City bond sale includes $350M for rail

The city announced last week it has sold $767 million in general obligation bonds, including $350 million that the Honolulu Authority for Rapid Transportation deemed significant to keep construction going for the 20-mile, East Kapolei-to-Ala Moana project.

HART said its $350 million bond issue, which was approved by the Honolulu City Council in July, will be used as gap financing to help with the project’s cash flow when its state tax revenues don’t keep pace with expenses.

The bonds will cover construction only as far as Middle Street, and will be paid through the Oahu-only half-percent surcharge to the state’s general excise tax.

City-backed borrowing of this kind has been part of rail’s official plan since at least 2012.

Nonetheless, the Council in July heard more than three hours of contentious public testimony, with critics questioning the wisdom of committing more money to a project still fraught with uncertainty. The Council ended up voting 6-3 to narrowly approve the bond sale. The City Charter requires six Council votes to OK bond-related measures.

Besides the $350 million for rail, $236 million will be used for various city capital improvement projects and equipment purchases, while $181 million will refund outstanding general obligation bond issues to realize an estimated $18 million in interest savings.

The city maintained its strong bond ratings for both current and outstanding debt by both Moody’s Investors Service and Fitch Ratings.

Moody’s rated the bond series as Aa1; Fitch rated it as AA+.

The city has maintained both designations since December 2010, and both are the highest ratings it has achieved.

The strong bond ratings send a message to investors that Honolulu’s GO bonds are a sound and reliable investment, city officials said.