Border Wall Declaration May Hurt Finances of Cash-Strapped Guam

(Bloomberg) -- President Donald Trump’s emergency declaration over a border wall could threaten federal funding for the U.S. territory of Guam, where the military has a major presence in the Asia-Pacific region, Moody’s Investors Service said.

The White House says the declaration allows Trump to divert $3.6 billion from military construction projects for a wall on the Mexican border, which 16 states have sued to block. Trump’s move could threaten about $750 million in funding for Guam, which is in the midst of a multi-year buildup of the military, Guam Congressman Michael San Nicolas has warned.

Such a move would pose a risk to the economy and finances of the territory, which is highly reliant on the military presence and has a junk credit rating, Moody’s analysts said in a report Thursday. Diverting federal funds from Guam could delay the deployment of 5,000 Marines to Guam from Okinawa, which would be a negative for the territory’s credit, Moody’s analysts led by Kenneth Kurtz said in the report.

The $750 million at risk is much more than the $314 million in military construction funding Guam received in fiscal 2018, the rating company noted.

"While all states and territories with significant military construction funding face a loss to finance the border wall, Guam is particularly exposed due to the significance of the military to its economy," the Moody’s analysts said.

Still, it’s not certain Guam would lose any money. The administration hasn’t yet said which funds would be diverted and Democratic lawmakers are seeking to block Trump’s declaration. It could be overturned by the courts, while Moody’s said "it’s unclear" whether the Department of Defense could cancel existing contracts.

Guam had $1.1 billion in bonded debt outstanding at the end of the 2017 fiscal year, according to the territory’s financial report.

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