The Guam Senate’s vote to chop taxes on companies is a credit score detrimental, Moody’s Scores stated.
Moody’s charges Guam’s basic obligation and enterprise privilege tax bonds Baa3 with steady outlooks
The Senate accepted the two-part lower to the territory’s enterprise privilege tax earlier this week as a part of a vote to override Gov. Lourdes “Lou” Leon Guerrero’s price range for fiscal 12 months 2026, which began Thursday.
The Senate voted to scale back the tax fee to 4.5% from 5% in fiscal 2026 and to 4% in fiscal 2027. The governor needed to maintain it on the 5% fee.
The tax lower in fiscal 2026 is anticipated to price the territory’s authorities about 4% of its complete basic income or $40 million, Moody’s stated Friday. The lower to the second 12 months would roughly double the affect.
“Though the enterprise privilege tax fee rollback doesn’t result in a structural imbalance for the overall fund, it’s nonetheless credit score detrimental contemplating all of Guam’s operations, together with enterprise operations, and particularly Guam Memorial Hospital – the one public hospital and one among solely two civilian hospitals within the territory,” Moody’s stated Tuesday.
“GMH has rising annual working deficits, even with ongoing monetary assist from Guam’s basic fund,” Moody’s stated. “Rising working deficits at GMH would harm the federal government’s budgetary stability ought to extra basic sources be wanted.”
Guerrero vetoed the Senate’s price range in early September to protect the 5% fee, with the objective of utilizing the preserved funds for the hospital.
Earlier this week Guerrero, a Democrat, despatched out an announcement urging the Senate to not override her veto and saying Moody’s had stated it will be credit score detrimental. That very same day the Senate voted 11 to 4, primarily from the assist of Republicans, to override the veto.
Senate Finance Chair Chris Duenas, who voted in favor of the override, instructed The Bond Purchaser “I stood agency in making certain that this price range not solely funds our core providers at report ranges but additionally offers again to the very companies which have stored our financial system afloat… This overridden price range regulation offers the governor extra funding than any administration has ever needed to function the chief department.”
Early this week the governor despatched a invoice to the legislature to attract $40 million from Guam’s basic fund stability for use for the hospital’s vendor payables, insurance coverage protection for employees and components of the capital enchancment plan. The legislature accepted the invoice.
This $40 million is outdoors of the accepted fiscal 2026 price range. The overall fund stability was just lately reported to be $200 million, stated Lester Carlson, director of the Guam Bureau of Finances and Administration Analysis.
The $40 million contribution “is just not a fiscally accountable method to fund vital wants and we can’t maintain this shifting ahead,” Carlson stated. “It’s like wanting in each nook and cranny for funds versus being able to have enough funds by means of the revenues contained within the annual price range. For this reason we strongly disagree with the legislative majority completely decreasing the enterprise privilege tax.”
Guam’s basic fund has been performing nicely and thru August was $74 million forward of price range, Moody’s stated. The rollback of the BPT to 4% doesn’t have an effect on the pledge of revenues that repays the BPT bonds, it stated.
S&P International Scores charges the island’s GO bonds speculative grade BB-minus and its BPT bonds BB, and
