Hawaii County plans to take advantage of low interest rates and its excellent bond rating to refinance up to $357 million in bonds.
The County Council is scheduled to vote on the plan, Bill 191, at its meeting Wednesday.
One of the bond rating agencies, Standard & Poors, in December raised the county’s credit rating, a move that typically lowers the interest rate on borrowing. Sako said the rating was raised from AA- to AA.
The county’s current outstanding debt, including bonds, state revolving loans, bank notes and bonds reimbursable by the Department of Water Supply, now stands at $449.4 million, down from the $477.6 million it owed a year ago.
The amount, however, doesn’t include $103 million the council approved in March for road projects. Finance Director Deanna Sako told the council earlier this month that bond issue would go out separately in October.
Nor does it include the $40 million the state loaned the county for lava recovery. Under questioning from Puna Councilwoman Ashley Kierkiewicz, Sako said she hasn’t included it in the report because the county hasn’t spent it yet.
Refinancing pays off various previously issued bonds and creates new bond debt “in order to achieve debt service savings and other benefits for the County in the management of its debt obligations,” according to Bill 191.
Sako said Friday that the administration doesn’t plan to immediately refinance all the bonds. Instead, she said, the bill will give the department the flexibility to do so, pending market conditions and Internal Revenue Service rules. The $17.6 million 2010 “B” bonds would be the ones most likely to be refinanced, she said.
“We hope to save $2.6 million over the next 9 years by refunding the 2010B bonds,” Sako said. “The annual payments will be reduced slightly but we won’t see the savings until next fiscal year.”
The county budgeted $59.4 million to pay principal and interest on its bond debt during the fiscal year that started July 1. While that may seem like a substantial chunk out of a $585 million overall county operating budget, it’s below limits imposed by general accounting principles and state law.
Sako, responding to council questions, said property tax collections were strong for the first collection period that ended last week. Some large property owners, such as hotels, worked out payment plans with the county to help delay some of the large payments until later this year, she said.
“We did expect hotels ad others would have problems and we budgeted for that,” Sako said.
The Tax Board of Review will continue hearing appeals of property taxes in September.
Regardless of how revenues are working out, debt payments must come off the top, she said.
“Per the charter, we cannot adjust debt service. That’s something that’s kind of like our highest priority,” Sako said. “So those payments would always be made and we’d have to cut something else.”
Under new COVID-19 procedures, public testimony will not be taken in-person. Instead, the public may provide oral testimony via WebEx. To register for access to the meeting, email Jeanette Aiello at jeanette.aiello@hawaiicounty.gov or call 961-8255 no later than noon Tuesday.
