Ads by Google Ads by Google

Lawmakers voice major concerns with bond bill

Lack of Fono oversight over bonds to be issued under the American Samoa Economic Development Authority (ASEDA) — and the issue of pledging all ASG taxes to the bonds — were two major concerns voiced by both the Senate and House in their respective committee hearings yesterday on the Administration bill, which sets out to amend the current ASEDA statute, a law first created some 20 years ago.

 

Committee hearings got underway yesterday morning as lawmakers reviewed their respective versions of the bill with the current 4th Regular Session of the 33rd Legislature, set to end this Friday.

 

However, the Senate has tabled its version of the bill for further consideration and review, while the House version went through second reading yesterday. A House majority agreed to return the measure to committee so that concerns over the lack of Fono oversight in a provision of the proposed amendment to the ASEDA law can be addressed.

 

HOUSE REVIEW

 

At the House committee hearing, which began around 7:30a.m., Rep. Vui Florence Saulo recalled that in a previous committee hearing, the concern at the time was a provision of the proposed amendments, which state in part that ASEDA “may issue its bonds... from time to time without further authorization from the Legislature, subject to the procedures and restrictions in this chapter.”

 

She said this means there is no Fono oversight when it comes to the issuance of bonds, in accordance with the bill’s amendments. “Fono oversight is needed when it comes to these types of matters,” she said and this was later echoed by other committee members.

 

House legal counsel Nat Savali, who was one of the two witnesses during the hearing, said that the matter raised by Vui was also a concern for the Fono’s legal team when the bill was put together for introduction in both chambers.

 

He said it's a “big concern” when there is no Fono oversight for the issuance of bonds, but cautioned that there are “inherent burdens” if the Fono is given another layer of approval on issuance of bonds.

 

Savali explained that the types of bonds cited in the bill are rated by a financial rating agency and that the higher the rating [for example, if the Rate is A] it means the bond is more secure, with solid funds pledged to it, and the interest rate is lower.

 

He said it's up to the committee to make a decision on the Fono oversight issue, which is a valid concern for the fact that the government needs to be protected. However, he pointed out again that "another layer of approval [by the Fono] might inadvertently drive the interest rate up”.

 

Another concern raised by some committee members is that “all taxes” such as corporate and individual taxes are pledged to repay the bonds.

 

Vice Speaker Talia Fa’afetai Iaulualo, as a member of ASEDA, was the other witness, and he explained that not all revenues from taxes are being pledged, only a a certain percentage. He maintained that the Fono still has oversight on bond issuance, as the Fono appropriates government funds when it comes to the bonds.

 

A 12-page ‘executive summary’ information sheet from the ASEDA board distributed to lawmakers during committee hearings states in part that although pledging the full stream of tax revenues is cited in the bill, the board would only use what is authorized and obligated by the Fono.

 

It says that only 20% to 25% of all tax revenues are utilized by the ASEDA in accordance with proposed amendments to the ASEDA statute.

 

However, a 100% pledge of revenue streams will “provide great confidence to investors” it says, and reiterates that the Fono"retains complete control of the amount of funds allowed to be used” and that the board cannot utilize tax revenue without Fono approval.

 

Several committee members agreed that the bill should be amended to reflect that the Fono still has oversight on bonds issued under ASEDA for refinancing outstanding ASG debts and creating a new revenue stream to pay for new infrastructure projects.

 

SENATE REVIEW

 

During the Senate hearing, several ASEDA board members were present, including ASG Treasurer Ueligitone Tonumaipe’a, who explained the reasons for the proposed amendments. He said the amendments are there to refinance ASG debt, such as the two loans from the ASG Employees Retirement Fund; and to get new revenue for infrastructure projects, such as roads. (See separate story in today’s edition).

 

However, Sen. Laolagi F.S. Vaeao pointed out that the biggest concern for himself, and probably for other senators, is the bill’s amendment which states that ASEDA “may issue bonds from time to time without further authorization from the Legislature”.

 

“If we’re to work together — the Executive and Legislative branches — as requested by the Administration, but without further authorization of the Fono, then I’m skeptical about this matter,” he said. “At the end of the day, there is clearly no Fono oversight when it comes to the bonds issued under the proposed amendments to the law.”

 

Attorney General Talauega Eleasalo Ale, who is not a member of the board but was called by the committee to testify, said that the Fono can make the necessary amendments now or maybe pass the bill now, and next year, make the necessary amendments to ensure Fono oversight.

 

Senate President Gaoteote Tofau Palaie agreed with the need to have Fono oversight, saying the Fono wants to help the administration move forward with this issue but when it comes to money, it has to be very clear on how it's spent.

 

Gaoteote said all taxes are pledged to the bonds issued under ASEDA, but what about the entire government?  He said that millions of dollars from these revenues are already earmarked for ASG's annual budget.

 

Laolagi added that the Fono had just approved the $108 million in local revenues for the FY 2015 budget, which is majority funded by tax revenue collections. “So how is this bond funding to be carried out with the FY 2015 budget already in place?” he said. “We have to address this issue now or face problems in the future.”

 

Commerce Department director Keniseli Lafaele, who is also a board member, explained  that the reason all tax revenues are pledged is to ensure that the bonds receive a lower interest rate. He explained that the 'many resources' pledge for a bond means a higher financial rating for the bond, and lower interest rates.

 

Other senators agreed with concerns raised by Gaoteote and Laolagi, saying the bill needed more work and clarification from the administration. Senators were also in agreement that the issue of pledging tax revenues should be addressed to ensure that only the amounts authorized by the Fono are used by ASEDA.