Guam § 148 - of the Internal Revenue Code of 1986, as amended.

§ 148. of the Internal Revenue Code of 1986, as amended.

That is, ‘yield’ means the annual discount rate which, when

used to discount all payments of debt service on an issue of

bonds to the date of issuance of the bonds, using a semiannual

compounding interval, results in the aggregate present value

of such payments being equal to the re-offering price to the

public of such bonds.

(6) Debt service means the scheduled principal of and

interest on bonds plus fees to be paid for credit enhancement

of such bonds.

(7) Debt Service Savings means the percentage by

which the present value of debt service on refunding bonds,

not including capitalized interest, is less than the present

value of the remaining debt service on the prior bonds

refunded by such refunding bonds. Present value shall be

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calculated for this purpose using the yield on the refunding

bonds as the discount rate.

(8) 1986 Bonds means the Government of Guam

General Obligation Bonds, Series 1986, that are no longer

outstanding.

(9) Section 30 Revenues means the revenues derived by

the government of Guam under 48 U.S.C. § 1421h (§ 30 of

the Organic Act of Guam).

(b) Authorization of Issuance of Bonds. I Maga’lahen

Guåhan is authorized to issue on behalf of the government of

Guam one (1) or more issues of bonds of the government

consisting of refunding bonds, subject to the following

requirements and limitations:

(1) the issuance of the bonds shall not cause a violation

of the debt limitation provisions of 48 U.S.C. § 1423a (§ 11

of the Organic Act of Guam);

(2) all obligation of the government to pay debt service

on, and the redemption price of, the prior bonds being

refunded shall be discharged concurrently with the issuance

of the refunding bonds. Thereafter, the prior bonds shall be

payable solely from and secured solely by an escrow

established for such purpose;

(3) the debt service savings resulting from the issuance

of the refunding bonds shall be not less than three percent

(3%);

(4) the aggregate amount of scheduled debt service on

the refunding bonds allocable to the refunding of the 1989

water bonds shall be, in each year to and including the final

maturity of such refunding bonds, less than the maximum

annual scheduled debt service on the 1989 water bonds, and

the final scheduled maturity date of such refunding bonds

shall be not more than five (5) years after the final scheduled

maturity date of the 1989 water bonds; and

(5) the aggregate amount of scheduled debt service on

the refunding bonds allocable to the refunding of the 1992

highway bonds shall be, in each year to and including the

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final maturity of such refunding bonds, less than the

maximum annual scheduled debt service on the 1992

highway bonds, and the final scheduled maturity date of such

refunding bonds shall be not more than five (5) years after

the final scheduled maturity date of the 1992 highway bonds.

(c) Source of and Security for Payment. The refunding bonds

shall be payable from and secured by the same source or sources

of revenues as the prior bonds refunded by the issue. Any pledge

or lien on revenues or other moneys authorized to be granted with

respect to the prior bonds refunded by the issue is hereby

authorized to be granted with respect to the refunding bonds. I

Liheslaturan Guåhan hereby finds and declares that it is the policy

of the government of Guam that § 30 Revenues shall be and

remain the primary source of payment of any bonds issued to

refund the 1989 water bonds.

(d) Terms and Conditions Determined by Certificate. The

terms and conditions of the refunding bonds shall be as

determined by I Maga’lahen Guåhan by the execution of a

certificate or indenture authorizing the issuance of such bonds.

The certificate or indenture shall contain terms and conditions that

are consistent with this Section, and shall include substantially the

same additional bond tests, rate covenants and other covenants as

were applicable with respect to the prior bonds. The proceeds of

the refunding bonds may be used to fund a bond reserve only if

and to the extent that moneys from any bond reserve for the prior

issue are transferred to the escrow from which the prior bonds will

be paid. Interest on the refunding bonds may be capitalized for a

period not exceeding fifteen (15) months.

(e) Valid and Binding Obligations, Collection of Revenues.

The bonds authorized by this Section shall constitute the valid and

binding obligations of the government of Guam. All officers

charged by law with any duty in the collection of any revenues

from which debt service on the issue is payable shall do every

lawful thing necessary to collect the amount necessary for such

purpose. The validity of any such bonds shall not be affected by

the validity or regularity of any proceedings for the implementa-

tion of the capital improvement projects funded by the prior

bonds.

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(f) Appropriation. The revenues described in Subsection (c)

of this Section are hereby continuously appropriated for the

purposes for which they are pledged.

(g) Waiver of Immunity. Notwithstanding any substantive or

procedural provision of Chapter 6 of Title 5 of the Guam Code

Annotated, the government of Guam waives immunity from any

suit or action in contract on the bonds authorized by this Section,

but does not waive sovereign immunity as to the personal liability

of elected officials and employees of the government of Guam.

(h) Form of Bonds; Covenants; Appointment of Fiduciaries;

Other Related Agreements. The technical form and language of

the refunding bonds, including provisions for execution,

exchange, transfer, registration, paying agency, lost or mutilated

bonds, negotiability, cancellation and other terms, covenants or

conditions not inconsistent with this Section, shall be as specified

in the certificate or indenture executed by I Maga’lahen Guåhan

authorizing the issuance of the bonds. The certificate or indenture

may appoint one (1) or more trustees or other fiduciaries

authorized to receive and hold in trust the proceeds of the bonds

and moneys relating thereto, to protect the rights of bondholders

and to perform such other duties as may be specified in the

certificate. I Maga’lahen Guåhan is also authorized to execute, on

behalf of the government of Guam, any appropriate agreements,

certificates or other instruments relating to the bonds and the sale

of the bonds, including, but limited to, an agreement, certificate or

instrument subordinating the pledge of revenues securing any

other debt to the pledge of revenues securing the refunding bonds.

(i) Authorization for Credit Enhancement. I Maga’lahen

Guåhan is authorized to enter into such contracts or agreements

with such banks, insurance companies or other financial

institutions as I Maga’lahen Guåhan determines are necessary or

desirable to improve the security and marketability of any bonds

authorized by this Section. Such contracts or agreements may

contain an obligation to reimburse, with interest, any such banks,

insurance companies or other financial institutions for advances

used to pay principal of or interest on the issue. Any obligations

under such contract or agreement shall be payable solely from the

same sources as debt service on the refunding bonds is payable,

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and any advance under such agreement, if necessary, shall be

treated as creating a reimbursement obligation issued to refund the

refunding bonds.

(j) No Personal Liability. No employee or elected official of

the government of Guam shall be individually or personally liable

for the payment of any amounts due on any bonds issued under

this Section, or for any other liability arising in connection with

the bonds; provided, however, that nothing in this Section shall

relieve any employee or elected official from the performance of

any ministerial duty required by law.

(k) Approval by Guam Economic Development Authority.

Section 50103(k) of Title 12 of the Guam Code Annotated,

provides that agencies and instrumentalities of the government of

Guam shall issue bonds and other obligations only by means of

and through the agency of the Guam Economic Development

Authority (‘GEDA’). No issue of bonds authorized by this

Section shall be sold until the board of directors of GEDA has

adopted a resolution approving the sale of such issue.

(l) Approval of Terms and Conditions. Said § 50103(k) also

provides that GEDA shall not sell any bond without the approval

of I Liheslaturan Guåhan of the terms and conditions of the

issuance of the bonds. I Liheslaturan Guåhan hereby approves

the terms and conditions of the issuance of the bonds authorized

by this Section, so long as such bonds are structured as provided

by this Act and achieve the savings required by this Act. Upon

issuance of bonds to refund the 1989 water bonds, § 30 Revenues

and other funds held in the bond account for the 1989 water bonds

shall be released pursuant to this Act.

(m) Approval by Guam Public Utilities Commission Not

Required. Section 12004 of Title 12 of the Guam Code Annotated

provides that the Guam Waterworks Authority (‘GWA’) shall not

enter into any contractual agreements or obligations which could

increase rates and charges prior to the written approval of the

Public Utilities Commission. Because debt service on the

refunding bonds issued to refund the 1989 water bonds is expected

to be paid from § 30 Revenues and not from GWA revenues, and

because the refunding bond indenture provisions relating to GWA

revenues are to be substantially the same as such provisions in the

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1989 water bond indenture, the entry by GWA into the refunding

bond indenture is hereby deemed not to increase rates and charges

in and of itself, is hereby authorized and approved, and shall not

be required to be approved by the Guam Public Utilities

Commission.

(n) Variable Rate Bonds and Interest Rate Hedges. Refund-

ing bonds issued to refund the 1989 water bonds may be issued as

bonds bearing interest at a variable rate, and I Maga’lahen

Guåhan is authorized to enter into one (1) or more interest rate

hedging contracts, including, but not limited to, arrangements

commonly known as swap agreements, floors, caps and collars,

which I Maga’lahen Guåhan determines to be necessary or

appropriate to place the obligations of the government of Guam,

as represented by the refunding bonds and such interest rate

hedging contracts, on a basis other than a fully variable rate basis,

but only under the following terms and conditions, which are

applicable in such circumstances in lieu of the requirements of

Paragraphs (3) and (4) of Subsection (b) of this Section:

(1) the initial interest rate hedging contracts, if any must

have an aggregate term of not less than two (2) years;

(2) each year over the longer of the first five (5) years

after the date of issuance of the bonds or the term of any

initial interest rate hedging contracts, the maximum net

annual obligation of the government, as represented by the

refunding bonds and such interest rate hedging contracts,

must be expected, on the basis of the prior ten (10) years

experience with comparable bonds and interest rate hedging

contracts, not to exceed the annual obligation that the

government would have had if the refunding bonds had been

issued as fixed-rate, current-interest bonds meeting the

criteria of Paragraphs (3) and (4) of Subsection (b) of this

Section;

(3) the aggregate principal amount of refunding bonds

outstanding at the later of the end of the first five (5) years

after the date of issuance of the bonds or the end of the term

of any initial interest rate hedging contracts may not exceed

the aggregate principal amount of refunding bonds that

would have been outstanding had the refunding bonds been

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issued as fixed-rate, current-interest bonds meeting the

requirements of Paragraphs (3) and (4) of Subsection (b) of

this Section;

(4) the final scheduled maturity date of such refunding

bonds shall be not more than five (5) years after the final

scheduled maturity date of the 1989 water bonds; and

(5) upon any conversion of the variable rate refunding

bonds to fixed rate, any period during which the fixed rate

bonds are not subject to optional redemption shall be less

than one and one-half (1.5) years.

(o) Permitted Investments. The proceeds of bonds issued by

the government, and any revenues relating to such bonds, may be

invested in, but only in, the types of investments permitted by the

certificate or indenture pursuant to which such bonds are issued.