Editor’s note: Chapter 5, with subchapters I through VI, of this title were enacted by PL 5-121. Chapters 1 through 4 were reserved. Title 58 itself was not given a title by PL 5-121, but the chapter title designated reflects the name of the Act.
SUBCHAPTER II
Authorization
SECTIONS
§ 521. Authorization; Validity.
§ 522. The pledge of funds.
§ 523. Bond fund.
§ 524. Committee.
§ 525. Tax free nature of the Bonds.
(1) The FSM is authorized to issue Bonds for the benefit of itself and/or any one or more of its constituent States in one or more series (including refundings), each series to be authorized by the Secretary acting for the committee, following the adoption of the resolution fixing the terms and conditions of the issue and the form of the Bonds or setting forth procedures for such determination.
(2) As specified in the resolution, the Bonds shall be valid general or limited obligations of the FSM, payable from one or more of the following: general funds of the FSM, general funds of any State, Pledged Funds, proceeds of any Credit Enhancement or swap instruments, and proceeds of refunding bonds or other indebtedness. The validity of the Bonds shall not be affected by the validity or regularity of the projects thereby funded. Except as required pursuant to section 522 of this subchapter, no subsequent appropriation will be necessary by the Congress of the Federated States of Micronesia for moneys for payment of the principal of, or interest or premium, if any, on the Bonds. This chapter and the resolution shall constitute the sole and complete authorization for the pledge of such amounts as are pledged by a participating State pursuant to the requirements of section 522 of this subchapter, and for the payment of the principal of, and interest and premium, if any, on the Bonds.
(3) (a) If the Bonds constitute general obligations of the FSM, all Bonds issued in certificate form shall contain on the face thereof a statement to the following effect: “This Bond constitutes a general obligation of the Federated States of Micronesia and the full faith and credit of the Federated States of Micronesia is pledged to the payment of principal of, and interest and premium, if any, on this Bond.”
(b) If the Bonds constitute limited obligations of the FSM, all Bonds issued in certificate form shall contain on the face thereof a statement to the following effect: “This Bond constitutes a limited obligation of the Federated States of Micronesia, payable solely [state sources of repayment]. Neither the taxing power nor the full faith and credit of the Federated States of Micronesia is pledged to the payment of the principal of, or interest or premium, if any, on this Bond.”
Source: PL 5-121 § 6; amended by PL 5-136 § 3.
Cross-reference: The statutory provisions on the FSM Congress are found in title 3 of this code.
(1) Upon the recommendation of the committee as set forth in the resolution or pursuant to procedures established thereby, the President may pledge all or any part of the Pledged Funds to secure payment of the Bonds and any payment to the provider of any Credit Enhancement. The Pledged Funds so pledged shall be made available pursuant to the relevant provisions of title 55 of this code, except that all Pledged Compact Funds included in the pledge shall be paid directly by the United States of America to the Trustee for the benefit of the holders of the Bonds. Any pledge pursuant to the provisions hereof shall be irrevocable and valid and binding from the time such pledge is made and shall be deemed a valid obligation of the Pledged Funds, notwithstanding the provisions of section 220 of title 55 of this code. The Pledged Compact Funds so pledged and thereafter received by the Trustee, or any other Pledged Funds so pledged and thereafter deposited into the Bond Repayment Fund established pursuant to subchapter V of chapter 6 of title 55 of this code, shall immediately be subject to the lien of such pledge without any physical delivery thereof or further act, and the lien of any such pledge shall be valid and binding as against all parties having claims of any kind in tort, contract, or otherwise against the FSM or any of its political subdivisions, irrespective of whether such parties have notice thereof. Neither the resolution nor the Indenture by which a pledge is created need be filed or recorded in the records of the FSM in order to perfect the lien or give notice of the pledge; PROVIDED that the FSM shall give due written notice of the pledge to the United States of America.
(2) The committee shall determine the extent of the pledge, provisions for release of moneys or other assets from the pledge, and other matters relevant thereto, all as evidenced in the resolution or the Indenture; PROVIDED, however, that the committee may not make such a determination nor any recommendation to the President regarding the pledge until it receives from each participating State and, if participating, from the FSM:
(a) A copy of a statute or statutes that:
(i) Identifies the source and amount of funds to be used to secure the borrowing;
(ii) Authorizes, if appropriate, the President to pledge the specified security offered by the participating State, or, if participating, the FSM as security for all financial obligations related to or resulting from the borrowing;
(iii) Authorizes the payment from the specified security offered by the participating State or, if participating, the FSM for the purpose of, and to the extent required, to satisfy all financial obligations attributable to the participating State or, if participating, the FSM related to or resulting from the borrowing;
(iv) Consents to and authorizes, if appropriate, a reduction in the amount of Compact funds received or to be received through the Compact Financial Assistance Fund on behalf of the State, with such reduction being commensurate with the amount of Pledged Compact Funds pledged by the State, and waives all rights to the receipt of such Pledged Compact Funds; and
(v) Authorizes the State to indemnify, hold harmless, and defend any officer or employee of the State who is subjected to any personal liability or accountability by reason of the issuance of the Bonds.
(b) An opinion, addressed to the President, of the Attorney General or the highest legal officer of the participating State or, if participating, the FSM that the statute or statutes provided is or are legally sufficient to meet the requirements set forth in subsection (a) of this section, and that all other necessary legal steps, administrative or otherwise, have been completed by the participating State or, if participating, the FSM in order to make the specified security available, as required pursuant to subsection (1) of this section, directly through the Trustee or through the Bond Repayment Fund established pursuant to subchapter V of chapter 6 of title 55 of this code for the purposes contemplated under this chapter. Such opinion shall be exclusively relied upon only by the President or the committee and no statement or any conclusion therein may be relied upon for any purpose by any other person, corporation or entity.
(3) The pledge to be determined by the committee shall not exceed the sum of the pledges authorized by the participating States or, if participating, the FSM.
Source: PL 5-121 § 7; amended by PL 5-136 § 4.
Editor’s note: The statutory provisions on the President and the Executive are found in title 2 of this code. The statutory provisions on the FSM Congress are found in title 3 of this code.
Subchapter V of chapter 6 (Funds) of Title 55 (Government Finance and Contracts) is on Bond Repayment Fund.
As set forth in the resolution, the proceeds of sale of the Bonds, net of any issuance costs, shall be paid into one or more trust funds with an FSM Fiscal Agent, as determined by the committee, and shall be managed and made available for the distributions and uses as set forth in an agreement regarding Pledged Funds and investment and distribution of Bond proceeds among the National and State governments of the Federated States of Micronesia.
(1) The committee shall consist of five members, who shall have one vote each, including the Secretary or his designee, the Director of Administrative Services of Yap, the Director of Finance of Truk, the Director of the Department of Treasury of Pohnpei, and the Director of Finance and Treasury of Kosrae; PROVIDED, however, that, with respect to the representatives of the States on the committee, the Governor of each State may elect to designate an alternative individual to serve in the place of the relevant State director specified above. Members of the committee shall serve without compensation. The Secretary or his designee shall be the secretary of the committee and may certify its action. The committee, through the Secretary or his designee, shall render reports from time to time to the Federated Development Authority for informational purposes.
(2) Subject to the express provisions of this subchapter II, the committee is authorized to determine, and by resolution shall determine, all matters set forth in this chapter to be determined by the committee; PROVIDED that any payments on the Bonds in any year shall not exceed the Pledged Funds held or to be received by the Trustee in such year; and PROVIDED FURTHER that the Secretary may take any action authorized in this Compact Financing Act, by the resolution or by the Indenture to be taken by him without any further authorization of, or other action by, the committee, unless this Compact Financing Act, the resolution or the Indenture expressly indicates that the committee is required to so authorize or otherwise act.
(3) The committee may adopt the resolution or any other resolution it may be required to adopt (a) by unanimous written consent, or (b) at a meeting of the committee, by an affirmative vote of the Secretary and not less than three of its other members. Presence at any meeting of the committee may be either in person or by conference telephone call during which each member can hear each other member present during such proceedings.
(4) Notwithstanding other provisions of this section, the actions which are required by this Compact Funds Financing Act to be taken by the committee may be taken by the Secretary and the member or members of the committee from one or more States if such State or States determine to borrow funds directly from a financial institution pursuant to this Compact Financing Act, as opposed to a public offering or private placement of Bonds. The actions taken by the Secretary and the member or members representing such State or States shall be deemed to be actions by the committee for all purposes of this Compact Financing Act with respect to such borrowing. All resolutions required to be adopted hereunder and all actions required to be taken hereunder shall be deemed to have been taken by the committee if taken by such member or members and the Secretary.
Bonds and the repayment of the principal of, and interest and 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 FSM or any of its political subdivisions, nor shall the FSM or any of its political subdivisions impose 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 FSM or any of its political subdivisions for purposes of any national, state or local taxation, assessment or levy.
Source: PL 5-121 § 10; amended by PL 5-136 § 6.
Cross-reference: The statutory provisions on Taxation and Customs are found in title 54 of this code.