By Mar-Vic Cagurangan
Variety News Staff

DEMOCRATIC senators said yesterday the government of Guam would save millions of dollars in interest payments on the proposed loan agreement with a bankers consortium if it pays $13 million a year for the principal instead of $10 million as proposed by the administration.
The administration is seeking to borrow $123.8 million from the Bank of Guam-led consortium to pay off the $123 million in cost of living allowances that GovGuam owes to 4,000 retirees. It pledges $10 million from the Section 30 funds for repayment of the loan, which is proposed to be paid off in 15 years at an annual interest of 7 percent. The first payment would be made in March 2008.
“The additional $3 million to be taken out of the Section 30 funds is insignificant compared to the savings that the government will realize. We can expect Section 30 funds to increase with military expansion,” Minority Leader Judi Won Pat, D-Malojloj, said.
Section 30 funds refer to the taxes paid by military personnel to the federal government and reimbursed to GovGuam every year.  
The finance and taxation committee, chaired by Vice Speaker Eddie Calvo, R-Maite, is scheduled to hold a public hearing on the administration’s loan proposal, docketed as Bill 23, on Friday.
At a press conference yesterday, Democrats said their proposed amendment to raise the amount of principal repayment from $10 million to $13 million a year would allow the government to save $40 million that would otherwise go to interest payments.
Former Sen. Benjamin Cruz, legal counsel for the Democratic minority, said under the $10 million repayment plan, GovGuam would end up paying nearly $113 million in interest alone by October 2022 and retain a principal balance amounting to $86.6 million.
In the end, “the agreement to borrow $123.8 million would cost our government $236 million before even counting the interest cost of the $86 million loan,” Won Pat stated in a letter to Calvo.
On the other hand, Cruz said, with the Democrats’ $13 million repayment plan, GovGuam would be paying only $77.5 million in interest, while the principal balance would be reduced to $5.97 million. All in all, he said, the government would be paying only a total of $201 million instead of $236 million.
“Under our proposal, we will pay a little more from Section 30 in the beginning, but the succeeding payments and the remaining balance will be easier to manage,” Sen. Rory Respicio, D-Agana Heights, said.
Sen. Judith Guthertz, D-Mangilao, said it would be a lot easier for GovGuam to refinance the remaining principal balance of $5.97 million at the end of the 15-year payment period.
“We’re hoping that the committee chairman will take our suggestion. Part of our responsibility is to see how we can reduce potential costs that the government has to pay,” Sen. David Shimizu, D-Inarajan, said.
Shawn Gumataotao, special assistant to the governor, said the administration welcomes any recommendation from the Legislature.
“What the governor has submitted to the Legislature is a solution to the COLA issue and his option is now before the Legislature,” Gumataotao said.
“We are working closely with Sen. Calvo’s committee to ensure that this proposal gets to the floor. The senators are the policymakers and we welcome any input from them,” he added.