DRAFT CSC, Title 28.  Finance
 
CHAPTER 9
Medium Term Note Program

1501.  Purpose.
1502.  Definitions.
1503.  Authority to borrow.
1504.  Authority of State Officials.
1505.  Delegation of authority to the President.
1506.  Compact Funds.
1507.  Indemnification.
1508.  Taxes.
1509.  Waiver of sovereign immunity.
1510.  Alteration of rights.
1511.  Authorization to debit certain expenses.
1512.  Relationship to other Laws.

      1501.  Purpose.
     The purpose of this Chapter Act is to authorize the State to borrow funds pursuant to the National Compact Funds Financing Act, such borrowing to be secured by the State. s Pledged Compact Funds.  The specific category and amount of Compact Funds that may be pledged as security shall be as set forth under this Chapter Act, specifically including Sections 1503 and 1512 of this Chapter.

Source:  CSL 193-06, 1 and CSL 2-94-17, 1, modified.

Editor's note:  CSL 193-06 that created this Chapter was signed into law by the Governor on December 24, 1992.

      1502.  Definitions.
     Unless the context clearly indicates otherwise, the following definitions apply to terms used in this Chapter the Act.

     (A. 1)  "Bond": any bond, note or other evidence of indebtedness issued under the National Compact Funds Financing Act, including any evidence of indebtedness for money borrowed from commercial banks or similar financial institutions and any reimbursement obligation to a provider of credit enhancement;

     (B. 2)  "Bond Repayment Fund": the fund created in Section 624 of Title 55 of the FSM Code to provide for the deposit and disbursements of funds pledged by a state government and/or the National Government which participates in a borrowing;

     (C. 3)  "Committee": the committee referred to in Section 524 of Title 58 of the FSM Code;

     (D. 4)  "Compact": the Compact of Free Association between the FSM and the United States of America and its attendant agreements;

     (E. 5)  "Credit Enhancement": bond insurance, letter of credit or similar credit enhancement instruments;

     (F. 6)  "Financing Program": the Medium Term Note Program and any other program for borrowing established or permitted by the National Compact Funds Financing Act and this Chapter Act, including without limitation, programs involving public offering or private placement of bonds or direct borrowing from commercial banks or similar financial institutions;

     (G. 7)  "FSM": the Federated States of Micronesia; other instrument pursuant to which the Bonds shall be issued, as approved by resolution of the Committee;

     (H. 8)  "Indenture": any Indenture, agreement or other instrument pursuant to which the bonds shall be issued, as approved by a Resolution of the Committee;

     (I. 9)  "National Compact Funds Financing Act": or "National Acts": section 511 et seq. of Title 58 of the FSM Code, as amended, and including any amendments that may be adopted hereafter;

     (J. 9)  "Pledged Compact Funds": the amounts payable under the Compact which the President is authorized to pledge to the payment of the bonds following legislative action by the FSM and the State;

     (K. 10)  "Pledged Funds": the pledged Compact Funds and/or other pledged moneys, and investment earnings thereon;

     (L. 11)  "President": the President of the FSM or his lawfully and properly appointed designee;

     (M. 12)  "Resolution": the resolution or resolutions of the Committee authorizing the issuance and sale of Bonds on the terms and conditions, and substantially in the form, approved therein or pursuant to procedures provided therein;

     (N. 13)  "Secretary": the FSM Secretary of Finance;

     (O. 14)  "State": the State of Chuuk; and

     (P. 15)  "Trustee": the FSM fiscal agent appointed as such in the Indenture pursuant to the National Act, and any successors or assigns, who will act as such for the benefit of the holders of the Bonds;.

Source:  CSL 193-06, 2 and CSL 2-94-17, 2, modified.

      1503.  Authority to borrow.
     The State is hereby authorized to participate in a borrowing under the Medium Term Note Program and any other program for borrowing established or permitted by the National Compact Funds Financing Act including, without limitation, programs involving public offering or private placement of bonds or direct borrowing from commercial banks or similar financial institutions.

Source:  CSL 193-06, 3, as amended by CSL 193-16, 1 and CSL 2-94-17, 3.

      1504.  Authority of State Officials.

     (1 A)  The Governor, the Director of the Department of Treasury, or the Governor. s designee, if any, to the Committee, and the Attorney General are authorized to perform the functions and duties described in the National Act.  In the case of the Attorney General, he is specifically Authorized to provide the legal opinion described in the National Act.

     (2 B)  Without limiting the foregoing, the Governor may authorize the pledge of security necessary to secure the borrowing, to satisfy any financial obligations attributable to the State related to or resulting from such borrowing, and to pledge such additional security as may be necessary to protect the FSM Government and any non-participating state against any loss arising in connection with the State's participation in a financing program; provided, however, that the Governor may take such actions only with respect to the specific amounts stated in Section 1512 of this Chapter Act.

     (3 C)  The Governor is also authorized to enter into an agreement or agreements with the Secretary and any leading institution regarding the disbursement of proceeds of bonds and earnings thereon or the proceeds of borrowings from commercial banks or similar financial institutions and regarding the payment of all financial obligations attributable to the State related to or resulting from the borrowing.

Source:  CSL 193-06, 4, as amended by CSL 193-16, 2 and CSL 2-94-17, 4, modified.

      1505.  Delegation of authority to the President.
     When the specific amount to be pledged and used to cover the costs of borrowing is known, the Governor may issue a written certification to the President that specifies the amount and source of funds or other security to be used to secure a borrowing and to cover the costs of borrowing.  When the anticipated project costs and/or the anticipated costs of borrowing is/are less than the amount State law allows to be borrowed, then the amount certified by the Governor may be the lesser amount.  Upon receiving the Governor's certification, the President is authorized to make irrevocable pledge(s) of the amounts of Compact Funds specified in the Governor's certificate (including any investment earnings therefrom) that would otherwise be payable to the State, or irrevocable pledge (s) of other security.  The President shall not make any such pledge except to secure borrowing of funds on behalf of the State. The pledge shall secure payment of the bonds or funds borrowed, costs and expenses and all other financial obligations resulting from or relating to the Financing Program that are not otherwise paid.  The President shall also be authorized to make the necessary payments from the pledged amounts for the purpose of and to the extent required to satisfy all financial obligations attributable to the State related to or resulting from the Financing Program. Any funds that are authorized to be pledged by statute but that are not actually pledged or used to satisfy such financial obligations shall remain as funds of the State.

Source:  CSL 193-06, 5, as amended by CSL 193-16, 3 and CSL 2-94-17, 5.

      1506.  Compact Funds.
     When the specific amount to be pledge and to be used to cover the cost of borrowing is known and the Governor has issued a written certification to the President as provided in Section 1505 of this Chapter Act, and the proceeds of the Financing Program have been actually or constructively received by the State, then the State consents to and authorizes a reduction in the amount of Compact Funds through the Compact Financial Assistance Fund, with such reduction Being commensurate with the amount of Compact funds pledged by the State, and irrevocably waives all rights to the receipt of such Pledged Compact Funds.

Source:  CSL 193-06, 6, as amended by CSL 193-16, 4 and CSL 2-94-17, 6, modified.

      1507.  Indemnification.

     (A. 1)  Recognizing the complexity of any Financing Program pursued under this Chapter Act and the National Act, the State indemnifies and holds harmless all officers, employees or other agents acting for or on behalf of the State from any and all claims, causes of action, demands, losses, costs, or damages including all court costs and attorney's fees, regardless of whether suit is actually brought (hereinafter called "claims" ) arising from or relating to any act or omission directly or indirectly related to the matters contained in this Chapter Act or the National Act, or related to the establishment or implementation of any Financial Program.  The State accepts tender of defense upon demand and immediately reimburses any payment of claims by the officer, employee or agent of the State.

     (B. 2)  This indemnification and hold harmless covers claims that are foreseeable and unforeseeable, whether the act or omission is deemed to be within or outside the scope of employment or responsibility, and whether caused by negligence or recklessness of any degree, or otherwise.  Moreover, without limitation, this indemnification and hold harmless specifically applies to the Attorney General with respect to any opinion or advice which may be required or rendered.  This indemnification and hold harmless does not apply to any criminal acts.

Source:  CSL 193-06, 7 and CSL 2-94-17, 7, modified.

      1508.  Taxes.
     In accordance with the National Act, neither the State nor any political subdivision thereof will impose any tax, assessment, or levy on or related to a borrowing under any Financing Program.

Source:  CSL 193-06, 8, as amended by CSL 193-16, 5 and CSL 2-94-17, 8.

      1509.  Waiver of sovereign immunity.

     (A. 1)  Notwithstanding any other law to the contrary, the State hereby waives its sovereign immunity but only to the extent necessary to permit the National Government or any other State of the FSM to bring an action and execute a judgment as to any assets of the State based on any loss arising in connection with the State's participation in a Financing Program.

     (B. 2)  The State specifically asserts and establishes its sovereign immunity from any other suit, judgment or execution with respect to any matter or action taken pursuant to this Chapter Act or the National Act.  Except as expressly authorized by Subsection (1 A) of this Section or as expressly authorized by other State law, the State does not waive its sovereign immunity regarding the aforementioned matters or actions.

Source:  CSL 193-06, 9 and CSL 2-94-17, 9, modified.

      1510.  Alteration of rights.
     After the issuance of any bonds the State will not limit or alter, or seek to limit or alter, the rights thereby vested pursuant to the indenture including, without limitation, the irrevocable pledge by the President of pledge Compact funds, until the bonds, together with interest and premium, if any, thereon, are fully paid and discharged; provided, however, that nothing herein contained shall preclude such limitation or alteration if and when adequate provision is made in accordance with the term of the indenture for protection of the holders of the bonds.  The FSM is authorized to make this undertaking for the State in the bonds and the Indenture.

Source:  CSL 193-06, 10, as amended by CSL 193-16, 6 and CSL 2-94-17, 10.

      1511.  Authorization to debit certain expenses.
     The Governor is authorized to approve, without further authorization or appropriation, the debiting of the Compact Financial Assistance Fund account of the State of Chuuk, as established by the Agreement on Internal Budget and Finance Procedures under the Compact of Free Association between the National Government and the State Governments of the Federated States of Micronesia, for expenses, including trustee fees, associated with a borrowing by the State under the National Compact Funds Financing Act.

Source:  CSL 193-06, 11 and CSL 2-94-17, 11.

Editor's note:  CSL 193-06, 12, as amended by CSL 193-16, 7, provided an authorization for a borrowing for Chuuk State Tuna Packing and Cannery Projects as follows:

     Section 12.  Authorization to Borrow.  In order to secure such borrowing, the Governor is authorized to authorize the President to make an irrevocable pledge of up to $14,813,000 in future Compact Funds, and any investment earnings thereon that would otherwise be payable to the State Government, PROVIDED, that he must follow the procedures contained in the Compact Funds Financing Act, and PROVIDED FURTHER, that the amount of such pledge shall not exceed the following amounts thereon from Chuuk State. s share of funds under the Compact of Free Association:

Fiscal Year          Compact Account                    Maximum Amount
1994               Sec.  211 (a) Capital Acct.               $  606,000
1995               Sec.  211 (a) Capital Acct.                   702,000
1996               Sec.  211 (a) Capital Acct.                   702,000
1997               Sec.  211 (a) Capital Acct.                   702,000
1998               Sec.  211 (a) Capital Acct.                2,160,000
1999               Sec.  211 (a) Capital Acct.                3,515,000
2000               Sec.  211 (a) Capital Acct.                3,320,000
2001               Sec.  211 (a) Capital Acct.                3,106,000

CSL 193-06, 13, as amended by CSL 193-16, 8, provided for an appropriation and authorization for appropriation as follows:
.
     Section 13.  Appropriation and Authorization for Appropriation.  The sum of $10.5 million which the Governor is authorized to borrow is hereby appropriated to fund Chuuk State's equity share and loan to the  WestPac Joint Venture.  The sum of $4.5 million or so much as may needed is hereby authorized to be appropriated for the Cannery Project. The Governor shall submit a report to the Legislature before September 30, 1993, which shall:

     1)  provide for the full disclosure of the obligations incurred against the sum appropriated by Section 1513, and indicate the status of these funds as of September 1, 1993; and
     2)  indicate the planned use, during the remainder of the fiscal year, of funds not obligated as of September 1, 1993; PROVIDED however, that a supplemental report covering the actual use and obligation of the funds shall be submitted to the Legislature or the appropriate committees thereof within 20 days after the closing of the fiscal year.

CSL 2-94-17, 12, provided an authorization for a borrowing for Chuuk State Tuna Packing and Cannery Projects as authorized under CSL 193-06 as follows:
 
     Section 12.  Authorization to Borrow.  In order to secure such borrowing, the Governor is authorized to authorize the President to make an irrevocable pledge of up to $5,359,198.00 in future Compact Funds, and any investment earnings thereon that would otherwise be payable to the State Government, PROVIDED, that he must follow the procedures contained in the Compact Funds Financing Act, and PROVIDED FURTHER, that the amount of such pledge shall not exceed the following amounts thereon from Chuuk State's share of Funds under the Compact of Free Association:

Fiscal Year          Compact Account                    Maximum Amount
1995               Sec.  211 (a) Capital Acct.                   162,098
1996               Sec.  211 (a) Capital Acct.                   300,800
1997               Sec.  211 (a) Capital Acct.                2,237,300
1998               Sec.  211 (a) Capital Acct.                1,622,950
1999               Sec.  211 (a) Capital Acct.                1,036,050

      1512.  Relationship to other Laws.
     The provisions of this Chapter Act shall apply notwithstanding any contrary provision of the Chuuk State Financial Management Act.

Source:  CSL 193-16, 9 and CSL 2-94-17, 13, modified.