Guam – Will Gov Guam be able to afford payments on the governor’s proposed $380 million dollar bond borrowing initiative? This is one of the major questions brought up by senators today during the Special Economic Services committee meeting in the legislature’s public hearing room this morning.
The governor has proposed borrowing $380 million dollars on the bond market in order to pay out overdue tax refunds to the people of Guam. Senators are concerned about Gov Guam’s ability to make payments on the loan known as debt service. The proposed bond would create an additional $57 million dollars a year in debt service payments. The governor is hoping that Rev&Tax will complete it’s tax mapping program soon. This program should give Gov Guam a more accurate picture of how much property on Guam is worth which should result in more revenue from property taxes. But how much revenue?
“Well $2 million is the anticipated increase that’s just anticipated…a year… but there’s a difference between taxes and aggregate assessed value,” said Rev&Tax Director John Camacho.
The aggregate assessed value that Camacho is referring to is basically the total value of all property on Guam. The total value of all property on Guam determines the island’s debt ceiling or credit limit. The administration is hoping that Guam’s total property value will increase which will result in an increased debt ceiling which will allow Gov Guam to borrow more money.
However, just as with a bank loan often times the most important factor is your ability to make loan payments. In order to pay the $57 million dollars a year in additional debt service payments Gov Guam will have to make more money. However, Department of Labor Economist Gary Hiles can’t say for sure how much more money Gov Guam can expect in the coming years because of the uncertainty of the buildup. “Of course projections can be made but the certainty that we can rely on those fundings materializing is more speculative,” said Hiles. “So…before we were shooting in the dark, now we’re going to be shooting in the darker?” replied Senator Ben Pangelinan.
Because of this uncertainty, lawmakers are wary of borrowing so much money on the bond market. Vice-Speaker B.J. Cruz was visibly frustrated saying, “If I were the borrower and I were to come to you and I want you to close my loan within the next month and you tell me well I’m talking to Gary and I’m trying to figure out what the growth is or I’m trying to figure out we’re going to put this software in we’re going to do this we’re going to figure this out in the next month it hasn’t happened in the last seven…the bank’s supposed to believe me? Well you know sir I’m looking for a job and I really think I’m going to be able to earn a million dollars. Well you haven’t had a job in the last year and your going to have a million dollars in the next month? Would you give me a loan? Those of you who’ve been in the financial industry know you wouldn’t…you’d throw me out from the third floor of the building.”
Lawmakers were pressing members of the governor’s fiscal team for information so that they can make a decision on whether or not to pass the bond borrowing measure. The budget which includes this bond borrowing measure must be passed by August 30th.
“Well we’re in the last month and you guys have been pushing this for five months and we’re now we have no hard figures on which I can make an informed decision. My heart says I want to pay the tax refunds alright but how am I supposed to vote for it if I don’t have hard figures to know that I’m going to be able to pay it off and then the next year have enough money so that we can keep the operation going and then not fall behind so that two years down the line we’re gonna have another two years of tax refunds that aren’t gonna be able to be paid,” said Cruz.
Paying out all tax refunds will result in a spike in the economy which will mean more money for Gov Guam to pay back the loan, but this spike won’t last and lawmakers are unsure of where the money will come from to make payments on this bond for the next 30 years.