Senators meet to consider the governor's bond proposal Friday, carrying with them a scathing condemnation of it from their own post auditor.
The report from Campbell Malone, post auditor, was released late Thursday. It concludes that the bond issue is "a very bad idea" and that the loan as structured "represents one in the series of borrowings before collapse."
Gov. Charles Turnbull has asked for authority to implement a complicated loan package to restructure some long-term debt and to provide "much-needed working capital to meet its current obligations."
His bill would authorize bond issues of $180 million and $130 million and tries to provide the government options in structuring the loans.
According to the post audit report, the government shells out about $40 million annually to pay back its long-term debts. The proposed bond package would add another $17 million to that payout each year.
Proceeds from the loan would not go far, either, Malone contends.
"The government is content on floating an aggregate up to $310 million, netting barely $83 million in order to partially pay a minute portion of current obligations, in exchange for a resultant debt service of more than $17 million per annum for 30 years," his report states.
That translates to repayment of $510 million for what is deemed a short-term solution to the territory's financial crisis.
"Again, (overdue) income tax refunds alone exceed $90 million at the last count; not to even mention the over $200 million in retroactive claims by certain government employees," Malone wrote. "This loan proceeds is just a pittance!"
If the government receives the now-pending federal authorization to use any revenue sources for general obligation bonds, then, the report states, in lieu of the "seemingly convoluted" bond proposal under consideration, the government could float a single issue and save itself at least $15 million in closing costs and reduce its monthly debt payments.
However, the report also states that "sound financial management principles dictate that it is totally inadvisable, and indeed foolish, to finance short-term obligations with long-term borrowing."
Malone's report also attacks the Turnbull-James administration, saying its officials "have avoided or delayed major decisions of import to fiscal and economic stimulation and management, and have otherwise squandered the confidence which the investment and consumer community require in order for investment to produce the profits from which the operating revenues and cashflows of the government are derived."