|YSC, Title 13. Taxation & Finance|
Chapter 15: State
Compact Funds Financing
§1501. Short title.
§1504. Pledge of Compact Funds.
§1505. Delegation of Authority to the President of the Federated States of
§1507. Tax free nature of the Bonds.
§1508. Amendment of inconsistent agreements; Disbursement Agreement.
§1509. Payment of costs.
§1510. Agreement of State with holders of the Bonds.
This chapter shall be known and may be cited as the "Yap State Compact Funds Financing Act of 1987".
Source: YSL 2-14, §1, modified.
(a) It is the purpose of this chapter to assist the State to achieve fiscal independence. It is necessary and appropriate that the State, in cooperation with the national government and the other state governments of the Federated States of Micronesia, use all practical means to enhance the benefits derived from moneys payable to the national government and the State pursuant to the Compact of Free Association, and related agreements, with the United States of America by participating in a financing secured by a portion of such Compact funds. The Legislature hereby finds and determines that the financial needs of the State can be met more appropriately if a portion of the State's share of Compact funds is utilized as security for a financing, the proceeds of which may be invested to generate income to increase the amounts the State would otherwise receive, and for other purposes of the State. It is necessary, in order to enjoy the benefits of such financing, that all rights to such pledged Compact funds be surrendered. The irrevocable pledge of such Compact funds for the sole purpose of repaying Bonds or other evidences of indebtedness issued by the national government is hereby acknowledged, with the understanding that any amounts so pledged not required to pay principal of and premium, if any, and interest on the Bonds will be returned to the national and state governments.
(b) It is also the purpose of this chapter to designate the maximum amount of the State's share of Compact funds which may be pledged and used for the costs of a borrowing pursuant to the authority granted by this chapter. The specific amount that may be pledged and used for the costs of a borrowing shall be set by statute.
(c) The method of financing secured by Compact funds acknowledged hereby is in the public interest and serves a public purpose.
Source: YSL 2-14 §2, as amended by YSL 2-71 §1, modified.
As used in this chapter, the following words shall have the meaning given to them in this section, unless the context otherwise requires:
(a) "Act" means this Yap State Compact Funds Financing Act of 1987, as amended.
(b) "Bonds" means the Federated States of Micronesia Bonds issued by the FSM under the National Compact Funds Financing Act and secured by, among other things, pledged Compact funds and investment earnings therefrom. "Bonds" includes notes, other evidences of indebtedness, or obligations to any bondholder, bank or provider of Credit Enhancement.
(c) "Committee" means the committee established in section 524 of the National Compact Funds Financing Act.
(d) "Compact" means the Compact of Free Association between the Federated States of Micronesia and the United States of America, as embodied in the United States of America Public Law 99-239, and related agreements.
(e) "Credit Enhancement" means bond insurance, letters of credit or similar enhancement instruments.
(f) "Financing Program" means any program for borrowing established or permitted by the National Compact Funds Financing Act and this Yap State 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.
(g) "FSM" means the Federated States of Micronesia.
(h) "Indenture" means the indenture, agreement or other instrument pursuant to which the Bonds shall be issued, as approved by a resolution of the committee.
(i) "National Compact Funds Financing Act" or "National Act" means sections 511 et seq. of Title 58 of the Code of the FSM, as amended, and including any amendments that may be adopted hereafter.
(j) "Pledged Compact Funds" means the moneys payable under the Compact irrevocably pledged by the FSM to the payment of the Bonds, which are otherwise payable to the State, identified in section 1504 hereof.
(k) "Resolution" means the resolution or resolutions of the committee authorizing the issuance and sale of the Bonds on the terms and conditions and substantially in the form provided therein and pursuant to procedures provided therein.
(l) "State" means the State of Yap.
Source: YSL 2-14 §3, as amended by YSL 2-71 §2, modified.
(a) The Legislature hereby authorizes the irrevocable pledge of moneys otherwise payable to the State under the Compact so that the State can participate in any program for borrowing or any other financing program established, or permitted, by the National Act, including, without limitation, programs involving public offering or private placement of Bonds or direct borrowing from commercial banks or similar financial institutions. The following amounts are designated as the maximum amounts which may be pledged or used to cover the costs of a borrowing or any financing program, subject to further legislation authorizing the specific amounts which may be pledged and used to cover such costs:
(1) Compact Funds in the following amounts: Section 222(a) Operations: 100%; Section 211(a) Capital Account: 100%; Section 212 CAT Teams: 100%; Section 214 Energy: 100%; Section 216(a)(2) Medical Referral: 100%; Section 217 Inflation Adjustment: 100%; and 100% of any such moneys, as the FSM shall determine, which are administered by the FSM and would otherwise be disbursed for the benefit of the State under Subsections 215(a)(3), 215(b)(3), 216(a)(1), 216(a)(3) and 216(b).
(2) Such additional security from the State's General Fund as may be necessary to protect the national government and any non-participating state against any loss arising in connection with the State's participation.
(b) When the specific sums of money that may be pledged and used to cover the costs of a borrowing have been authorized by statute:
(1) The Governor, the Director of Administrative Services, the Governor's delegate, if any, to the committee, and the Attorney General may perform their functions and duties, as described in the National Act. The Attorney General is specifically authorized to render the legal opinion required by section 522(2)(b) of the National Act.
(2) Without limiting the foregoing, the Governor may authorize the pledge of security necessary to secure the borrowing and satisfy any financial obligations attributable to the State related to, or resulting from, the borrowing and he may also 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, that the Governor may take such actions only with respect to specific amounts allowed by State law.
(3) The Governor may also enter into an agreement or agreements with the FSM Secretary of Finance and any lending institution regarding the disbursement of proceeds of Bonds and earnings thereon or the proceeds of borrowings from commercial banks or similar financial institutions and also regarding the payment of all financial obligations attributable to the State related to or resulting from the borrowing.
(c) To secure the financing program, the State acknowledges that such Pledged Compact funds will be transferred directly by the United States government to a trustee who will hold such funds for the benefit of the holders of Bonds and such funds will be unavailable for use by the State. Proceeds of the Bonds and earnings thereon will be available only as permitted pursuant to the Indenture, and the ability of the State to direct investment of such funds will be limited by the Indenture.
(d) The State hereby consents to and authorizes a reduction in the amount of its share of Compact funds received, or to be received, through the Compact Financial Assistance Fund, with such reduction being commensurate with the amount of Compact funds pledged by the State. The State further waives all rights to receipt of such Compact funds.
(e) As additional security, the State hereby authorizes the deposit of funds other than Pledged Compact funds in a sub-fund of the Bond Repayment Fund established by section 627, Title 55 of the Code of the Federated States of Micronesia.
(f) Without further authorization or appropriation, any appropriate Compact Financial Assistance Fund account of the National Government or the State may be debited for expenses, including trustee fees, associated with the State's Compact Financial Assistance Fund accounts or with the State's borrowing under this chapter.
Source: YSL 2-14 §4, as amended by YSL 2-71 §3, modified.
(a) The Governor shall certify in writing to the President of the Federated States of Micronesia the amounts and sources of Compact funds or other security to be used to secure a borrowing and cover the costs thereof. Any pledge of such moneys identified in the Governor's written certification shall be effective only to the extent set forth in writing. Upon receiving the Governor's written certification, the President of the Federated States of Micronesia is authorized to make an irrevocable pledge of the Compact funds or other security, as specified in the Governor's certification.
(b) The President shall not make any such pledge except to secure a borrowing of funds on behalf of the State.
(c) The President, or his designee, shall certify to the Governor in writing the amount actually so pledged and the amount authorized but not actually pledged. Any funds authorized to be pledged but not actually pledged or used to satisfy such financial obligations shall remain as funds of the State.
Source: YSL 2-71 §4, modified.
(a) The State hereby agrees to indemnify, hold harmless and defend 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, fees, attorneys' fees and expenses, regardless whether a suit is actually brought, arising from or relating to any act or omission directly or indirectly related to matters contained in this Act or the National Act, or related in any way to the establishment or implementation of any financing program or to the repayment of any borrowing under any financing program. This indemnification and hold harmless shall apply, without limitation, to the Attorney General with respect to any opinions or advice which may be required or rendered.
(b) The State shall accept tender of defense upon demand and immediately reimburse any payment of claims previously made by any officer, employee or other agent of the State.
(c) This indemnification and hold harmless shall cover claims which are foreseeable and unforeseeable, whether the act or omission is deemed to be within the scope or outside the scope of employment or responsibility, and whether caused by negligence or recklessness.
(d) This indemnification does not apply to any criminal acts.
Source: YSL 2-14 new §6, created by YSL 2-71 §5, modified.
The Bonds and the repayment of their principal and the interest, premium, if any thereon, and original issue discount and market discount, if any, with respect thereto, shall not be subject to any tax, assessment or levy, now or hereafter imposed, of the State or any of its political subdivisions, nor shall there be any tax, assessment or levy upon the sale or disposition of such Bonds. The Bonds shall be deemed obligations not located within the jurisdiction or legal boundaries of the State or any of its political subdivisions for purposes of any State or local taxation, assessment or levy.
Source: YSL 2-14 §5, as amended by YSL 2-71 §9, modified.
(a) The Governor shall proceed as expeditiously as possible to cause to be amended any agreements between the State, the FSM, and other states of the FSM which may be inconsistent with the purpose of this legislation. It is the intent of the Legislature that to the extent inconsistent the provisions of this Act shall control.
(b) The agreement regarding disbursements of proceeds of the Bonds and earnings thereon presented to the Legislature is hereby approved and the Governor is hereby authorized to execute and deliver the same on behalf of the State as set forth in section 1504(b)(3) of this chapter.
Source: YSL 2-14 §7, as amended by YSL 2-71 §6, modified.
The State's share of costs of issuing the Bonds based upon the State's percentage share of proceeds of the Bonds shall be paid out of the State's share of the proceeds of the Bonds. Such costs shall include:
(a) costs incurred by the FSM prior to the issuance of the Bonds;
(b) costs incurred at the issuance of the Bonds; and
(c) administrative costs after the issuance of the Bonds.
The share of the State of such costs shall be certified by the Public Auditor of the FSM.
Source: YSL 2-14 §8, modified.
The State does hereby agree with holders from time to time of the Bonds as contemplated by this chapter that the State will not limit or alter, or seek to limit or alter, after the issuance of the Bonds, the rights hereby vested and vested pursuant to the Indenture including, without limitation, the irrevocable pledge by the FSM of Pledged Compact Funds, until the Bonds, together with interest and premium, if any, thereon, are fully paid and discharged, provided that nothing herein contained shall preclude such limitation or alteration if and when adequate provision shall be made in accordance with the terms of the Indenture for protection of the holders of the Bonds. The FSM is hereby authorized to make this undertaking for the State in the Bonds and the Indenture.
Source: YSL 2-14 §9, as amended by YSL 2-71 §9, modified.
If any provision of this chapter or the application of this chapter to a particular situation is held invalid, and if this invalidity does not substantially prevent the achievement of the purposes of this chapter, the remainder of this chapter or the application thereof to other situations shall continue in force and effect.
Source: YSL 2-71 §7, modified.