Gov. Lolo Matalasi Moliga has submitted to the Fono legislation which seeks to modernize and enhance the bond issuing capability of the American Samoa Economic Development Authority (ASEDA).

The bill was introduced late last week in both the Senate and House but no committee hearings have been scheduled yet on the measure, which the governor says will help move forward the work of ASEDA,  whose board was reconstituted last year.

Since the appointment and confirmation of the new board members, Lolo says, the board has reviewed the government's financing needs and options and other statutory requirements of ASEDA, which was first established by law in 1986. Since that time, there have been "substantial and profound changes in the financial services industry,” he noted.

These changes were largely precipitated by the Global Financial Crisis commencing in 2008, resulting in increased regulatory compliance burdens, and a heightened market awareness of inherent market risks, he said.

Further, markets for municipal bonds have evolved significantly as a result of these developments, and consequently there is a heightened sensitivity to risk and a greater focus on security and steady cash flow to support the issuance of municipal bonds.

The law creating ASEDA was initially intended to focus on project financing, such as the Executive Office Building.

However, the bill’s preamble says the governor and the ASEDA Board have determined that sound financial planning warrants the refinancing of outstanding government debt, owing to the American Samoa Government Employees’ Retirement Fund and the U.S. Department of Interior (the tobacco loan) and financing the payment of the settlement of the Progressive Insurance case judgment (the Laufou fire). Also, at today’s lower rates of interest, refinancing can reduce the government’s overall interest expense and debt service burden, thereby maximizing the government’s revenue streams.

In order to finance the payments of operating expenses of the government, it is necessary to have the authority to issue general obligation bonds, which authority ASEDA does not presently have, it says.

Amending current law to modernize its language will extend to ASEDA the authority to issue general obligation bonds, and ASEDA will have available to it a full range of modern financial tools to enable the government to competitively enter the United States bond and secondary markets in order to finance past, present and future obligations, the bill states.

Furthermore, by amending current law, American Samoa will have available to it the same full range of modern financial tools as other states, territories and municipalities have, enabling them to better manage their debt and to fund new projects and developments over their useful lives, rather than having to “pay as you go” which is necessitated as a result of limited Capital Improvement Project funding on a year to year basis.

Among the major proposed amendments to current law is a provision authorizing the issuance of bonds, and the Authority may issue it’s bonds from time to time without further authorization from the Legislature, subject to the procedures and restrictions cited in the law. Refunding bonds shall be issued by the Authority in the same manner it issues bonds under the provisions of this chapter.

Another proposed amendment says that general obligation revenue bonds issued under the law shall constitute a general obligation of ASG for which the full faith, credit and resources of ASG are pledged for the full and prompt payment of the principal and interest on such bonds as the same shall become due and payable.

In addition, all or any portion of the revenues from income taxes, corporate taxes and excise taxes may be pledged by the Authority to pay and secure the general obligation revenue bonds issued by the Authority.

Also pledged to pay and secure such bonds are revenues from any other source of funds lawfully available to the Authority, to be pledged to bonds for the life of the proposed bonds, including, but not limited to, grants from the Department of the Interior and funds received from the Federal Government to acquire, construct, finance, own, operate or lease a project.