Governor says GovGuam debt amongst the lowest in the nation

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Governor Eddie Calvo says the U.S. GAO report on GovGuam’s debt does not take into account certain things and thus Guam’s per capita debt is actually “among the lowest in the country.”

Guam – According to a release from the Governor’s office the report does not factor in the fact that in the U.S. mainland there are several levels of debt including city and state debt. Guam has only one state level debt and no local debt. The idea is that this changes the way per capita debt is calculated per resident. Also, the municipal finance market measures per capita debt by excluding GWA, GPA and airport bonds. The Governor argues that when these points are applied Guam’s actual debt per capita is one of the lowest in the nation.

The Governor also points out that there are numerous unfunded federal mandates that have added to Guam’s debt. For example, earned income tax credits which, unlike the states, are not paid for by the federal government, the federally required $200 million-dollar closure of the Ordot dump and the opening of the Layon landfill. Calvo says the authors of the GAO report took a more negative outlook on GovGuam’s finances despite the fact that GovGuam has been paying its debts and has received great ratings from municipal bond rating agencies.

READ FULL RELEASE BELOW:

NEWS: Governor calls out federal government in the response to GAO report

Oct. 10, 2017 (Hagåtña) — A recent public debt report on U.S. Territories fails to view territories’ debt accurately, particularly with regard to unfunded federal mandates.

 

This is one of the points the Governor made in response to the draft Government Accountability Office’ U.S. Territories Public Debt Outlook in September. He also pointed out:

  1. In the mainland U.S. there are several levels ofdebt, including city and state. Guam has only “state” level debt and no local debt. (For example, per capita debt for a San Diego resident, if calculated the same as Guam’s, would include the city’s debt, added with California’s debt.) Additionally, federal debt CANNOT be added to our debt.
  2. The Municipal Finance Market measuresdebt per capita by EXCLUDING public enterprise or revenue bonds by Guam Waterworks Authority, Guam Power Authority, and the A.B. Won Pat Guam International Airport Authority. The Municipal Finance Market is the bond investment market where bonds are bought and sold for municipal governments.

When both of the above points are applied, we can see that Guam’s actual debt burden per capita is among the lowest in the country.

 

“This must have hit a nerve because our report received a response from the GAO defending how they compile information,” Governor Calvo stated. “But just as we have to continue to call out the inconsistencies in how a number of federal policies and requirements cripple our economy and our ability to move our island forward, we have to speak out when the federal government also measures our progress in ways that make no sense.”

 

UNFUNDED FEDERAL MANDATES

The report notes that the people of Guam had to take on debt to meet federal mandates and pay for debt or other issues that went unpaid in the years or decades prior to the Calvo Tenorio administration, such as:

  1. Funding the Earned Income Tax Credit that IS NOT reimbursed by the federal government. (EITC for people living in U.S. States is paid by the federal government). In 2004, the territory agreed to pay $60 million over 9 years in settlement of unpaid EITC refunds from 1996, and in September 2006, the territory reached a new settlement replacing the 2004 agreement in which it agreed to pay up to $90 million.
  2. In 2004, U.S. EPA and the Department of Justice filed a consent decree for Clean Water Act, which required we borrow more than $200 million to pay for the closure of the Ordot dump and open Layon Landfill.
  3. Additionally, Guam Airport Authority issued bonds to fund airport upgrades, much of which was required by the federal government.
  4. In 2011 and 2012, the administration, with the consent of the Legislature, which included then-Senator BJ Cruz — took the burden of about $300 million tax refunds owed to the people of Guam going back as far as 2006 and placed it with the bank.

The Governor also calls out the authors of the GAO report, who chose a more negative outlook on Guam’s finances. GovGuam didn’t just see revenues increase over the years, we also have been paying our debt (not having missed any payments is just one of the reasons we have received great ratings from credit rating agencies. The increased revenues meant we were better able to pay our debt – something the report only just touches upon.

 

Some of the debt was taken on because leaders wanted to address the needs of our community. Guam issued revenue bonds between fiscal years 2005 and 2015 to finance infrastructure.

 

Additionally, a 2006 Superior Court of Guam decision determined that GovGuam had to pay for $123.5 million plus interest in past due Cost of Living Allowance. A bond was floated in 2007 to accommodate the total $151.9 million to finance settlement payments, refinance priordebt and fund infrastructure projects.

 

SHARED CONCERN

 

There is a concern reflected by federal officials that Governor and his fiscal team have voiced.

 

“Despite economic growth, we found that Guam faces large fiscal risks related to unfunded pension liabilities and other post-employment benefits that, if unaddressed, may hamper is ability to repay existing debt and increase its need to issue debt,” the report states. (Page 45).

 

In 1995, GovGuam closed the defined benefit plan to decrease liabilities. However, the 33rd Guam Legislature’s then Vice Speaker BJ Cruz along with Sen. Mike San Nicolas and then Speaker Judith Won Pat, created a version of the defined benefit plan that – at the very least opens the door to increasing liabilities. We have estimated it would add about $173 million to the unfunded pension liability.

 

The Governor, however, has reassured investors and credit rating agencies that Guam continues to pay down the unfunded liability. Making regular payments, we anticipate paying off this unfunded pension liability in 15 years.

 

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