Fitch Rates Hawaii County, HI's $50MM GO Bonds 'A+'
2008-11-21 17:38:03 -
Fitch assigns an 'A+' rating to Hawaii County (the county), HI's $50 million general obligation (GO) bonds, 2008 Series A and also affirms the 'A+' rating on $293 million in outstanding parity bonds. The new issue will be sold via negotiation on Nov. 24, 2008. The Rating Outlook for all bonds is Stable.
The rating reflects the county's solid tourism-based economy and sound growth, along with a strong financial position and low debt burden. These strengths are balanced against the vulnerability inherent to tourism-based economies as well as the county's more recent history as a competitor to the other larger tourist destinations on neighboring islands. Also, the county recently experienced a dramatic rise in assessed valuation which has begun to slow and may slow further or decline. Fitch notes strong management practices such as multi-year financial planning and full funding of its other post-employment benefits at the actuarial required level.
Hawaii County's economic strength derives from the island's natural beauty and solid development by private sector interests. Tourism indicators showed strength through 2007. More recent data indicates softening or declines; visitor counts are projected to be down 12% in 2008, but the county reports that the average length of stay has increased, somewhat offsetting the lower visitor count. Total employment on the island has risen an average 2.6% per year from 2000-2006, before slowing to 1.1% growth in 2007. The unemployment rate has historically been well below the national average and was just 3.3% in 2007, but has risen year-to-date through August 2008 to 4.9%.
The county's job base remains dominated by the economically sensitive leisure and hospitality, retail and construction sectors with a large government sector providing some stability. Taxable value has risen a remarkable 13.4% on average per year since fiscal 2001 (including 12.3% growth in fiscal 2009), and while the county prudently expects growth to slow, Fitch believes that the real estate market remains vulnerable to declines in value given the deterioration in the national real estate climate. The county continues to aggressively working to diversify its economy, focusing on agribusiness and specialty products as well as scientific research and development.
The county's financial operations are marked by several years of consecutive surpluses resulting in high year-end reserves, with operations fueled by rising property tax revenue. The county's revenue basis consists largely of property taxes and state-shared hotel taxes. Expenditures show sizable gains as well, driven by the area's economic development, market-driven salary increases, and rising pension costs. The unaudited fiscal 2008 general fund balance rose to $45.5 million, a sound 14.8% of spending. The unreserved portion also increased, to $32.3 million, or 11.0% of spending.
The county has budgeted for roughly break even results in fiscal 2009, expecting fund balance levels to remain at the same level as fiscal year end 2008. The fiscal 2009 budget assumes a 5.3% increase in TAT and 7.2% growth in property tax revenues compared to fiscal 2008. Fitch views the county's current fund balance levels as prudent given the its particular vulnerability to a global economic slowdown. Like all counties in the state, Hawaii County is constrained somewhat by statewide bargaining with labor groups, as well as state management of pensions and other post employment benefits. Offsetting the constraint is a sizeable amount of pay as you go capital and other discretionary funding which may be reduced quickly.
The county's debt burden is low, the result of the sizable state role in infrastructure financing and the county's rapid amortization. Overall funded debt per capita is about $2,000 and debt to taxable AV is just 1.2%. Including the 2008 Series A issue, 54% of the county's outstanding debt will be paid off in 10 years; nonetheless, debt ratios likely will rise as the county continues to address its capital plan.
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Fitch Ratings
Karen Ribble, +1-415-732-1756 (San Francisco)
Amy S. Doppelt, +1-415-732-5612 (San Francisco)
Cindy Stoller, +1-212-908-0526 (Media Relations,
New York)
mailto:cindy.stoller@fitchratings.com
