The Port Authority of Guam is projecting a $48-million revenue in fiscal 2021, which is roughly $1 million less than last year’s estimates.
The revenue projection was based on the revenue collected from March 2020 through July 2020 and extrapolated over 12 months, said Rory Respicio, general manager of Port Authority.
Anticipated federal reimbursements have been factored into the revenue forecast, he added.
Respicio said the budget proposal submitted by the Port Authority to the board of directors represents the Port’s “best estimation of the resources, operational, and capital requirements for the upcoming fiscal year.”
“More importantly, this proposed budget builds our financial posture, meeting our operational needs, and exceeding the minimum requirements of the bond raters,” he said. “Ultimately, this proposed budget represents our collective desire to keeping the Port moving forward, even as our island community faces unprecedented challenges created by the Covid-19 pandemic.”
Respicio said the FY19 budget included salaries and benefits that were not budgeted by $2 million due to implementing a 25th market percentile salary.
The Port said “through prudent fiscal management, strong internal controls, and cost containment,” it has managed maintain the initial budget expense figure, absorbing the $2 million shortfall and allocating $3.1 million for past personnel issues.
“Because of these measures, the Port finished FY19 with a net income of $3.5 million,” the Port said in a press release.
The Port went from a loss of $103,000 in FY18 to earning nearly $7.5 million in just one year.
Respicio added that in the face of all the financial challenges the Port experienced in FY19, the agency was able to accomplish a Debt Service Coverage Ratio of 2.3 percent, almost a 100 percent increase as compared to the bond
indenture requirement of a 1.25 percent ratio.
The Port also improved the daily cash on hand from 869 days to 966 days.
The Port said its proposed budget was prepared with a "zero-based budgeting’ mindset, provides fiscal discipline in developing realistic spending plans, and identifies continued potential cost savings.”
Due to the ongoing pandemic, Respicio said the Port’s fiscal team had to take a more intense look at different possible outcomes and then factor the impact from the pandemic into the current cash inflow.
“Our team created three scenarios composed of the revenue numbers on (1) the normal months of the fiscal year (October to July); (2) the months when the Pandemic started worldwide (January to July); and (3) the months when the Pandemic had an impact in Guam (March to July),” Respicio said.
He said the selected revenue projection was the most conservative and was based on the current financial collections, in an economic environment where Guam’s tourism industry is temporarily halted, and without any assumptions made to the impending military buildup construction.
"As you know, these are two of the three factors historically used to make budgetary assumptions for revenue projections. The third determinant factor is federal grants and aide deposited into our island’s economy, currently totaling $1.5 billion,” Respicio said.
The general manager said the zero-based budgeting process started in July and was done in collaboration with all of the agency division heads using a bottom-up approach which allowed each division to submit its budget request, followed by one-on-one sessions to deliberate their respective budget submissions.
The initial phase was led by Luis R. Baza, deputy general manager for Administration and Finance, and supported by Jojo Guevara, Financial Affairs controller, Francine Rocio, HR administrator, and Vince Bamba, budget analyst.
In formulating the budget, the Port said its team took stock of the Port’s current fiscal health and other considerations and challenges, all of which will have a budgetary impact for the upcoming fiscal year.
“Although our team was able to decrease the overall request by $5.6 million, unfortunately, it would have resulted in a net negative income of $537,109 and place our DSCR to 1.22 percent,” Respicio said.
“Additional budget cuts were made to ensure that the final numbers resulted in a positive net income and accomplished a debt service coverage ratio that is within the minimum condition set by the Port’s bond rating agencies.”