THE government of Guam’s long-term debt is manageable with lower interest rates “that won’t burden our children as much as before,” according to Gov. Eddie Calvo.
“We’ve turned a new corner. Now your children’s children can grow up in an era when the word associated with government isn’t deficit – it’s trust and reliability,” Calvo said in his weekly address.
GovGuam’s debt restructuring, “disciplined” payments of obligations, and budgeting controls have rebuilt the lenders’ confidence, according to Deloitte & Touche.
The latest audit showed GovGuam ended fiscal 2012 with a bonded debt of $1.08 billion.
Of this amount, $433.4 million comprises debt backed by GovGuam's full faith and credit, with varying annual interest rates between 5 and 7 percent, according to Deloitte’s audit report.
The remaining $644.7 million in debts are revenue bonds payable from and secured solely by the specific revenue sources, Deloitte’s audit report stated.
The three general obligation bonds – 1993 Series A, 2007 Series A and 2009 Series A – were all rated B+/stable by Standard & Poor’s.
These bonds were issued for payment of tax refunds, court-mandated payment of cost of living allowances owed to retirees, health insurance premium payments, and delinquent contributions to the Government of Guam Retirement Fund.
“The critics can say all they want about our successful plan to finance tax refunds on the bond market,” Calvo said. “The fact is, we lowered the interest rate on what was already a debt and frankly, we paid the tax refunds.”
Calvo said deficit elimination “is an historic achievement” and “it’s critical to the survival of government services to you.”
The three general obligation bonds entail an annual debt service of $34 million from 2013 to 2017. It goes up to $170 million between 2018 and 2022 and starts going down in the succeeding years. The annual debt service between 2038 and 2040 would be $75 million.
By then, GovGuam will have paid a total of $922 million in principals and interests for the three general obligation bonds, according to Deloitte’s audit.
Click here to view the report on GovGuam's annual debt for general obligations from FY2013 to FY2040.
The auditing agency said Guam’s overall economic performance throughout fiscal 2012 remained stable; and based on its forecast, the island will see moderate economic growth to level off in 2013 and 2014.
“It took a lot to get to this point,” Calvo said. “I know you’ve been used to hearing a lot of flowery nothings over the years.”