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Another bond sale looking to fund ASTCA and Legislature projects

American Samoa Executive Office Building
That’s the Hawaiki cable and new Fono Building
fili@samoanews.com

Pago Pago, AMERICAN SAMOA — The American Samoa Economic Development Authority (ASEDA) board of directors has proposed the sale of another bond, totaling more than $50 million, with proceeds earned toward two projects involving the American Samoa TeleCommunications Authority (ASTCA) and the Legislature, and includes funding a Debts Service Reserve Fund and insurance costs.

Government officials told Samoa News that an ASEDA delegation, of nearly a dozen people including supporting staff, were to depart last night for Honolulu, where they will meet next week with US mainland investors.

Samoa News understands that the meeting in Honolulu was firmed up after the ASEDA board held a teleconference call two weeks ago with the US investors.

The ASG officials told Samoa News last week that the new proposed bond targets two specific ASG entities — ASTCA with just over $35 million and $10 million for the new Fono building.

For ASTCA’s share, it will be used to pay ASG Employees Retirement Fund and the balance will be ASTCA’s payment to Hawaiki Cable System, which is due this year, according to information received by Samoa News last week.

The ASEDA Proposed Series 2018 Bonds document received by Samoa News this week, provides specific details of the new proposed bond, which totals $51.26 million with:

• $17 million - Hawaiki - the “amount already advance from the Retirement Fund”;

• $18.5 million, which is the “amount due near the beginning of 2019”;

• $10 million - Fono building;

• $4.5 million for Debts Service Reserve Fund; and

• $1.26 million for Costs of Insurance.

Samoa News notes that during ASTCA’s FY 2019 budget hearing, Sen. Tuaolo Manaia Fruean, who is also vice chair of the Retirement Fund, emphasized that the $17 million that the Retirement Fund put in this year — was an “investment” not a loan. (See Samoa News editions Aug. 30 and 31 for details).

At press time, Samoa News wasn’t able to get confirmation as to whether this new proposed bond, will require amendment to current ASEDA law, allowing ASG to proceed forward with the sale.

However, an ASG official, with knowledge of such a process, tells Samoa News that Fono approval is not required. The official didn’t elaborate further at this time.

A set of email questions sent last week Tuesday and again last week Friday to both ASEDA board chairman, ASG Treasurer Uelinitone Tonumaipe’a and vice chairman Attorney General Talauega Eleasalo V. Ale, didn’t garner any responses as of yesterday morning.

Talauega left last week Thursday evening with other ASG officials for a meeting in Washington D.C. with US Department of Interior officials this week followed by a meeting with US Federal Emergency Management Agency (FEMA) officials in Oakland, California. (See Samoa News yesterday for information.)

Government officials tell Samoa News that they believe the main reason for the new proposed bond sale came after the Fono rejected in the last Legislative session, an Administration bill which sought to hike the local investment rate from 17% to 35% with the Retirement Fund.

The bill also had a new proposed provision allowing ASTCA to borrow up to 35% of total Retirement Fund assets for its Hawaiki project.

While the House of Representatives approved the bill, the Senate rejected the measure, with some senators arguing that the Fono needs to see an actuary report — as required by law — for review when it comes to any proposed changes to the Retirement Fund law. There was no report provided to the Senate. 

Some senators also believed that this measure can be submitted again in January during the new 36th Legislative Session, when all necessary reports are provided by both the Administration and the Retirement Fund.

Samoa News notes that ASTCA’s fiscal year 2019 budget of more than $43 million in revenues includes $18.25 million, which ASTCA acting chief executive officer Falaovaoto Sualevai told lawmakers — during budget hearings — is a request to the Retirement Fund, which the Fund has not approved yet.

It was also revealed during budget hearings that the $18.25 million proposal with the Retirement Fund was dependent on Legislative approval of the bill hiking the local investment rate of the the retirement fund from 17% to 35%.

And ASTCA budget documents show that the $18.25 million is to be used as payment for the Hawaiki submarine cable.

The Fono made no changes when it approved the final FY 2019 budget, with ASTCA budget remaining intact. There were questions raised afterwards — not only in the Fono but others in the Lolo Administration — as to how ASTCA would come up with the $18.25 million.

“Perhaps another bond sale is the only avenue at this point to secure this money for ASTCA,” a government official said yesterday, and reminded Samoa News of the importance of Hawaiki in the Administration’s move to boost telecommunication service in the territory, as another way to bring in new industry as well as create new jobs and bring down the cost of internet service.

Samoa News will report next week on other information outlined in the ASEDA proposed 2018 bond document.

BACKGROUND

According to ASTCA’s FY 2019 budget documents, the authority has two recent loans from the Retirement Fund, with the first in October 2016 for $4.25 million and the second in October 2017 of about $6 million. The loan term is 10 years, with interest rate of 8% per annum and the monthly repayment is $117,340.

According to a US Government Accountability report in October last year it was in fiscal year 2015 that the American Samoa government issued a general obligation bond for about $55 million, and in January 2016 a second bond was issued for $23 million.

“Most of American Samoa’s bonded debt outstanding is scheduled to mature by 2035,” according to the GAO’s report, “U.S. Territories: Public Debt Outlook” to US Congressional committees. The proceeds from the sale of the bonds helped fund a number of local infrastructure projects.

Source of bonds repayment comes from various government taxes, as identified in current law. And all revenues collected from these taxes and other revenue sources are deposited in a separate account for the main purpose of repaying the bonds.

GAO points out that it had previously reported that American Samoa relies heavily on the tuna processing and canning industry. “Disruptions in this industry could affect its ability to repay debt,” said GAO.