IN THE old TV program “Dragnet,” Sgt. Joe Friday’s line when anyone tries to snow him over was met with the words: “The facts, just the facts.” Well, despite all the misdirection and attempts to “snow” you on the latest sweetheart deal between the governor and Core Tech here are the facts that you should know:
Fact No. 1. The governor cancelled the lease in June 2011 because the government did not have money for lease payments. On the day the lease was to expire at the end of September 2011, the governor rescinded the cancellation. On the last day of 2011, Gov. Calvo signed the amendment to the lease agreement with Core Tech to continue leasing the former JFK campus in Tiyan. It was as if Santa Claus showed up at Adelup at Christmas with a bag full of money for the lease payments.
Fact No. 2. The old lease gave the government the right to terminate the lease with adequate notice if it did not need the Tiyan facility. The governor’s amendment does not allow the termination of the lease even if the facility is not needed or used. The government must pay the lease payments of $5.65 million every year until 2024. This is a minimum total cost to the government of Guam of almost $70 million!
Fact No 3. The lease payments will be paid by the government of Guam through the issuance of Gross Receipts Tax (GRT) credits. These credits will decrease the government of Guam’s cash collections. Core Tech will simply not pay any GRT taxes they may owe the government of Guam unless they owe more than $5.65 million for the year. More importantly, if Core Tech GRT taxes are less than $5.6 million in any given year, it can assign or transfer these credits to any person or corporation without consideration whatsoever. This almost guarantees the use of these GRT credits and surely guarantees the government of Guam will not receive the more than $5.65 million in GRT taxes every year through 2024.
Fact No. 4. If the governor does not increase tax revenues by $5.65 million, there will be $5.65 million that will have to be cut from government agencies each year. This means cuts to departments such as Public Health, Education, Rev and Tax, and maybe even GPD and GFD, and even more unacceptable to me, income tax refunds to you.
Fact No. 5. The governor’s amendment now includes an option to purchase the more than 50-year-old Tiyan barracks for a total cost of $125 million including paying $1.01 and $1.63 million per year for “insurance and maintenance.” This total cost is part of the amendment and by no means is a calculation of my own.
Fact No. 6. The purchase option amount of $43.5 million at an interest rate of 7.193 percent per annum for 25 years, shall be financed by Core Tech. This is despite the fact that the last borrowing using the GRT guarantee, just like the one given to Core Tech by the tax credits, was below 5 percent per annum.
Fact No. 7. This lease amendment essentially increases the government of Guam’s debt by as much as $70 to $125 million. It is a “bond” disguised as a lease amendment that will further increase the government’s debt, and if no new revenues or cuts in spending occur will increase the deficit for years to come.
Hidden Facts. What remains hidden and unknown is who negotiated this deal on behalf of Core Tech? Who brought this deal to the governor? Who represented the government? The governor’s legal counsel? The chief policy advisor? The governor himself? Why was the Attorney General not included, or the Public Auditor for that matter? Who was watching out for the people of Guam’s interest?
Agreed-to Facts. I completely agree with the governor that the safety of students is paramount and should be achieved at all costs.
But did he have to withdraw the government’s ability to terminate the lease in order to guarantee the students’ and teachers’ safety? Did he have to increase the number of years on the lease from 2019 to 2024? Did he have to guarantee the government of Guam will increase its debt? Did he have to agree to higher interest rates than the government is now paying?
The answer to these questions is plain and simple: NO.
The question then is why?