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2021 Bond Series would increase govt debt, according to Rep. Sanitoa

Rep. Larry Sanitoa
… and would require ASG to increase taxes or fees

Pago Pago, AMERICAN SAMOA — After reviewing the American Samoa Economic Development Authority’s (ASEDA) public notice of their plan to issue and sell a 2021 bonds series, Rep. Larry Sanitoa says the bonds would increase the government debt by up to $25 million and maintains his belief that the Fono is explicitly granted authority by the constitution to pass laws appropriating and enabling the spending of public funds.

A “Notice of Bonds To Be Issued”, published in the Samoa News on Monday this week as a paid advertisement, announced that the ASEDA board of directors on Apr. 22 adopted a resolution in which it authorized the issuance and sale of Series 2021 bonds.

The first one is General Revenue Bonds — Series 2021A bond — in an aggregate principal amount not to exceed $21 million.

Revenues collected under 2021A bond will finance any portion of the acquisition and construction of the new Fono building, including demolition, fixtures, furniture, equipment, parking and ancillary facilities, construction of a new high court facility and all related improvements, and a feasibility study on the relocation of the youth and adult correctional facilities — collectively referred to as the “Series 2021 Project”. (See yesterday’s Samoa News online for details.)

“Upon reviewing [the public notice] advertisement and after consulting an expert on bonds, the Series 2021A Bond increases the government’s debt by $21 million to $25 million,” Sanitoa said responding to the Samoa News request for comments on the bond proposal. Additionally, the annual government Debt Service will increase by $2 million to $3 million.

“Realistically, this increase in debt service will require the government to increase taxes or fees — otherwise the funds available for government services will need to be decreased,” he said, and pointed out that while the “ASEDA statute exempts ASG from seeking debt authority for borrowing from the Fono, ASG must include the additional debt service for appropriations.”

“The current arrangement potentially sets up a situation whereby the American Samoa Government incurs the debt but is unable to make the payments if the Fono does not approve the appropriations,” he pointed out.

According to the Tualauta faipule, the 2021A Bond would raise up to $21 million for the specific projects.

However, he argued that the two projects — construction of the new Fono building/offices and conducting a feasibility study to relocate the Tafuna Correctional Facility and the Juvenile Detention Center — “are non-revenue generating – therefore the agencies will not be able to repay the Bonds.”

According to the ASEDA notice, General Revenue Refunding Bonds, Series 2021B Bonds will be issued in an amount not to exceed $10 million for the purpose of refunding ASEDA’s outstanding General Revenue Bonds, Series 2015B; funding a deposit to a debt service reserve fund, if necessary; and paying the costs of issuance of the Series 2021 Bonds.

Sanitoa said the 2021B Bond would raise up to $10 million to refinance the 2015B Bonds that were originally used to finance the Territorial Bank of American Samoa and the Office of Financial Institutions. “The original [2015] Bonds have a coupon rate of 10%. The new bonds will have a substantially lower rate of no more than 6%,” he pointed out.

“It is still my belief the American Samoa Legislature is the only government branch explicitly granted the authority in the Constitution to pass laws appropriating and enabling the expenditure of public funds,” he argued.

Sanitoa, was among three House members, who filed a lawsuit in 2019 against ASEDA boards of directors over the agency’s spending of the $50 million in proceeds from sale of the 2018 bond series without Fono approval.

The High Court on Jan. 6, 2020 dismissed the lawsuit, pointing out — among other things — that plaintiffs “lack standing” in their suit, and the proper venue for the plaintiffs to address concerns regarding provisions of the ASEDA law is through the legislative process, not the court.

The defendants argued that all bond proceeds are exempt from the budgetary process by the Fono.

A Senate approved bill, now pending in the House, would require “prior” authorization from the Fono before ASEDA issues future bonds. ASEDA will also be required, under the Senate bill, to present to the Fono, projects to be paid by the bond proceeds and its plan for repayment prior to issuance of new bonds.