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CDA authorizes $25M pension obligation bond

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THE Commonwealth Development Authority has adopted a resolution authorizing a $25 million pension obligation bond on behalf of the CNMI government.

It is a special revenue bond, as provided in Public Law 21-4, “to be used to refund general obligation bonds.”  The law also authorizes the pledge of gross revenue taxes or special revenues to pay for the bond.

P.L. 21-4 stated that the pledge of the gross revenue tax to those bonds “may be senior to all other uses.”

CDA Chairman Ignacio L. Perez informed Senate President Victor Hocog and Speaker Blas Jonathan Attao that the CDA board adopted Resolution No. CDA-001-2020 on July 24, 2020.

Perez also provided the Legislature a copy of a POB credit agreement between CDA and the Bank of Guam.

The CDA resolution states: “Pursuant to the Bond Act and the CDA Bond Law, a pension obligation bond, designated as the ‘Commonwealth of the Northern Mariana Islands Pension Obligation Bond, Series 2020A,’ in an aggregate principal amount not to exceed $25,000,000, secured by the full faith and credit of the Commonwealth and additionally secured by the pledge of Business Gross Revenue Taxes as defined and provided in the Credit Agreement, is authorized to be issued by the Authority for and in the name and on behalf of the Commonwealth. The amount and timing of the issuance of the Bond shall be determined by the Chairman of the Board or the Executive Director of the Authority, which determination shall be conclusively evidenced by the execution and delivery of the Bond.”

The POB credit agreement states: “No part of the loan funds disbursed hereunder shall be used for operating expenses of the Commonwealth except as authorized by Article X, Section 10 of the Commonwealth Constitution, and no part thereof shall be made a part of the general revenues of the Commonwealth or commingled therewith. The Commonwealth shall not by legislation enacted subsequent to this Agreement, alter the purposes and permitted uses of the Loan extended hereunder. These covenants are for the benefit of Lender and to assure Lender that the Commonwealth will utilize the Loan Funds hereunder for lawful purposes. Lender shall not be held to account to the Commonwealth, or otherwise, for the application by the Commonwealth of Loan Funds hereunder.”

 

 

 

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