HILO — Hawaii County’s credit rating rose two notches Friday, when Fitch Ratings upgraded the county from AA- to AA+.
AA is the second-highest rating available from Fitch, one of three major rating agencies for government borrowing. AAA is the highest, while A is below AA. The increased rating — which put the county closer to a AAA rating — means Hawaii County can expect to get lower interest rates and more favorable terms on future borrowing.
“We’re extremely pleased and excited at this news,” said Deputy Finance Director Deanna Sako. “The county has worked very hard to maintain its good credit rating over the years.”
The county’s net funded bond debt as of December was $411.3 million, up from $375.5 million in May. For the preliminary annual budget Mayor Harry Kim is scheduled to release today, about $45 million has to come off the top to pay on the principal and interest before the rest of the annual budget is computed.
Fitch estimates the county’s carrying costs, such as service on the bond debt, pensions and retiree health-care contributions, at about 20 percent of spending. That is expected to grow because of increased retiree expenses and labor costs. The county has little control over labor and retiree costs, which are negotiated at the state level, Fitch noted.
However, the rating agency listed the county’s flexibility and resilience and its ability to withstand cyclical revenue declines as positive factors in increasing its rating.
“General fund revenue growth has exceeded U.S. economic performance and inflation,” Fitch said in a press release. “In addition, the county has unlimited legal authority to adjust property tax rates.”
Hawaii County’s rating is now better than the state’s, at least as far as Fitch is concerned. The agency had maintained the state’s rating at AA in September.
Fitch said the future pace of spending is expected to be “in line to marginally above revenue growth.”
“The county’s financial resilience given a moderate budget downturn is very strong and is supported by solid reserves, a history of limited revenue volatility and superior budget flexibility,” Fitch concluded. “Budget management is conservative and the county has not increased property tax rates since fiscal year 2014, preserving revenue flexibility.”