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Government of Guam Business Privilege Tax Update Jay Rojas Administrator (671) 647-4332 x120 [email protected] Tina Garcia Public Finance Manager (671) 647-4332 x121 [email protected]
Government of Guam Business Privilege Tax Update
Jay Rojas Administrator (671) 647-4332 x120 [email protected]
Tina Garcia Public Finance Manager (671) 647-4332 x121 [email protected]
Overview of the Business Privilege Tax (BPT) The BPT is a comprehensive tax on goods, services and the sale of tangible property and one of Guam’s strongest revenue sources
BPT Highlights
§ The BPT is a broad-based island-wide tax that is similar to, but more expansive than, sales taxes in other jurisdictions
§ Historical collection rate 90-97%
§ Guam’s Business Privilege Tax has continued to grow over the last 10 years as Guam’s economy has expanded and diversified
§ Since 2006, Guam’s BPT has grown more than 50%
§ Strong tourism and construction activity have helped contribute to the growth in BPT
§ The BPT continues to be one of Guam’s strongest revenue sources, accounting for approximately 1/3 of the General Fund revenues
§ BPT is locally (not federally) controlled
§ Top 10 BPT taxpayers account for 17% of BPT revenues
§ No single BPT taxpayer accounts for more than 2.5% of BPT revenues
§ The Department of the Navy estimates that the Marine Build-Up and other Department of Defense projects will increase BPT revenue by a combined total of over $100 million from 2018 through 2027 as of April 2014 Socioeconomic Impact Assessment Study (SAIS)
0
50
100
150
200
250
300
2006 2008 2010 2012 2014 2016
($ m
illio
ns)
FYE (9/30)
BPT Collections FY 2006-2016(1)
(1) FY 2016 based on unaudited BPT collections
Retail 43%
Services 24%
Construction 12%
Insurance 9%
Rentals 6%
Other 6%
Source: Guam Department of Administration
BPT Collections by Sector (FY 2015)
(Based on full 4%, not pledged 3%)
Source: Guam Department of Administration, Audited Financial Statements (FY 2006-2015) BBMR (Consolidated Revenue and Expenditure Report Ending Sept. 2016)
51.9% Total Growth
1
The BPT Credit Shows Strong Fundamentals
Revenue Source
§ A 4% tax on business receipts which accounts for approximately 1/3 of General Fund revenues
§ 3% of this 4% is pledged to the BPT Bonds
Legal Structure
§ First lien on pledged BPT revenues § Monthly set-aside of 1/6 interest
and 1/12 principal deposited into bond fund
§ Deposits are funded in advance so that 100% of debt service payments are on deposit three months prior to debt service payment dates
Additional Bonds Test
§ 3.0x MADS for any consecutive 12 month period during the 24 months next preceding issuance
Principal Payment Date
§ January 1 (Series 2011A & 2012B)
§ November 15 (Series 2013C & 2015D)
BPT Credit Overview Outstanding BPT Debt
(as of December 1, 2016)
Series 2011A $235,000,000
Series 2012B 108,700,000
Series 2013C 9,130,000
Series 2015D 410,485,000
Total Outstanding Debt $763,315,000
S&P Rating: A / stable Sources: Government of Guam, S&P Global Ratings
0 20 40 60 80
100 120 140 160 180 200
2017
2019
2021
2023
2025
2027
2029
2031
2033
2035
2037
2039
2041
($ m
illio
ns)
FYE (9/30)
Series 2011A Series 2012B Series 2013C Series 2015D
BPT Debt Service Coverage
Source: Guam Bureau of Budget and Management (BPT Collections as of October 2016)
Trailing 12-Month Collections (3% of the 4%)
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PROMESA
§ On June 30, 2016, the President signed into law the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”)
§ PROMESA establishes a financial oversight and management board only for Puerto Rico.
§ PROMESA defines a “territory” as (A) Puerto Rico, (B) Guam, (C) American Samoa, (D) the Commonwealth of the Northern Mariana Islands, and (E) the United States Virgin Islands
§ The stated purpose of an oversight board is to “provide a method for a covered territory to achieve fiscal responsibility and access to the capital markets” (at present, only Puerto Rico is a covered territory)
§ An earlier version of the Congressional bill that became PROMESA included text providing that, except with respect to Puerto Rico, an oversight board “for a territory is established in accordance with this section only if the Legislature of the territory adopts a resolution signed by the Governor requesting the establishment”
§ That provision is not included in the final enacted version of PROMESA
Action by Congress and the President would be required before an oversight board could be established for any territory other than Puerto Rico
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Debt per Capita (Combined State, Local Gov’t Debt Obligations)
4
Debt per Capita (State and Local Government Finance)
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5
10
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State Local
1 Based on FY 2013 state and local government debt obligations, the most recent information available from the U.S. Census Bureau Sources: U.S. Census Bureau (population estimates, State & Local Government debt for U.S. states and the District of Columbia), FY 2013 Audited Financial Statements (long-term debt outstanding for U.S. territories, as of FYE 2013)
§ Based on U.S. Census Bureau FY 2013 data,1 Guam’s debt per capita (estimated at $6,504 / person) ranks among the lowest combined state and local government debt burden for all 50 U.S. states and territories
§ Guam does not pay federal income taxes to the U.S. Treasury to support the federal debt and has no overlapping tax authorities (e.g., school districts, cities and counties)
Summary
§ The fundamentals of the BPT credit remain strong
§ 3.14x historical MADS coverage1
§ Over 50% growth in BPT since 2006
§ Historical collection rate of 90-97%
§ Low concentration of taxpayers
§ Guam’s economy continues to grow with record tourism and the planned Marine relocation
§ Department of the Navy projects $100 million in additional BPT revenues during the Marine build-up2
§ PROMESA establishes a financial oversight board only for Puerto Rico
1 Based on FY2016 unaudited BPT collections 2 Aggregate total from 2018-2027 as detailed in 2014 SIAS
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Contact Information
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Guam Economic Development Authority
Jay Rojas Administrator
(671) 647-4332 x120 [email protected]
Tina Garcia
Public Finance Manager (671) 647-4332 x121
Please join us for the Invest Guam Symposium February 21 – 24, 2017
Tumon, Guam
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