel McPhetres’s class on Social Issues at North-ern Marianas College, Harry Blalock’s Island Issues radio show, through a personal visit to Lt. Governor Timothy P. Villagomez, and in a two-hour public forum.

Dr. John Salas, former president of the University of Guam and a former senator in the Guam Legislature, assisted the author with meetings at the Saipan Chamber of Commerce, the Rotary Club and the public forum. Dr. Salas responded to questions in the Chamorro language and provided his perspective as a tourism educator. Fear of change and mistrust of the federal gov-ernment were themes ex-pressed by several partici-pants. Views opposing the MTMNM were often based on misinformation or, in some cases, disagreements with assumptions used in the study.

In previous public reaction, some opponents wrote let-ters to the governor and the local newspaper using rhetoric that was quite di-visive and judgmental even though few facts about the proposed Monument had been provided. The obvious comparison with the PMNM in Hawaii also led to some scaremongering. For example, John Gourley, in the May 23, 2008 Saipan Tribune, wrote: “This is the same media tactic that Pew, their advocates, and paid consultants, including Mr. Scott Foster and the W&CPN members, used when they took the Northwestern Hawaiian Islands away from the Hawaiian people.” This letter was written at a time when the tri-partite co-manage-ment plan for the PMNM had already been worked out, including provision for a ‘seat at the table’ for the State of Hawaii.

Thus, instead of the proper view of intergovernmental rela-tions between the federal and local governments, many crit-ics shifted the emphasis to an outside force (Pew) without a complete understanding of the Ocean Legacy program and the intent of the sponsoring foundations. Feedback from the forum presentation indicated that the argument of “losing the islands” was one factor causing opposition to the Monu-ment. Also, some felt that the CNMI owns the submerged lands and the EEZ, in spite of the Supreme Court decision to the contrary. One student commented that the proposal for the monument would have been more acceptable if it had originated within the CNMI.

Some forum participants criticized the study’s consideration of extractive activities. In their view, this activity would not be allowed under the CNMI Constitution, so it should not have been addressed in the report. The presenters explained that observations about possible mineral deposits, including manganese modules, had been mentioned, without any evi-dence of proposals, bids, or any other documentation of po-

tential revenue sources. The presenters acknowledge that, in an attempt to be inclusive of potential revenue streams, though, the idea of extractive mineral leases may have been over-emphasized.

While some of the misconceptions were addressed in the public discussions, others remained simply because the process typical of federal monument funding and manage-ment was not clearly understood. One respondent asked if the Monument funding would be abandoned after President Bush left office. In retrospect, the discussion of federal com-mitments that ensued led to a topic that was probably the


19

biggestomissionofthisbriefstudy—anexaminationoftheeconomicimpactoftheCNMIAmericanMemorialPark(AMP).Attheforumtopresentthisstudy,ChuckSayonprovidedasynopsisofthefundinghistoryofthepark,whichissummarizedherein.

TheAMPisa133-acre(54-hectare)parceloflandthatwas dedicated in1975 to theU.S. andMarianas sol-dierswho fought inWorldWar II. Its initial fundingcamefroma$2-milliontrustfund,buttheearlystagesofthepark’sdevelopmentwerequiterocky,movinginfitsandspurtsofactivitywithuncertainongoingfund-ing. Nonetheless, the park now includes a 1.5-milewalking path, tennis courts, a 1,200-seat amphithe-ater,andrecentadditionsofaresearchlibrary,avisitorcenter,aWWIIexhibitionhall,anda120-seataudio-visualtheater.

Review of the documents provided by Mr. Sayon re-vealed two very relevant facts.Onewas that the localgovernmentoperatesapublicmarinawithin theAMP(evidence of successful co-management with the fed-eralandlocalgovernments).Inonesurveyseveralyearsago,onemillionvisitor-usedayswere tracked for themarina during the CNMI’s peak visitor periods (C.Sayon,personalcommunication).Simplyput, thisex-periencemightreassuretheresidentswhodistrustthefederalgovernment.

Theotherinterestingtrendwasthemannerinwhichthefederal commitment to theAMP increasedover time.Asmentioned above, funding was not initially steadyorassured,andtherewereperiodswherelittlefundingprogresswasmade.From1996to2006,however,thefundingincreasedfrom$149,000to$1,120,000peryear(C.Sayon,personalcommunication).Someofthisfunding kept salaries competitive and some enabledincreased duties, such as additional enforcement. Inadditiontotheannual increases,therewereover$12millioninconstructionprojectsby2004.

The experience of the AMP might advise caution inregard to the “Annual Funding Commitment” de-scribedinthebenefitsportionofthecurrentstudy.Iftheinitialfunding,projectedat$1,670,000peryear,increased at the same rate as the AMP funding from1996to2006,thebudgetintheeleventhyearwouldbe$12,553,020.

Inasimilarvein,adiscussionabouttheMTMNMVisi-torCenterrevealedanotherpotentialweaknessofthe

current study. Some respondents felt that the currentstudymayhaveunderestimatedthetourismpotentialorthe“traffic’”oftheproposedcenter,meaningthatitsini-tialplanwasunderscale.

Iftherewasapersonalbiasinthestudy,itwastoavoidexaggerating the economicbenefits.Thiswasbased inpartontheauthor’sexperienceofviewingmanypropos-alsfortheregion’seconomicdevelopmentthatdidjustthat—usingmultipliersthatweretoohighorunrealisticestimatesofvisitorspending.Theauthorattemptedtobecareful in this regard toproducebenefit estimates thatcouldbejustifiedandwere,ifanything,atthelowerendofarangeofpossibilities.Assomerespondentspointedout,thisrestraintmightservetodiminishtheattractive-nessoftheMTMNMproposalinthefaceofestimatesofotherdevelopmentproposals,which,ifinflated,onlyob-fuscatethegenuineprospectsforeconomicbenefit.Inthismanner,thepoliticalcapitaloftheMTMNM—whichwas presented with realistic expectations—may not beviewedasequallyattractive.

As the public presentations encouraged, the readershould re-visit themodels in the report.What if tour-ismgrowthwere10percentinsteadof2percent?WhatiftheAnnualFederalCommitmentfollowedthepathofthe AMP and grew exponentially?What if NGOs andfederalagenciesfoundnewinterest infundingprojectsrelated to theMTMNM?Combinationsof theseeffectscouldleadtobenefitsexceedingtheroughly$15millionperyear that aredescribed in this study.The relativelyconservativeestimationprocessshouldbeseenasasen-sible and appropriately careful approach that gives theproject’ssupportersasolidbasisfortheirenthusiasminseeingitcompleted.

Despite several calls for criticism and, particularly, forevidenceofadditionalcoststhatwereoverlooked,nosig-nificanterrorsofcommissionoromissionwerereportedwithintherequestedone-weekreviewperiodotherthanthosediscussedhere.However,thedraftreportwascir-culated only a day or two before the presentations, soother evaluationsmay still be forthcoming.The authorfullyaccepts responsibility forerrorsoroversights thatremain.


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