- 1 of 2
GovGuam total debt now $2.2B
THE government of Guam is immersed in outstanding debts totaling $2.2 billion, of which $1.128 billion is subject to a set ceiling based on the 10 percent aggregate tax value of real property on Guam as of the first quarter of this year, according to the Guam Economic Development Authority’s recently released debt abstract report.
In an April 20 memo to Gov. Eddie Calvo, Revenue and Taxation Director John Camacho said the total appraised value of real property on Guam as of March 2011 was $11.39 billion, hence pegging the debt cap at $1.139 billion.
Since the public debts covered by the borrowing limit have reached $1.128 billion, GovGuam is just $10.69 million shy of hitting the ceiling, GEDA Administrator Karl Pangelinan said. “We’re near it obviously,” he added.
GovGuam’s budget has appropriated $59 million for debt service in fiscal 2012.
Debt service payments will begin climbing to $70 million in 2013, and $77 million in 2014 before peaking at $94 million in 2015, according to GEDA records.
Debt service levels will begin descending every year from $86 million in 2016 to $24 million in 2042. By then, GovGuam will have paid a total of $2.398 billion, records show.
Of the total $2.2 billion debts, $1.117 billion are obligated by revenue bonds, which based on the Guam Supreme Court’s 2006 decision are “not considered public indebtedness” and therefore not covered by the Organic Act-mandated borrowing limit.
“Obligations that are paid from special revenue stream are not considered public indebtedness,” the Attorney General’s Office stated in an opinion dated Oct. 20, 2008, citing the high court’s ruling.
Revenue bonds, according to the AGO, are those secured by special revenues “generated by public improvements.”
According to GEDA’s GovGuam debt abstract, the $1.117 billion revenue bonds include loans acquired by the Guam Power Authority, Guam Waterworks Authority, Guam International Airport Authority, the Judicial Council, Guam Housing Corporation as well as bonds secured by the tobacco settlement fund.
GWA issued a $118 million bond in June 2010, while GPA issued $206.5 million during the same period.
“Bonds payable from non-General Fund revenue sources, such as GPA and GWA, are not subject to the debt ceiling,” Pangelinan said.
General obligations, limited bonds
Covered by the borrowing cap are GovGuam’s general obligation bonds totaling $482 million, and limited obligation bonds amounting to $646.6 million – with a combined value of $1.128 billion.
Citing the Supreme Court decision, the AGO said obligations secured by “specific taxes” that flow into the General Fund were “counted toward the debt ceiling.”
These obligations include loans pledged with Section 30 funds, business privilege, liquid fuel taxes, license fees, and vehicle registration fees, among others.
Among GovGuam’s most recent loan acquisitions included the $235 million bond sold by the Calvo administration in December 2011 for tax refunds and cost of living allowance payments. By the time this bond matures in 2042, GovGuam will have paid $454.9 million in net debt service.
The administration sold an additional bond worth $108.7 million in June of this year to cover the remaining tax refunds for 2011 and health insurance premiums. This bond will mature in 2042 with a net debt service of $205 million.
Both bonds will be paid through business privilege tax collections.
Under the Camacho administration, the largest bond issuances were made in June 2009. One was the $271 million general bond that was used for payments of tax refunds, the court-mandated cost of living allowance and retirement contributions for the Guam Memorial Hospital and the Department of Education; and the other was the $202 million landfill bond backed by Section 30.
Currently pending in the Legislature is Bill 472-31, which proposes a borrowing of $75 million through the Grant Anticipation Revenue Bond (GARVEE) for Department of Public Works projects.
“GARVEE bonds are not subject to the debt ceiling as they are payable from Federal Highway Administration funding,” Pangelinan said.
GovGuam issued Hotel Occupancy Tax bonds in 2011 for “projects benefitting Guam’s tourism industry totaling $55.5 million,” which included an allotment of $27 million for the construction of the Guam Museum," Pangelinan said.
Last year and this year, GovGuam issued new Business Privilege Tax bonds for approved financing to cover $15.7 million for the Department of Land Management building; $21.8 million for Okkodo school expansion; $100 million for Department of Education public schools; $21.6 million for University of Guam Student Services Center & Engineering Annex; and $6 million for GCC Crime Lab and Buildings.
“The HOT bonds and BPT bonds are included in debt ceiling calculations,” Pangelinan said.