Concerns About Repayment of ASEDA Bonds

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The House Commerce Committee Chairman Rep Larry Sanitoa is seeking information regarding how the projects picked by the American Samoa Economic Development Authority for funding were identified.

Sanitoa says a committee hearing is scheduled for this week and one of the questions is since the sale of the Series A, B and C bonds which netted $78,915,000, what is the rationale that went into the projects proposed for funding and more importantly whether ASG actually affords to pay the ASEDA bonds during the life of these debt services.

The lawmaker says in a message to Committee members the total debt service over the life of these bonds for principal and interest is $149,129,362 at an average annual cost to ASG of over $8 million.

He drew members’ attention to the current debt service budget for 2016 which is $2.5 million and said the basic premise for borrowing funds is the ability to repay them.

Sanitoa said documents recently provided to the House Commerce Committee by ASEDA should generate thoughtful discussions and/or provoke more questions.

He said it’s important to find out ASG’s contingency plan in case of default; and how will government services be impacted.

He asks,”What happens if the canneries close down or goes elsewhere? Is it fair to leave this much indebtedness to future generations,?

Sanitoa said while these Bonds are a done deal, it is critical and vitally important for us lawmakers to understand the details and the effects these bonds will have for American Samoa’s economy and future generations.

The planned House Commerce Committee hearing is also to follow up on the Development Bank of American Samoa‘s finances based on its 2014 audit.

Sanitoa said the committee needs a better understanding of DBAS’ Economic Development loan Program, criteria for business and home loans, and if there are other loan portfolios offered by the bank.

Furthermore, given the recent reports of the DBAS $2 million loan from the Retirement Fund, the committee needs to know DBAS plans for use of this loan for economic development and the repayment loan.

Sanitoa highlights that the DBAS 2014 audit report shows bad debts of $1.3 million in 2013 and an additional $108,551 in 2014.

He said this is significantly high for a small bank and more alarming is the section in the report about loans outstanding to employees, officers, directors and their affiliated companies of $528,742 as of Dec. 31, 2014.

Sanitoa said the Committee needs to ask if low income families are getting the opportunity to apply for small loans of $10,000 to make basic improvements to their homes.

Regarding the DBAS loan from the Retirement Fund, the Tuala-uta Representative points out that a recent actuarial valuation of the Fund showed a loss of $28 million from 2014 to 2015.

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