Negative outlook on Guam bonds? Adelup's got a ready villain
The Moody's bond rating agency has assigned "a negative outlook" for bonds issued by the Government of Guam and Guam Waterworks Authority revenue bonds, given the impact of President Trump's much trumpeted tax cuts, which have left Guam facing a $67 million deficit for this fiscal year, according to Adelup's numbers.
An Adelup news release quoted Moody's report: “The change in outlook is triggered by the significant budget gap and liquidity pressures resulting from a reduction in Guam's income tax revenues, driven by the enactment of the federal tax cuts in December. Guam's individual and corporate tax rates are tied directly to the federal rates. The most recent estimate is that revenues for the current fiscal year, 2018, will fall short of budget by approximately $67 million or 9.7% of budgeted general fund revenues. While the government has enacted some spending cuts to offset the shortfall, it has not yet adopted tax increases needed to close the budget gap completely. Moreover, as tax withholdings have come in short of budgeted amounts, the government's liquidity has deteriorated rapidly.”
So the bad guy(s) are the U.S. Congress and President Trump? Both parties have been touting the tax cuts as a huge victory.
No, the release cautions, it's the fault of the Guam Legislature, which the governor has constantly called into session in recent weeks and presented with various Adelup-sponsored bills to impose emergency taxes and impose various short term service cuts. Says Adelup, it's the job of the local lawmakers to fix what Washington has wrought.
"Is this a downgrade? If not, then what does it mean? This is NOT a downgrade," the news release thunders. "The negative outlook from Moody’s means that our ratings will be lowered if there is solution to the $67 million shortfall caused by the federal Tax Cuts and Jobs Act of 2017." Governor Calvo seized on the Moody's reporter to bolster his campaign for a response: "'Bills could have easily been passed the last few weeks, but because of legislative inaction, there has been uncertainty, leading to first a negative credit watch from S&P, and now a negative outlook from Moodys,' Governor Calvo stated. 'Yesterday it felt like we were finally getting closer to the passage of a bill that would have covered the $67 million shortfall in revenue for the fiscal year. Having said that, the credit rating agencies and investors only want to see stability, or at the very least, action towards re-gaining stability.'”