THEY must still be celebrating over there at Adelup today.
Yesterday, the governor’s tax refund bonds didn’t just pass muster, they got the highest rating ever in GovGuam history.
So much for the dire warnings about the bearish state of the bond market and the American economy in general!
Even as U.S. government bonds were getting their worst rating in history, our bonds went the opposite direction and got an unprecedented endorsement from the hardnosed rating agencies.
All those roadshow presentations must have really made an impact, for Standard & Poor’s and Fitch are very sober and conservative rating agencies that cannot be easily swayed.
This is where the governor’s background in the business world proved invaluable.
Due to his previous incarnation as a member of the business community, Calvo knew what rating agencies and financial institutions are looking for when assessing bonds.
Thus, even before the bonds were formally proposed, Adelup already went on a round of house cleaning – initiating a hiring freeze, cutting costs, and streamlining the government of Guam.
This, of course, is music to the ears of Fitch and S&P, which are notoriously fiscally conservative. As a result, it’s looking more likely that Calvo’s bonds would be well-received in the market and we will be getting our refunds just in time for Christmas.
Politically, this makes Calvo look like a saint. Not yet one year in office and he is now poised to do what many administrations have failed to do – give the people’s money back.
I have a suspicion that this is what Calvo was targeting all along. This is certainly a big coup for any politician’s first year in office.
Of course, it helps that the bond offering provides a deferral of principal payments for five years. That means any bad effects resulting from the bond borrowing won’t really be felt until after at least one 4-year Calvo term.
By that time, Calvo is betting on the buildup finally getting back on track and other sources of revenue coming in. In addition, the cost-cutting measures that Calvo initiated would have helped trim, if not eliminate, GovGuam’s perennial deficit.
All these initiatives, plus the other investments that the Calvo administration has been wooing through various trade missions could not only stabilize the economy but lead to another economic boom. If everything clicks in place, a Calvo re-election would be almost a shoo-in.
For the short-term, this also gives Calvo and the Republicans momentum going into next year’s senatorial election.
Remember the bitter debates between Calvo and the Democrats over this same bond? The unprecedented ratings given by Fitch and S&P now seem to have vindicated the governor and the senators who voted in favor of the bond float.
If the refunds are indeed given out by Christmas time, the senators who voted for the bond may have enough goodwill from the people to ride on until the November senatorial election.
The Governor’s Office, in a statement released immediately after the good news issued by the rating agencies, made sure that Calvo’s allies in the bond fight got their due.
“I really want to thank Senators Tony Ada, Frank Blas Jr., Chris Duenas, Judi Guthertz, Sam Mabini, Tina Muña-Barnes, Adolpho Palacios, Dennis Rodriguez Jr., Mana Silva Taijeron and Aline Yamashita for supporting what we proposed to do. They made the right decision, obviously. We just wish the legislative leadership would have authorized a bond that would take care of all tax refunds,” Calvo said.
Note that there are a couple of Democrats in that list, too. And note the pointed dig at the Legislature’s Democratic leadership, referring to the last minute revision made on the administration’s bond proposal.
For now, Calvo and the Republicans are on cloud nine and have the high ground politically.
But November 2012 is still a long way off and the Democrats, who will be choosing new leaders this month, may still pull a surprise.
Remember that the voters of Guam have notoriously short-term memories. By the time the senatorial election comes, all the good feelings brought about by the tax refund bond may very well be gone.