By Gina Tabonares
Variety News Staff

THE U.S. Supreme Court ruled that Guam cannot borrow any more money, ending the debate over the island’s debt ceiling.
The nine justices of the U.S. Supreme Court reversed the Guam Supreme Court’s July 2003 ruling and determined that Guam’s debt limitation must be calculated according to the “assessed” valuation of property and not “appraised” value of property.
Before discussing the merits of the case, the nation’s highest court ruled that it has jurisdiction over the petition filed by former Attorney General Douglas Moylan, saying that the 90-day period for filing was suspended when the Congress stripped the Court of Appeals jurisdiction over such petitions.
The high court affirmed the argument of Moylan, who blocked the bond borrowing plan of the Camacho administration and the 28th Legislature, questioning the local Supreme Court’s interpretation on the phrase “aggregate tax valuation” in the Guam Organic Act debt limitation provision.
Moylan calculated the debt limitation as 10 percent of the “assessed” valuation of property on Guam but Gov. Felix P. Camacho calculated the debt limitation as 10 percent of the “appraised” valuation.
Guam assesses property at 35 percent of its appraised value and with Moylan’s interpretation, it would result in a much lower debt limit.
Moylan did not sign the governor’s bond borrowing plan, saying that the government had already exceeded its debt ceiling.
According to Moylan, based on his earlier calculation using 2003 figures, the government had over $700 million which could reach $900 million which is way over the assessed value even on the over-inflated real property estimates.
The Guam Supreme Court agreed with the governor and held that the debt limitation was 10 percent of the “appraised” valuation of property in Guam.
The U.S. Supreme Court, however, reversed the local Supreme Court’s ruling, saying that its interpretation agrees with most states’ practice of tying the debt limitations of municipalities to “assessed” valuation.
The federal court declared that the local Supreme Court erred when it ruled that the issuance of bonds would not violate Organic Act of Guam.
The U.S. Supreme Court said that while it agrees that territorial courts should be regarded in matters of purely local concern, it argues that the Organic Act is a federal statute about which the United States should be very much concerned.
The federal court said that the debt limitation provision protects both Guam and the United States from the potential consequences of territorial insolvency.
“This is not a matter of purely local concern. The Organic Act is a federal statute which we are bound to construe according to its terms,” the U.S. Supreme Court said.
It added that the actual market value of property is the only economic index of Guam’s ability to collect property taxes to pay its bills.
“The only figure under consideration that is fixed in the real world, and the only figure that provides a genuine limitation. This was the figure employed or required by Congress in each of the other territories,” the court stressed.
Vindicated
Moylan said the U.S. Supreme Court decision vindicates him and silences his detractors who have been criticizing his move not to approve further government debt.
“I feel vindicated. The public was able to see some truth in what was filled with a lot smoke and mirrors for the last four years. There were several personal and professional attacks on me back then. Now they have proved to be untrue,” Moylan said in a press conference.
He said the latest court decision is a significant one because of the role of money in the lives of Guam people.
“With this decision of our nation’s highest court, leaders now have no choice but to do what they were elected to do--that is to lead…The decision sends a clear message that today’s leaders must solve the problems now and not pass them on to the next generation. Our credit has a limit and we cannot borrow more than we can realistically repay,” Moylan said.
The former attorney general suggested ways to help alleviate Guam’s debt problems, including the budgetary control of the Guam Legislature over autonomous agencies, liquidation of government assets and properties, downsizing of government operations, and selling off autonomous agencies.
He warned that the current line of credit legislation is illegal and in violation of the Organic Act debt ceiling, adding that the only exception or only borrowing that the government can do is through revenue bonds.
Moylan warned the governor that he can be held in contempt if he pushes for his borrowing plan, and hoped that his successor, Attorney General Alicia Limtiaco, would be as vigilant as he was to “uphold the interest of the public.”
Otherwise, he said, vigilant taxpayers can bring necessary actions before the federal court to enforce the latest court decision.
Vanguard
Limtiaco, for her part, said she will ensure that further bond borrowing would take place in accordance with the language of the U.S. Supreme Court decision.
She said any future borrowing would be thoroughly reviewed by the Attorney General’s Office.
“Now that we have these guidelines from the U.S. Supreme Court, we have to recalculate the figures and make sure that we will not exceed our debt ceiling,” Limtiaco told Variety.
She said her financial team will independently study Guam’s debt ceiling, and determine how much the government can borrow.
Reacting to Moylan’s statement, Limtiaco said she can protect the public interest and will make her decision based on her independent evaluation and not based on face value or figures that are fed to her.
“We will look into any calculation that they give but my financial experts will put our calculations together and we will review it independently,” she said.