Saturday, January 28, 2023
Hawai'i Free Press

Current Articles | Archives

Friday, December 2, 2011
$800M Borrowed to Sit Money in Hurricane, Rainy Day Accounts
By News Release @ 1:41 PM :: 4798 Views :: Energy, Environment

Abercrombie Administration Continues to Tackle State Debt, Sells $1.28 Billion of General Obligation Bonds

As a result State to recapitalize Hurricane Relief and Rainy Day Funds

News Release from www.Hawaii.gov/gov December 1, 2011

Honolulu – Retail and institutional investors responded favorably to the State of Hawai'i’s creditworthiness and financial planning as reflected in the State’s recent bond transaction in New York. Governor Neil Abercrombie and Budget & Finance Director Kalbert Young announced today the State of Hawai'i successfully sold $1.28 billion of General Obligation Bonds (Bonds) over a week ago. This latest financial action is the result of the culmination of work by the Abercrombie Administration to restructure its debt and create a solid financial foundation.

Following the transaction, Moody’s Investors Service, Standard & Poor’s Ratings Service and Fitch Ratings affirmed the State’s credit ratings of Aa2/AA/AA. Standard & Poor’s commented, “Governor Neil Abercrombie’s willingness to implement aggressive solutions, totaling $1.32 billion, to balance the fiscal 2011-2013 biennial budget in light of a projected budget shortfall that had reached $1.25 billion for the biennium.”

Moody’s further cited the State’s “historical fiscal conservatism” because all of Hawai'i’s General Obligation debt is issued at a fixed rate, and repayment is relatively rapid with 95% of principal repaid in 15 years. In addition, Fitch affirmed that the State’s “financial management is sound.”

Taking advantage of the market's lower interest rates, the Bonds also refinanced $488 million in previously issued bonds for economic savings. For the refinanced bonds alone, the cost was refinance to 2.3 percent. These Bonds will also help the State of Hawai'i reduce its annual debt service payments with significant economic savings from the refinancing – over $59 million of present value savings (or 9.65 percent of the refunded principal amount). The total transaction had an interest cost of 3.34 percent.

“A year ago, we inherited a tremendous budget deficit and I made the commitment to get us out of that deep fiscal hole,” said Governor Abercrombie. “My Administration stayed the course by being fiscally disciplined and having clear objectives. We made the tough decisions, and garnered a lot of criticism. Now, one year later, we have turned the corner and investors have taken notice.”

Earlier this year, Governor Abercrombie made the tough decision to use money from the Hurricane Relief and Rainy Day Funds to assist in balancing the budget. The Bond transaction now allows the State to recapitalize those reserves.

“This transaction exemplifies that our actions were, in fact, prudent and beneficial to the State and taxpayers. Because of our hard decisions, the State is in a much stronger financial position and is now being recognized as a leader among other states for improving our financial condition,” stated Governor Abercrombie.

In completing the bond transaction, the Abercrombie Administration also sought to improve the State’s credit rating. “To achieve this objective the State’s financial goal in the near term is to show positive results in rebuilding reserves, reducing unfunded liabilities ratios, and balancing future revenue drivers such as military contributions and federal program spending,” said Director Young. “Credit agency reports evaluating the State’s financial management positively highlighted the State’s planned efforts.”

This transaction achieved the following:

  • Reduced debt service by saving $59 million on refunded outstanding debt
  • Keeps debt service for fiscal year 2012 – 2013 at legislatively-appropriated level
  • Restructured current outstanding debt
  • Normalizes the State’s debt service profile
  • Builds debt capacity from 2014 to 2019
  • Improves the state’s financial position
  • Garnered positive credit rating review
  • Enables recapitalization of the Hurricane Relief and Rainy Day Funds

“This is the largest bond issue in the history of the State of Hawai'i to date,” added Director Young. “The merits and components of this transaction execute on our objective to get our financial house in order and at the same time we are rebuilding investor confidence.”

Director Young led a finance team from the State of Hawai'i to complete this transaction during a recent trip to New York City. The team included Department of Business, Economic Development and Tourism Director Richard Lim, B&F Financial Administrator Scott Kami, State Economist Eugene Tian, Ph.D., and Representative Kyle Yamashita.

“I commend our team who sought a very attractive interest rate in selling this amount of bonds and ensuring that our taxpayer dollars are being invested for the benefit of our fiscal future,” said Governor Abercrombie. “We are beginning to reshape the way Government does business in Hawai'i and building a more financially stable government. Future generations will benefit greatly as we continue to work on minimizing future debt.”

The $1.28 billion in bonds included $800 million in new debt, but was complemented with $488 million in refunding currently existing bonds at a lower interest rate.

Bond buyers benefit from purchasing Hawai'i bonds because interest on the bonds is excluded from gross income for Federal income tax purposes and exempt from all taxation by the State of Hawai'i.

The $800 million of new money proceeds from the bond sale will be used for various public improvement projects, including public buildings and facilities, elementary and secondary schools, community college and university facilities, libraries and parks.

Chamber of Commerce of Hawai'i Board of Directors’ Chair Dr. Ginny Pressler stated, “It is clear that the Abercrombie Administration is taking a business approach in dealing with its finances. Investors have given their approval, which is great for the overall business of Hawai'i.”

“The response by these investors is welcomed news to Hawai'i,” said Sherry Menor-McNamara Chief Operating Officer of the Chamber of Commerce of Hawai'i. “This transaction proves that our State government is doing business to stabilize its finances.”

Bank of America Merrill Lynch and Goldman Sachs and Co. served as the joint bookrunner managers for the bond sale, with Barclays Capital, Morgan Stanley, JP Morgan and Citi serving as co-managers. Firms with offices in Hawai'i also participated in a retail selling group for the Bonds.

CLICK HERE TO SEE STANDARD & POOR'S RATING REPORT

See below for relevant statistics on The Bond Sale

###

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

ACA Signups Hawaii

Alliance Defending Freedom

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Astronomy Hawaii

Back da Blue Hawaii

Ballotpedia Hawaii

Better Hawaii

Broken Trust

Build More Hawaiian Homes Working Group

ChinaTownWatch.com

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

DVids Hawaii

FIRE

Fix Oahu!

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Habele.org

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii Legal News

Hawaii Legal Short-Term Rental Alliance

Hawaii Matters

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

HIEC.Coop

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Navy League

Honolulu Traffic

House Minority Blog

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

July 4 in Hawaii

Kakaako Cares

Keep Hawaii's Heroes

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

MentalIllnessPolicy.org

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

NAMI Hawaii

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

NFIB Hawaii News

No GMO Means No Aloha

Not Dead Yet, Hawaii

NRA-ILA Hawaii

Oahu Alternative Transport

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

ReRoute the Rail

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Save Dillingham Airfield

School Choice in Hawaii

SenatorFong.com

Sink the Jones Act

Statehood for Guam

Talking Tax

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT