County official: Refinancing bonds could save taxpayers millions

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HILO — Hawaii County officials say they can save taxpayers $12.3 million by refinancing $270.2 million in bonds.


HILO — Hawaii County officials say they can save taxpayers $12.3 million by refinancing $270.2 million in bonds.

The bonds are primarily from 2006 through 2008 and carry interest rates of 4 to 6 percent, Finance Director Deanna Sako said Monday. A few later-issued bonds are also on the list in case the county gets a good deal.

It’s uncertain what interest rates the refinanced bonds will be issued for, but it’s sure to be lower, she said. A 2013 bond issuance, for example, carries an interest rate of 2.75 percent, according to the county’s Comprehensive Annual Financial Report for 2014-15.

“We can’t say for sure what the interest costs will be when we go to sell the bonds, but we expect lower interest costs,” Sako said.

County officials plan to go to San Francisco in January to meet with bond rating agencies to pitch their bonds. Rating agencies determine the county’s risk, which sets interest rates on borrowing.

Fitch Ratings Inc., one of the three bond rating firms, earlier this year reaffirmed Hawaii County’s solid financial status. Fitch Ratings affirmed its previous rating of county bonds at AA-. The rating agency cited the county’s strong financial management, resilient tourist-dominated economy, centralized governance and independent ability to raise revenues, low debt burden and rising retiree costs as factors in its rating.

An AA- rating is considered a high bond rating, but not as high as the prime rating AAA or other high ratings AA+ or AA, according to the Fitch rating system. An AA- rating means the county has a strong capacity to meet its financial commitments.

The County Council has authorized the issuance of $357.6 million in general obligation bonds to finance a list of capital improvement projects. Of that, $213.7 million has not yet been issued.

The county’s annual debt service — how much interest and principal it pays annually on its borrowing — is 7.9 percent of expenditures, a figure that could increase to 13.8 percent if all the authorized bonds were issued.

The Government Finance Officers Association recommends a ceiling of 15 percent.

The full faith and credit of the taxpayer is pledged under general obligation, or G.O., bonds, compared to other types of bonds that rely on revenues from services or special districts, for example.

The County Council is scheduled to take up Bill 118, authorizing the refinancing, at its meeting Wednesday in Hilo. The public can comment at 9 a.m. at the start of the meeting from Hilo or by videoconference from the West Hawaii Civic Center, the Waimea Council office, the conference room adjacent to the Hisaoka Gym in Kapaau, the Naalehu state office building or the Pahoa Neighborhood Facility.


Finance Committee Chairwoman Karen Eoff had agreed to waive the bill through the Finance Committee because of the need to get the bill passed in time for the Finance Department to set up a meeting with the rating agencies.

“It’s a good time to do it if we can save that much money,” Eoff said Monday.

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