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The U.S. Supreme Court on March 27 issued the following decision: The justices decided unanimously that the Territory of Guam must calculate its borrowing limit based upon the assessed value of property in the territory, not on the appraised value. Limtiaco v. Camacho, No. 06-116. In 2003, Guam lacked sufficient revenues to pay its obligations. The Guam Legislature authorized the governor to issue bonds worth approximately $400 million. The governor signed the new legislation. However, under Guam law, Guam’s attorney general must review and approve all government contracts prior to their execution. The attorney general refused to approve the bond contracts, arguing that issuance of the bonds would raise the territory’s debt above the level authorized by Guam’s Organic Act, 48 U.S.C. 1423a, which prohibits debt in excess of 10% of the “aggregate tax valuation of the property in Guam.” In response, the governor sought a declaration from the Guam Supreme Court that issuance of the authorized bonds would not cause Guam’s debt to exceed the debt limitation. The attorney general had calculated the debt limitation as 10% of the assessed valuation of property in Guam. But the governor calculated the debt limitation as 10% of the appraised valuation. Because Guam assesses property at 35% of its appraised value, Guam Code Ann., tit. 11, � 24102(f), the attorney general’s interpretation resulted in a much lower debt limit. Guam’s high court agreed with the governor and held that Section 1423a sets the debt limitation at 10% of the appraised valuation. The 9th U.S. Circuit Court of Appeals granted certiorari in October 2003. While the appeal was pending, Congress ended the 9th Circuit’s jurisdiction over appeals from Guam. The 9th Circuit dismissed the attorney general’s appeal on March 6, 2006. The U.S. Supreme Court then granted certiorari to the attorney general’s petition. The justices reversed and remanded. Writing on behalf of the court, Justice Clarence Thomas said that the term “tax valuation” most naturally means the value to which the tax rate is applied. It therefore means “assessed valuation,” a term that is consistently defined as a valuation of property for tax purposes. Appraised value is simply market value, which may or may not relate to taxation. The Guam Supreme Court’s contrary interpretation � that “tax” limits the kinds of property qualifying for inclusion in the debt-limitation calculation � rearranges the statutory language in an impermissible fashion. “Tax” modifies “valuation,” not “property.” Thus, “tax valuation” refers to the type of valuation to be conducted, not the object that is valued. The court also erred in reasoning that, because the Virgin Islands’ debt-limitation provision explicitly refers to “assessed value,” Congress must have intended to base Guam’s limitation on some other value. Congress’ rejection of “assessed” says nothing more than its rejection of “actual” or “appraised,” terms it could have used had it meant actual, market or appraised value. The U.S. Supreme Court’s interpretation comports with the practice of most states of fixing the debt limitations of municipalities to assessed valuation. States use clear language when departing from this approach, and it is clear that Congress has not done so in this case.

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