Guam Bond Information

Per Guam Code Annotated (GCA) Title 12, Section 50103(k), the Guam Economic Development Authority (“GEDA”) serves as the central financial manager and consultant for the Government of Guam (“Government”) and those agencies or instrumentalities of the Government requiring financial guidance and assistance.

Such technical assistance by GEDA includes, but is not limited to, obtaining funds through bonds or other obligations, structuring such bond issuances, preparation and dissemination of financial and investment information, including bond prospectuses, development of interest among investment bankers and bond brokers, maintenance of relationships with bond rating agencies and brokerage houses and, generally, acting as the centralized and exclusive financial planner and investment banker for all the agencies and instrumentality’s of the Government.


INTRODUCTION TO GUAM

  • 212 square miles, 3,800 miles west‐southwest of Honolulu, Hawaii, 1,550 miles South‐southeast of Tokyo, Japan and 1,600 miles east of Manila, Philippines
  • Unincorporated territory of the United States
  • Relationship with United States defined by Organic Act of 1950
  • Guam citizens are U.S. citizens
  • Population of 159,358 as of 2010 Census
  • Sovereign entity generally subject to U.S. law (sovereign immunity waived for these bonds)
  • Within jurisdiction of U.S. 9th Circuit Court of Appeals and U.S. Supreme Court
  • GovGuam is only taxing authority on the island (i.e., no cities, counties, school districts, etc.)
  • Governor elected at large every 4 years; unicameral legislature (15‐member Senate, elected at large) elected every 2 years, including with gubernatorial elections
  • One non‐voting representative to U.S. House of Representatives

 


CURRENT RATINGS AND OUTSTANDING DEBT

Guam's Ratings Have Improved Since 2011.


General Fund Obligations

Guam's centralized consolidated debt issuance is reflected in overall debt levels.

  • Debt profile reflects prudent amortization with no back loading of obligations (essentially level debt profile)
  • GovGuam will continue to prudently manage its debt obligations in order to ensure continued improvement in its financial position
  • Responsible debt management and oversight managed through GEDA
  • In 2015, GovGuam achieved $45 million gross savings ($28 million PV) from refunding the 2007A & 2009A G.O. Bonds with new BPT bonds
    • Matched maturity refunding, no extension of debt service
  • Most recently, GovGuam refunded its Section 30 debt for $20 million gross savings ($17.6 million PV)
    • Matched maturity refunding, no extension of debt service


Government of Guam Debt Statement as of March 31, 2017

Debt obligations paid from General Fund sources include General Obligation bonds, Limited Obligation (Section 30) bonds, Business Privilege Tax bonds, COPs and various loans.


Capital Plan and Projected Financing Activity

Capital Plan includes a limited number of potential new money projects.


Debt per Capita (FY 2013)1
  • Based on FY 2013 data, Guam’s debt per capita (estimated at $6,504 / person) ranks among the lowest combined state and local government debt burdens
  • Guam does not pay federal income taxes to the U.S. Treasury to support the federal debt and has no overlapping tax authorities underneath it (e.g., school districts, cities and counties)


PROMESA
  • On June 30, 2016, the President signed into law the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”)
  • PROMESA establishes a financial oversight and management board for Puerto Rico only
  • PROMESA defines a “territory” as (A) Puerto Rico, (B) Guam, (C) American Samoa, (D) the Commonwealth of the Northern Mariana Islands, and (E) the United States Virgin Islands
  • The stated purpose of an oversight board is to “provide a method for a covered territory to achieve fiscal responsibility and access to the capital markets” (at Present, only Puerto Rico is a covered territory)
  • An earlier version of the Congressional bill that became PROMESA included text providing that, except with respect to Puerto Rico, an oversight board “for a territory is established in accordance with this section only if the Legislature of the territory adopts a resolution signed by the Governor requesting the establishment”
    • That provision is not included in the final enacted version of PROMESA

Action by Congress and the President would be required before an oversight board could be established for any territory other than Puerto Rico.


ECONOMY

Guam's Economy Continues on an Upward Path

Guam’s economy performed well over the past decade and is poised for additional growth.

Economic Overview

  • Guam’s GDP measured $5.7 billion in 2015, representing the 12th consecutive year of increasing economic strength
    • GDP has grown over 19% since 2009
    • Private fixed investment has increased 16.5% since 2009
  • Unemployment rate at 4.0% as of March 2016, the latest date for which information is available
    • Down from 13.3% in March 2011
  • CY2016 saw private sector non‐construction jobs increased led by gains in hotels and retail trade
  • Diversification and growth in the tourism markets has resulted from successful trade missions to China, South Korea, Taiwan and other destinations


Guam's Economy Continues to Grow

Guam’s economy has shown steady growth over the past decade and its economy continues to show signs of additional expansion.

Tourism Highlights

  • FY 2016 experienced record visitor arrivals (1.51 million)
    • Up 10.1% compared to FY 2015
    • Growth in targeted market visitor arrivals is strong,
      with Korea up 35.2% and China up 11.4% YoY
  • GovGuam and the Guam Visitors Bureau continue to pursue the strategic vision laid out in the Guam Tourism 2020 Plan of 1,600 hotel rooms
  • Scheduling of WHO, FESTPAC and TPP meetings reflect growing recognition of Guam as a destination for conferences, seminars and meetings
  • Increased access to Chinese visitor market (10‐year, multiuse visa)
  • Increased marketing efforts at Asian trade missions
  • Continued increases in Korean travelers
    • New air service expected to provide capacity for 2,500 additional passengers each month
  • Increase in number of hotel rooms and hotel development
    expected

Construction and Infrastructure Initiatives

  • Recently completed $70 million runway extension at A.B. Won Pat International Airport will lead to expanded long haul flights to Guam
  • GWA to open new $59.6 million Agat‐Santa Rita Wastewater Treatment Plant by March 2017
  • $200 million, 25 MW Solar farm developed by NRG will supply the power needs of 10,000 homes
  • GPA is looking to make an approximate $400 million investment in upgrades to its generation facilities

Military Buildup

  • Signing of Record of Decision (ROD) in late August 2015 is expected to trigger a decade‐long run of military construction projects
  • Marine relocation to Guam is set to cost at most $8.7 billion under the 2016 National Defense Authorization Act

Economic Development Projects

Recently completed projects demonstrate diverse economic development and provide a solid foundation for sustained economic growth.

 


Growth in Tourism Market

Since 2010, visitor arrivals have grown 29% and Guam’s tourism base continues to expand and diversify.


Update on Marine Relocation & DoD Projects

The signing of the Record of Decision (ROD) in August 2015 for the Marine relocation began the process for significant additional military investment in Guam.


GENERAL FUND

Guam's FY 2016 Financials Show an Improving Fiscal Outlook

Government of Guam reduced spending levels to create a balanced budget without adding to the deficit.

  • When comparing actual revenue against the prior year, revenue for GovGuam increased
    • Income Taxes of $343.8 million represent a 6% increase from the previous year, up from $324.4 million in FY 2015
    • Gross Receipts Taxes of $233.9 million reflect a 3% increase compared to the FY 2015 amount of $226.6 million
  • Actual expenditures were 7% less than the authorized level
  • Economy is growing
  • Aggressive tax collections and tax compliance, with tax refunds paid in a timely fashion
  • Imposition of 15% reserves on appropriations


Government of Guam's Pension Management

Guam is keenly focused on managing its pension obligations.

  • Security ratio continues to improve, up from 53.3% in FY 2014 to 55.66% in FY 2015
  • The unfunded actuarial accrued liability decreased from $1.369 billion in FY 2015 to $1.298 billion as of FYE 2015
  • GovGuam’s contribution rate has been declining and is now 27.4%, compared to 30.1% in FY 2010
  • The average annual return on the market value of assets for the last 5 years has been 8.1%
    • GovGuam uses a 7% discount rate
  • An experience study is currently being performed for the period 10/1/2011 – 9/30/2015
  • Guam reformed its pensions in 2016, creating two new retirement plans, known as the DB (Defined Benefit) 1.75 and the Guam Retirement Security Plan
    • New law allows those who wish to retire, to “buy” their years of service based on the actuarial determine amount
    • Contributions for new members begin in January 2018


SECTION 30

Overview of the Section 30 Credit

The Government’s right to receive Section 30 Revenues is granted by Section 30 of the Organic Act and GovGuam has been collecting Section 30 Revenues since 1978.

Section 30 Highlights

Revenue Source

  • All Section 30 Revenues as defined in 48 U.S.C.A. § 1421h

Legal Structure

  • Statutory lien on Section 30 Revenues
  • Government has irrevocably requested that all amounts owed to Guam under 48
    U.S.C.A. § 1421h be remitted to the Trustee
  • Section 30 Revenues are set aside by the Trustee in an amount sufficient to fund interest and principal due on or before November 30 of the next succeeding fiscal year
    • Debt service for following fiscal year funded in full by September 30th of each year

Additional Bonds Test

  • 2.0x the lesser of (i) most recent completed fiscal year revenues or (ii) average of the three most recent completed fiscal year revenues

Principal Payment Date

  • December 1

Composition of Section 30 Revenue

  • All Federal income taxes and customs duties derived from Guam
    • Predominantly paid by federal employees, both civilian and military, as Guam residents generally do not pay federal income taxes and instead pay comparable income taxes directly to GovGuam
  • All Federal taxes paid on articles produced in Guam
  • Proceeds of any other taxes which may be levied by Congress on residents of Guam
  • All quarantine, passport, immigration and naturalization fees

Collection

  • Majority of Section 30 Revenues (income tax component) is received directly from the U.S. Government just before October 1st each year
  • Quarantine, passport, immigration and naturalization fees are collected throughout the year

Section 30 Revenue

Historically, over 90% of the Section 30 revenues are paid by the federal government directly to the Trustee in the form of an estimated lump sum payment each September.


Base Section 30 Revenues Have Shown Strong Growth


Business Privilege Tax

Overview of the Business Privilege Tax (BPT)

The BPT is a comprehensive tax on goods, services and the sale of tangible property with a historical collection rate of approximately 95%.

BPT Highlights

  • The BPT is a broad‐based island‐wide tax that is similar to, but more expansive than, sales taxes in other jurisdictions
  • Historical collection rate 95%
  • Guam’s Business Privilege Tax has continued to grow over the last 10 years as Guam’s economy has expanded and diversified
  • Since 2006, Guam’s BPT has grown more than 50%
  • Strong tourism and construction activity have helped contribute to the growth in BPT
  • The BPT continues to be one of Guam’s strongest revenue sources, accounting for approximately 1/3 of the General Fund revenues
  • BPT is locally (not federally) controlled
  • Top 10 BPT taxpayers account for 17% of BPT revenues
  • No single BPT taxpayer accounts for more than 2.5% of BPT revenues
  • The Department of the Navy estimates that the Marine Build‐Up and other Department of Defense projects will increase BPT revenue by a combined total of over $100 million from 2018 through 2027 as of April 2014 Socioeconomic Impact
    Assessment Study (SAIS)


The BPT Credit Shows Strong Fundamentals

BPT Credit Overview

Revenue Source

  • A 4% tax on business receipts which accounts for approximately 1/3 of General Fund revenues
  • 3% of this 4% is pledged to the BPT Bonds

Legal Structure

  • First lien on pledged BPT revenues
  • Monthly set‐aside of 1/6 interest and 1/12 principal deposited into bond fund
  • Deposits are funded in advance so that 100% of debt service payments are on
    deposit three months prior to debt service payment dates

Additional Bonds Test

  • 3.0x MADS for any consecutive 12 month period during the 24 months next preceding issuance

Principal Payment Date

  • January 1
    (Series 2011A & 2012B)
  • November 15
    (Series 2013C & 2015D)

HOT Bond Credit


Port of Guam

Guam Power Authority

Guam Waterworks Authority

Guam International Airport Authority

Officer In Charge of Construction - Marine Corps Marianas

DOWNLOADS

Guam Credit Ratings as of September 2017
Government of Guam Public Debt Management Plan & Bond Disclosure Policy: as of March 2017
Government of Guam Long-Term Debt Abstract
Guam Disclosure Policy
Government of Guam Business Privilege Tax Update December 2016
Press Release - Military Buildup 4/6/17
GPA Audit FY 2016
GWA Audit FY 2016
GIAA Audit FY 2016
TAF Audit FY 2016
GovGuam Retirement Actuarial Report: as of April 2017
GovGuam FY 2016 Audit
S&P Guam HOT Bond Rating 8/31/2017
S&P GovGuam BPT 8/31/2017
S&P GovGuam GO 8/31/2017

LINKS
Electronic Municipal Market Access (EMMA)
Office of Public Accountability Financial Audits
Consolidated Revenue and Expenditure Report