KSC, TITLE 10.  FINANCE
 
 
Chapter 7.  Compact
Fund Financing

Section 10.701.  Definitions.
Section 10.702.  Authority to borrow.
Section 10.703.  Authority of State officials.
Section 10.704.  Delegation of authority to the President.
Section 10.705.  Compact Funds.
Section 10.706.  Indemnification.
Section 10.707.  Taxes.
Section 10.708.  Waiver of sovereign immunity.
Section 10.709.  Alteration of rights.
Section 10.710.  Authorization to debit certain expenses.

      Section 10.701.  Definitions.
       Unless the context clearly indicates otherwise, the following definitions apply to terms used in this chapter:

     (1)  "Bond": any bond, note or other evidence of indebtedness issued under the National Compact Fund 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.

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

     (3)  ["Committee"]: the committee referred to in section 524 of Title 58 of the FSM Code.

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

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

     (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 including, without limitation, programs involving public offering or private placement of bonds or direct borrowing from commercial banks or similar financial institutions.

     (7)  "FSM": the Federated States of Micronesia.

     (8)  "Indenture": any indenture, agreement or other instrument pursuant to which the Bonds shall be issued, as approved by a resolution of the Committee.

     (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.

     (10)  "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.

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

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

     (13)  "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.

     (14)  "Secretary": the FSM Secretary of Finance.

     (15)  "State": the State of Kosrae.

     (16)  "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.

Background
Added by State Law 5-11.

      Section 10.702.  Authority to borrow.
       The State may participate in 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. The specific amount that may be pledged and used to cover the costs of the borrowing is authorized by law.

Background
Added by State Law 5-11.

      Section 10.703.  Authority of State officials.
       When the specific amount that may be pledged and used to cover the costs of borrowing is authorized by law:

     (1)  The Governor, the Director of Department of Administration and Finance, the Governor's delegate, 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)  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 specific amounts allowed by State law.

     (3)  The Governor is also authorized to enter into an agreement or agreements with the Secretary and any lending institution regarding the disbursement of proceeds of Bonds and earnings thereon or the proceeds of borrowing 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.

Background
Added by State Law 5-11.  Subsection (1) was amended by State Law 7-1.

      Section 10.704.  Delegation of authority to the President.
       When the specific amount to be pledged and used to cover the costs of borrowing is authorized by law, 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 including the anticipated costs of borrowing 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 irrevocably pledge 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 irrevocably pledge such other security as may be specified in the Governor's certificate.  The President shall not make any such pledge except to secure a borrowing of funds on behalf of the State.  The pledge shall secures 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.  The President shall certify to the Governor in writing the amount actually so pledged and the amount authorized but not actually pledged.  Any funds that are authorized to be pledged by law but that are not actually pledged or used to satisfy such financial obligations shall remain as funds of the State.

Background
Added by State Law 5-11.

      Section 10.705.  Compact Funds.
       When the specific amount to be pledged and to be used to cover the cost of borrowing is authorized by law, and the Governor has issued a written certification to the President as provided in section 10.704 of this chapter, 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 received or to be received on behalf of the State through the Compact Financial Assistance Fund, with such reduction being commensurate with the amount of Pledged Compact Fund pledged by the State, and irrevocably waives all rights to the receipt of such Pledged Compact Funds.

Background
Added by State Law 5-11.

      Section 10.706.  Indemnification.

     (1)  Recognizing the complexity of any Financing Program pursued under this chapter 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 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 or the National Act, or related to the establishment or implementation of any Financial Program, or to the repayment of any borrowing under any Financial Program.  The State accepts tender of defense upon demand and immediately reimburses any payment of claims by the officer, employee or other agent of the State.

     (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 opinions or advice which may be required or rendered.  This indemnification and hold harmless does not apply to any criminal acts.

Background
Added by State Law 5-11.

      Section 10.707.  Taxes.
       In accordance with the National Act, neither the State nor any political subdivision thereof imposes any tax, assessment or levy on or related to a borrowing under any Financial Program.

Background
Added by State Law 5-11.

      Section 10.708.  Waiver of sovereign immunity.

     (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 within the FSM 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.

     (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 act or the National Act. Except as expressly authorized by subsection (1) 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.

Background
Added by State Law 5-11.

      Section 10.709.  Alteration of rights.
       After the issuance of any Bonds, the State does not limit or alter, or seek [to] limit or alter the rights thereby vested and vested pursuant to the indenture including, without limitation, the irrevocable pledge by the President of Pledged 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 terms 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.

Background
Added by State Law 5-11.

      Section 10.710.  Authorization to debit certain expenses.
       Without further authorization or appropriation, the State approves the debiting of the Compact Financial Assistance Fund account of the State of Kosrae, 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 reasonable expenses, including trustee fees, associated with a borrowing by the State under the National Compact Funds Financing Act.

Background
Added by State Law 5-11.
9XX=pq`~>CYkc啞}T&uf31g-dTP/ ;Τac_Y1QF:2_/x=M)ʌ*>t@.vBV\w[207=ȀS_rT³j Jv"H 0X7FW1gVi"8npŇCp 6QeW 8i FSHdfv1qx)p`5鼪\3C ,PH}@Ẓ>%ML2tyrkW퉗z -n$Ӏ2YڋZ/ ڸTNxGZiJ]\s%5;/bH/㫿Ʉ5ss`t~4V dL,zs!xY=jb-fdS?fHm0X1N4Tgu ?:(pCE"sTA]E$(