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  • By Mar-Vic Cagurangan

Leon Guerrero unveils economic relief plan in response to COVID-19

Gov. Lou Leon Guerrero is joined by her fiscal team in Adelup during the unveiling of her administration's economic relief plan to address the impact of COVID-19 outbreak on local economy. Photo by Mar-Vic Cagurangan

Gov. Lourdes Leon Guerrero on Monday unveiled a $40-million temporary economic relief package to assist the local community in mitigating the impact of the COVID-19 pandemic, which has paralyzed the travel industry and is threatening to bring the global economy to a standstill.

Guam's volatile economy is largely reliant on tourism and the “viral storm” was projected to have cost the government of Guam $31 million in tax losses resulting from business slowdown since the onset of the COVID-19 outbreak.

The administration's five-point relief package, billed Temporary Economic Assistance and Mitigation (TEAM) Guam Plan, consists of deferment of a fraction of business privilege tax payment, waiver of credit card fees for government customers, small business loan offer, airline rebate and payment plan options for utilities.

While the measures may be temporary, Leon Guerrero said, the relief assistance will be implemented immediately.

“These actions were chosen because they can each provide economic relief without the complexities of the legislative process and we can sustain the TEAM Guam Plan temporarily because our fiscal management and discipline has given us the ability to respond with immediacy and effectiveness,” the governor said.

“Taken together, the TEAM Guam Plan is a comprehensive set of action that will help individuals, families and businesses weather this viral storm,” she added.

Under TEAM Guam Plan, businesses can voluntarily postpone payment of 40 percent of BPT for 90 days without interests or penalties. The tax relief program applies to BPT payments due on April 20, May 20 and June 20. Each period is covered by the 90-day partial payment postponement.

The government of Guam will temporarily absorb 100 percent of the 3.7 percent credit card fees charged to customers for use of credit cards to pay for government taxes and non-tax payments from April 1 to June 30. This fee relief is projected to cost the government between $3 million and $5 million.

The Guam Economic Development Authority will offer up to $50,000 loan, with initial payments deferred for 90 days, to assist small businesses such as tour operators with their cash flow needs.

For airlines, the administration is working with the Guam International Airport Authority to approve a percentage rebate on landing and apron fees.

For residential utility ratepayers, the administration is requesting the Guam Power Authority and Guam Waterworks Authority to offer payment plans for power and water bills.

“Our fiscal discipline team is watching the situation as it develops, and we will take whatever steps are necessary and appropriate to protect our people and their economic well-being,” Leon Guerrero said.

While implementing the economic relief plan, Leon Guerrero said the administration will also reassess the government’s austerity initiatives to mitigate the impact of stagnated revenue stream.

“A recent review of budgetary status shows a potential of up to $10 million that can be directed toward this goal,” according to information sheet from the governor’s office.

The austerity plan, however, does not include freeze-hiring.

“We will hire people as we feel the need for public service. We will continue to hire offers that are needed at Customs and Guam Police Department,” Leon Guerrero said.

As of March 8, the global number of confirmed cases of COVID-19 has surpassed 100 000, with 3,831 reported deaths, according to the World Health Organization.

last month, the Guam Visitors Bureau reported more than 15,000 booking cancellations, resulting in $9.1 million in lost revenues.

Leon Guerrero said actual figures will be calculated based on reduced number of arrivals from February to April.

The government’s fiscal team, she said, assessed the COVID-19’s economic damage according to different scenarios based on projected number of seat cancellations from 100,000 to 500,000 throughout the pandemic period.

Based on average spending of $627 per tourist, a total cancellation of 300,000, for example, would mean $188 million in losses for the local tourism industry.

Leon Guerrero, who has proposed a $1 billion budget for 2021, said the administration is not modifying its revenue projection at this point.

At the legislature, Sen. James Moylan revived his proposal for a BPT rollback from 5 to 4 percent to mitigate the impact of COVID-19 on local small businesses.

Leon Guerrero, however, shrugged off this proposal, saying the TEAM Guam Plan is “a more reasonable approach” to addressing the impact of COVID-19.

Sen. James Moylan

Besides the renewed call for a BPT rollback, Moylan’s Bill 311-35 also proposes a revision of the Dave Santos Small Business Act to provide any small business with gross earnings of under $500,000, a BPT exemption on the first $250,000 of earned income. This provision would place a freeze on the interim exemption benefit provided to businesses, he said.

"While some may argue that this measure would greatly impact the government's collections, the reality is that we are already heading in this direction by remaining status quo,” Moylan said.

“There are already actual stories circulating of reduced work hours in the private sector, which means a reduction in the government's collection of withholding and income taxes. Sales are down across the island, as the tourism industry trickles into benefitting many other industries, hence corporate and BPT taxes will also be impacted."

Moylan said his bill would allow some investment back into these businesses, with the hopes that they would maintain employee hours, employee benefits, or even invest back into their operations, all of which helps stimulate the economy is some way.”

Moylan said the one-point reduction in the BPT alone would result in an almost $30 million impact in the government's coffers.

“Contrary to belief, the reduction for medium sized companies would result in estimates around $5,000 (estimate for a business generating $1 million in gross income) for the six-month period. As for the BPT Exemption benefit, a small business could save an average of around $6,250 during that six-month period,” Moylan said. “While the numbers may not seem significant, this could be the relief in keeping employees on board for forty-hour work weeks, or assuring that benefits are not impacted.”


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