A complaint for declaratory judgment will be filed this week by Tuala-uta Representative Larry Sanitoa on behalf of his constituents against the American Samoa Economic Development Authority over the constitutionality of use of revenue bonds without approval of the legislature,
Sanitoa said in a statement that since January of 2019, he and some of his colleagues have been requesting a comprehensive report on the new 2018 bond series which was issued in December, 2018.
Unfortunately, limited information was provided and therefore, he wrote to the bond advisors George K Braum and Company (GKB) with some specific questions on the status of the bond.
In his July 22 letter Sanitoa said residents of Tuala-uta along with the rest of the territory will be responsible for the bond’s debt service through 2038. They are also concerned about the American Samoa Government’s level of indebtedness which stands at approximately 25% of GDP.
Sanitoa wrote that the US Government Accountability Office (GAO) raised similar concerns in their 2019 update of their US Territories Public Debt Outlook (https://www.gao.gov/mobile/products/gao-19-525).
“There are serious doubts about the legality of this bond issue. We believe the statute delegating debt authority to ASEDA is unconstitutional.”
He cites Article II, Section 24 of American Samoa’s Constitution : “The power of the Government to act for the general welfare of the people of American Samoa, shall never be impaired by the making of any irrevocable grant of special or exclusive privileges or immunities. All general laws or special acts passed pursuant to this section may be amended or repealed.”
Furthermore, significant portions of the proceeds from the Series 2018 Bonds have been disbursed without legislative appropriation, Sanitoa wrote.
He told the bond advisors that most of the un-appropriated bond proceeds went to purchase the American Samoa Spur of the Hawaiki Cable and pay for infrastructure related to it.
“We feel there are significant irregularities with these transactions, First, the American Samoa Telecommunications Authority (ASTCA) sold the Spur to the American Samoa Government Employees’ Retirement Fund (ASGERF) on December 6, 2017 through a Point-to-Point IRU and Leaseback Agreement for $17,000,000, a substantial discount from the $29,750,000 ASTCA paid Hawaiki. Consequently, on the date of the Series 2018 Bond issuance, December 20, 2018, ASTCA and as a result the American Samoa Government no longer owned the dpur.”
Sanitoa also highlighted that the business case for the dpur rests almost entirely upon sales of bandwidth to neighboring Pacific island countries.
He reminded that ASTCA’s financial statements for FY2016 and FY2018, contained a going concern qualification that states, ASTCA has incurred substantial losses from operations in both 2018 and 2017, has negative working capital, and negative cash flows from operations, which raise substantial doubt about its ability to continue as a going concern at March 29, 2019.”
He also pointed out that the ownership of the spur by ASGERF has raised a regulatory issue since the Cable Landing License was issued by the FCC to ASTCA.
Sanitoa said disputed ownership of the Spur would deter any prudent potential subscriber outside the Territory from purchasing capacity. Resolution of this matter could result in the FCC mandating ASTCA to purchase the Spur from ASGERF. Such a transaction would be tantamount to ASTCA purchasing the Spur twice at which point the financial viability of the Spur would truly be in doubt.
The bond advisor’s legal counsel responded that they are not a law firm and therefore could nto answer Sanitor’s inquiry.
With the lack of information Sanitoa said he is filing on behalf of constituents a complaint of declaratory relief against ASEDA over the 2018 bonds.
