Port of Guam gets the green light to tap agency funds for bond paydown

By Pacific Island Times News Staff

The Port Authority of Guam’s board of directors has unanimously approved a resolution authorizing up to $3.07 million from existing port funds to pay down a portion of the 2018 revenue bond debt, a technical correction aimed at maintaining compliance with the debt service coverage ratio requirement for fiscal year 2025.

“The port is not in financial trouble,” said Rory Respicio, general manager. “The issue is technical, not operational. We are using our own funds to reduce debt and maintain future capital options. The move is proactive, responsible, and strengthens our ability to invest in long-term improvements.”

Respicio explained that the port has met the required 1.25 debt service coverage ratio every year since the first payment under the 2018 revenue bond.

“But each year, the calculation excluded revenues from the crane surcharge, facility maintenance fee and marina operations, even though these are recurring revenues used to support operations and capital improvements,” he said. “We have had to manage around a debt coverage formula that does not reflect our full financial position.”

To manage this imbalance and maintain compliance, the board adopts a defeasance strategy to reduce the amount of debt used in the fiscal year 2025 coverage calculation.

“In fiscal year 2025, that limitation finally reached a point where action is required,” Respicio said. “Without this measure, our projected ratio would drop to 0.85. With this pay down, the ratio is expected to improve to 1.78. This is not about changing the rules, it is about protecting the Port’s financial standing while working within the rules we inherited.”

He added that if those excluded revenue sources had been counted under the 2018 bond indenture, the Port would have consistently exceeded the required ratio.

“The formula leaves out the very revenues we rely on to run and improve the Port,” he said. “It created artificial barriers in our reporting.”

“This structure, which predates the current administration, created technical issues that now require correction through defeasance,” he added. “It is a reminder that well-intended decisions do not always work in practice, especially when they limit flexibility in managing a 24/7 operation like the port.”

Respicio also noted that fiscal year 2025 revenues are trending about 8.4 percent below projections and that this year’s finances reflect several one-time outlays. “These include full replacement value insurance coverage for the first time in 20 years, major capital equipment purchases, and post-typhoon Mawar repairs,” he said. “These were responsible decisions to protect assets and avoid higher costs later.”

The board’s resolution directs the port to deposit $3,019,862.25 into a restricted escrow account for the July 1, debt service payment. Funds will come from available Port cash, unrestricted funds, and a release from the debt service reserve.

The resolution also authorizes $50,000 in costs, including reimbursement to the Guam Economic Development Authority for coordinating the transaction, along with the Bureau of Budget and Management Research, Bank of America Securities and Morgan Stanley & Company LLC.

“This is about maintaining bond compliance today and keeping the door open for future capital borrowing,” Respicio said. “It also shows we are financially disciplined and focused on long-term planning.”

The board also stated its intent to ensure that future bond agreements allow all recurring operational revenues to be counted. This will correct the flaws in the 2018 terms that restrict how the port’s financial strength is measured.

At the board meeting, Respicio also presented the fiscal 2025 mid-year review, which outlined key operational and financial milestones, including strong revenue performance, streamlined spending, and the implementation of systems that support transparency and efficiency.

“The mid-year review is more than a progress report. It’s a cultural shift toward consistent performance and shared accountability,” Respicio said. “We are building systems that work, and we’re seeing the results in how port employees are leading, how our projects are moving forward, and how we are all delivering on our responsibilities to the public and to our federal partners.”

The board also approved several personnel-related measures, including the establishment of new classified positions for Tariff Technician I, II, and III to strengthen tariff monitoring and regulatory compliance, and the abolition of outdated positions of maintenance manager and equipment maintenance superintendent in accordance with the port’s succession plan.