By Ben Pangelinan
For Variety

THE recent news out of Washington touting HR 1075, the United States Territories Infrastructure Bond Bank Authorization Act, is perceived by many as good news. The bill proposes to create a bond bank for the territories to access capital for the construction of vital public sector infrastructure projects.
The theory is that the territories will be able to borrow at a reduced interest rate to make federal dollars go farther when financing health, welfare and safety projects such as sewer treatment plants, municipal water supply and treatment facilities, solid waste facilities, public safety equipment and facilities, roads, traffic control devices and other transportation facilities, sidewalks, buried utility line and other streetscape improvements, parks, and other open space or recreational areas.
Many are citing that this is an example of thinking outside the box. If it is, then we need to do more thinking to really get us out of the box or a smaller box because we barely break the boundaries. Let’s take a look at what the bill actually does.
First, the most financially attractive feature of the bill is that all bonds issued by the bond bank will be exempt from federal, state and local taxation. Triple tax exempt as they call it. Where is the advantage for the territories in this? Right now, bonds issued by all of the territories eligible for loans from the bank can issue their own bonds which are also exempt from federal, state and local taxation.
We already have an entity that issues these bonds — GEDCA in Guam, the Commonwealth Development Authority in the CNMI, and their counterparts in the Virgin Islands and American Samoa for general obligation bonds, the only type of bonds authorized to be issued by the bond bank. Is the bond bank only a “super” GEDCA or CDA? We need bigger thinking to get us out of this same box and gain some advantage by going through the bond bank.
They say that the bank can secure better interest rates than the territories on the bonds issued by the bank. I am not sure on what basis this can be concluded from the provisions of the bill. If the bonds issued by the bond bank and loaned to the territories were guaranteed by the federal government, then I can see how it can secure better rates on its bond issues.
However, the bill is clear that this will not be the case. Quoting from Section 10 of the bill, “Any security or debt-financing instrument issued by the infrastructure bank shall expressly state that the security or instrument does not constitute a commitment, guarantee, or obligation of the United States.”
The one new feature that is contained in the bill is that the bond bank can “intercept” federal aid. I presume this means federal grants if the territory defaults on its obligation to the bank to pay off the obligation. This has to be a condition of the debt instrument. Again, this can be done today by the separate territories through what is commonly known as “garvees” or grant anticipation notes. I am not sure what advantage this presents to the territories by the bond bank.
One driving idea that seems to be worthwhile is for the bank to generate additional capital for lending to the territories. This will come from the investments it can make unlike GEDCA, for example, which has no capital to invest and uses all of its income for operating expenses. Of course, this can be changed by local law.
As I said at the beginning, we need to break boundaries to get out of the box on this concept of a bond bank. Next week, I will let you know my thinking behind the bond bank and my conversations with John McCaroll of EPA and David Cohen of the Department of the Interior on this matter.

Ben Pangelinan is a senator in the 29th Guam Legislature and a former speaker now serving his seventh term in the Guam Legislature.
E-mail comments or suggestions to senbenp@guam.net or ctzenben@ite.net.