Retirement Fund’s investment in ASTCA could total $35.5M
Pago Pago, AMERICAN SAMOA — American Samoa TeleCommunications Authority’s new proposal of $18.25 million in funds pending with the ASG Employees Retirement Fund is dependent on Legislative approval of an Administration proposed bill seeking to hike the local investment rate of the retirement fund from 17% to 35%.
This is according to information revealed during ASTCA’s fiscal year 2019 budget hearing on Wednesday, where Sen. Tuaolo Manaia Fruean stressed that the recent $17 million from the Retirement Fund is “an investment” in the Hawaiki cable, through ASTCA.
During the budget hearing, ASTCA acting chief executive officer Falaovaoto Sualevai revealed that the $18.25 million — included in ASTCA proposed FY 2019 budget — is a request to the Retirement Fund, which the Fund has not approved yet.
And ASTCA budget documents show that the $18.25 million is to be used as payment for the Hawaiki submarine cable. (See yesterday’s edition for details.)
Tuaolo, vice chair of the Retirement Fund board of trustees, offered an explanation, which links the $18.25 million to the Administration’s proposed measure — sent last week to the Fono — hiking the local investment percentage of the Retirement Fund from 17% to 35%.
He reminded lawmakers that current law allows only 17% of total Fund assets for local investment and the measure would raise that percentage. And if the investment rate is not raised, the Retirement Fund can no long invest more than 17%.
He further stated that during a recent meeting of the Retirement Fund board, the Attorney General explained that “we have exceeded the limit” of 17% for local investment, which includes loans.
Tuaolo said the AG explained that unless the board of trustees increases the investment ceiling, the Retirement Fund can’t investment any more money locally.
He also recalled that the AG told the board, not to be afraid to tell the public the truth and explain to the public this important issue. Tuaolo said he is now providing the explanation to the lawmakers for their understanding.
Some lawmakers, including the Fono leaders, noted their concerns with inclusion of the $18.25 million in the budget proposal while the measure increasing the investment rate has not yet come up for discussion and debate in both chambers.
Lawmakers did acknowledged the importance of the role ASTCA plays in improving telecommunication services and that the Authority needs financial support at this point.
According to ASTCA’s proposed FY 2019 budget, the authority has two recent loans from the Retirement Fund, with the first in October 2016 for $4.25 million and the second was last October of about $6 million. The loan term is 10 year, with interest rate of 8% per annum and the monthly repayment is $117,340.
Responding to a lawmaker’s question Tuaolo made clear that the $6 million, which is a “bridge loan” made last October is separate from the $17 million that the Retirement Fund put in this year — as an “investment”. He stressed that the $17 million is “an investment... not a loan.”
(As noted during the hearing, the $6 million “bridge loan” and $17 million both went towards the Hawaiki cable system.)
Fono Joint Budget Committee co-chair, Sen. Magalei Logovi’i suggested that the issue pertaining to increasing the investment rate be set on the side, and focus questions and discussion on the budget.
The Retirement Fund “is not a loan institution,” said Magalei, a former ASG Treasurer and Budget director in previous administrations.
A recommendation was made by another committee member and others agreed for lawmakers to move on with questions specific to the budget while questions pertaining to the $18.25 million be taken up at a later time.
Rep. Vailoata Eteuati Amituana’i questioned the status of ASTCA payments for the US Rural Utility Services (RUS) loan of $10 million — approved a few years ago that was connected to the $90 million grant money for the BLAST project — and the two Retirement Fund loans ($4.25 million in 2016 and $6 million last year.)
Sualevai said current balance for the RUS loan is $6.4 million and for the Retirement Fund loans, current balance stands at $9 million.
ASTCA budget documents show that the RUS loan is for 10-years with an interest rate of 2.84% per annum while the monthly payment is $80,118. According to the payment plan, the RUS loan should be paid off by the year 2026.
Budget documents also show that the two Retirement Fund loans are expected to be paid off in the year 2027.
With ASTCA’s many and ongoing expenditures including these loans to be repaid, Vailoata recommended that the management refrain from recruiting more employees and to save its cash for pressing expenditures until its financial situation improves.
ASTCA’s budget shows over $4.63 million proposed for personnel cost for 194 staff positions. “Personnel costs represent 24% to 27% of total revenue,” it says and described strategies for reduction of personnel costs.
Among them, overtime is controlled and pre-approved; hiring is based on “critical needs basis”, managers review teams and manage costs; and vacant positions are to be absorbed as possible within divisions.
ASTCA INVESTMENT BILL
The Administration’s bill increasing to 35% the investment capacity of the Retirement Fund “to invest in opportunities in American Samoa and authorizes investing in the Hawaiki” cable was introduced yesterday in the Fono.
The bill also adds a new provision of the law authorizing the Retirement Fund to invest in the Hawaiki cable.
According to budget documents, ASTCA is forecasting a 30% broadband revenue growth in FY 2019, citing Hawaiki cable infrastructure as the driving force.
The ASTCA Financial Statement report — Years Ended Sept. 20, 2017 and 2016 — does not report the $17million investment, as it was done this year — 2018.
The 2016- 17 financial report does say ASTCA’s Long-Term Debt was not in compliance with the long -term agreement with the Rural Utilities Service (RUS), which “requires the maintenance of certain financial ratios and contains restrictions as of Sept. 30, 2017. ASTCA was not in compliance with defined ratios and other contractual restriction as of September 30, 2017.”
In Note 7 of the report, the auditors point out that “effective September 29, 2017, the ASGERF loan was amended to reflect a principal amount not to exceed $9,678,975, payable in equal monthly installments of $117,340 commencing on November 1, 2017, due October 1, 2027, collateralized by real and personal property.”
It adds that “subsequent to year-end, ASTCA received loan proceeds of $6,000,000 related to the amended loan agreement.” According to Note 7, “this additional loan is expected to be a short-term bridge financing agreement associated with the Hawaii cable project, which is in negotiation with ASGERF and the American Samoa Government, to be converted to an equity investment in ASTCA.”
The note to financial statements concludes that “as of the date of the financial statements, negotiations are still in progress with ASG regarding the conversion of debt to equity.”
It should be noted that according to Sen. Tuaolo the bridge loan is a loan, not an investment.