Unclear and conflicting information over tobacco loan prompts Senate hearing

The status of of the Tobacco loan — including how much the government now owes on its $18.6 million loan from the U.S. government — and the amount of additional revenue received by American Samoa in its share of the national Master Settlement Agreement with the nation’s cigarette makers, were among the issues that surfaced during a Senate hearing last week.

 

The hearing was called by Sen. Laolagi F.S. Vaeao, chairman of the Senate Budget and Appropriations Committee, following concerns from senators over unclear and sometimes conflicting information from the administration regarding the loan, which was one of the three issues senators tackled last Thursday with ASG Treasurer Dr. Falema’o ‘Phil’ M. Pili.

 

As reported by Samoa News on several occasions, American Samoa opted out of receiving its yearly MSA payments in favor of a federal loan — administered by the U.S. Interior Department — for a debt restructure paying off in 2001 a total of $14.3 million in long standing ASG debts and using $4.3 million to implement fiscal reforms, which included the establishment of the Territorial Office of Fiscal Reform.

 

While the territory’s share of the MSA was to pay off the loan, senators were very surprised and concerned when Gov. Lolo Matalasi Moliga told lawmakers in his address in January this year that included in the government long-term debt of around $100 million is the tobacco loan.

 

This is the first time the tobacco loan debt has been included by an administration in ASG’s debt total, resulting in senators asking the Senate leadership as to what happened to the MSA shares meant to repay the loan, and if there is a problem with paying off this loan.

 

Sen. Magalei Logovi’i says information shared by the governor gave some in the Fono and many in the community the impression that there is this outstanding debt with no funds to pay it off, when in fact, this was addressed a long time ago, according to Magalei.

 

During the committee hearing, Pili informed senators the $4.3 million has been paid off, while the balance of the $14.3 million stands at $10.7 million. He assured senators that the MSA shares are being use to pay the loan that matures in 2027, the year when ASG is to make a “balloon payment” of what ever amount is left.

 

However, Pili was quick to point that he needed to review the “balloon payment” again and promised to provide senators with solid information.

 

He also shared that in early 2013, negotiations were carried out on the MSA and American Samoa received a re-adjustment of $2.1 million — of that total about $955,000 continues to go towards repayment of the loan while the balance came to ASG.

 

(Included in the funding source for the FY 2013 supplemental submitted to the Fono in early March last year was $1.3 million in tobacco ‘windfall’ money from the re-adjusted payment. According to the FY 2014 budget document $1.2 million is expected to be received in the current fiscal year.)

 

According to the Treasurer, the next payment is due next month but the actual amount depends on the percent used for the calculation of amounts each state and territory is to get from the MSA.

 

“We are looking at ways to refinance the loan with a lower interest rate because the current loan rate is 6.4%,” he says.

 

Piii also explained that there is another amount — about $6.8 million — of American Samoa’s share sitting in an escrow account and the government has heard that it could be applied towards the loan payment.

 

ASG has been in contact with DOI “to try and advise us as to where this money stands because that’s additional funds for us,” he said, adding that if it’s going to be applied to the remaining balance of the loan, then “we’re home free” on bringing down the outstanding loan amount before the loan matures.

 

As previously reported by Samoa News, the $6.8 million — which is unassigned interest in provision two (2) of the MSA — only surfaced in September 2012 during budget hearings for fiscal year 2013.

 

Pili told a House hearing in March 2013 that the $6.8 million, sitting in an escrow account — in accordance with conditions of the MSA — can be used by DOI to pay the loan and “it will take an act of Congress” to return this money to American Samoa.

 

He says a separate account is in place to deposit these proceeds, and the administration has requested Congressman Faleomavaega Eni’s Office for help in returning this money to American Samo

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