by Ken Quintanilla

Guam - Over the last few months, there's been plenty of skepticism and resistance from the Legislature over the Administration's proposal to obtain a bond to pay tax refunds. The hard work has paid off as Guam received its highest bond rating today, which means island residents can expect tax refunds this Christmas.

Adelup can see the light at the end of the tunnel as they intend to pay out tax refunds next month. Their efforts are possible after Business Privilege Tax Bonds were given the highest investment rating in GovGuam history and officials will head to the bond market next week in hopes to bring home an early Christmas holiday gift to taxpayers.

Guam Economic Development Authority administrator Karl Pangelinan said, "We're extremely proud and excited about the news that we got from Fitch, which was a 'A- with a Stable Rating' and that shortly after from Standard & Poor's, which was a 'A with a Stable Outlook'. This was the rating that we were targeting from the get-go."

Although some people thought it was too ambitious, Pangelinan says the ratings are proof that the government is on the right path toward fiscal stability. The bonds will pay $198 million in prior year unpaid tax refunds and up $20 million in owed cost of living allowance to retirees and retirement contributions owed by the Guam Memorial Hospital and the Department of Education. The bonds are secured by a lien on three of the 4% business privilege tax that's levied on goods and services.

"And so with the anticipated debt service, the coverage, what they look at is how many times coverage there is in this particular revenue stream and we have shown that historically and its trending to be eight times the debt service," he said. Pangelinan says officials will market the bonds early next week before they are priced. He's hopeful the bonds will receive a 5-5.5% interest rate, adding, "So the next week and a half is going to be crucial time with us talking to our bond holders, the investment houses that buy Guam bonds to get them comfortable with the credit, and something that they will need clarity on to get comfortable with before they decide to participate in the issuance."

The Calvo Administration is confident that the bonds will be closed by early December, in time to get refunds out to residents in time for Christmas. Acting Governor Ray Tenorio says the Administration is working on getting the last leg of financing for tax refunds and hopes for support to ultimately put the government's debt behind. "To become solvent, to be able to operate the government with the operational funds that are needed so that we're not leaving vendors unpaid for months and sometimes years, so that we're not leaving tax refunds unpaid, as well. These are obligations of our government and we need to operate within our limitations and Governor Calvo is on the right track," he said.

The report from Fitch Ratings noted the Calvo Administration's ongoing efforts to achieve structural balance in the budget with the implementation of a hiring freeze, reductions in the use of power and vehicles, rescinding across the board pay increases and budget retentions for all agencies.

An 'A' rating is investment grade, meaning the Government of Guam has a strong capacity to meet financial commitments but somewhat susceptible to adverse economic conditions and changes in circumstances. "Stable Outlook" means that a rating is not likely to change.

Meanwhile, Governor Eddie Calvo is currently off-island before he prepares to head out again with GEDA to sell the bond next week.