Guam outlook raised by Moody’s

Moody’s Investors Service raised the outlook on Guam to positive from stable on Thursday.

The outlook is on the Ba1 rating of the territory’s general obligation, special tax rating, and the Ba2 rating on its certificates of participation rating, all of which were affirmed.

The improved outlook stems from Guam’s improved financial position resulting from strong general revenue performance, said Moody’s Lead Analyst Pisei Chea, who attributed it to federal pandemic aid over the last two years.

Starting in February 2022 the island has been given annual advanced federal payments for the territory’s Earned Income Tax Credit and Child Care Credit programs. This amounts to $113 million or 13% of the general fund revenue. These payments are expected to continue indefinitely.

Moody’s rates $22 million of Guam GO bonds, $64 million in COPs, $59 million in hotel occupancy tax bonds, and $278 million in business privilege tax bonds.

Moody’s said its Ba1 issuer rating reflects the territory’s small economy that is heavily reliant on international tourism, a small but improving fund balance, very high long-term liabilities and fixed costs, and,as a positive, strong federal government assistance and military construction activity.

Guam expects to sell general obligation bonds later this year.

The governor and lieutenant governor’s “fiscal discipline has resulted in the elimination of an $83 million general fund deficit when they assumed office for their first term in 2019,” said Lester Carlson, director of the Guam Bureau of Budget and Management Research.

“And now we are in a surplus position for the first time in decades. Governor Leon Guerrero is pleased that Moody’s has recognized this achievement,” Carlson said.

“Guam still has work to do to expand our economy but that is the governor’s primary focus in her second term,” Carlson said. “We worked very hard on the tourism front and have realized the resumption of visitors to our island,” he said, citing efforts to restore tourism from Japan and Korea, a mainstay of the territory’s pre-pandemic economy.

“The full deployment of the 3rd Marine Division from Okinawa to Guam will occur within the next three years and this infusion of 5,000 Marines and their families will be an entrepreneur’s dream with the explosion of our retail customer base,” Carlson said.

“The permanent funding for EITC and CTC from the federal government has assisted our cash flow,” Carlson said.