Honolulu plans to sell $257.1 million in general obligation bonds to subsidize its 2024 capital improvement program as well as the ongoing construction of the Honolulu Authority for Rapid Transportation’s rail project.
The city’s aim is to offer the bonds to local Hawaii investors during a special two-day retail order period that begins today.
The city will issue and sell the series of 2023 GO bonds toward major projects that include the nearly $10 billion Skyline route, which is planned for completion by 2031, and the city’s $1.34 billion-plus CIP budget for the current fiscal year, which
began July 1.
Andrew Kawano, the city’s Department of Budget and Finance director, said orders will be taken today and Wednesday from all buyers — including Hawaii investors — and the city’s underwriter will determine which orders are “consummated” with those buyers.
“It provides retail investors with an initial and attractive opportunity to purchase the city’s GO bonds and thereby enhancing the volume of buy orders from retail investors,” Kawano said via email.
In general, bonds’ proceeds from these sales will be used to fund the city’s CIP and equipment budgets as funding is needed, he said.
“There is no direct ‘tie-in’ to projects at the time of the bond sales,” he added.
Likewise, he said GO bonds are not “specifically designated to a particular part of the rail line” either — like the 5.2-mile segment from Aloha Stadium to Middle Street planned for completion by mid-2025 — but would instead act as “bridge financing for the rail construction” overall.
Meanwhile, in advance of its scheduled sale of GO bonds, the city announced last week that it received a “very strong AA+” credit
rating.
Fitch Ratings Inc. has reaffirmed Honolulu’s existing AA+ credit rating, while S&P Global ratings released its new AA+ credit rating — with a stable outlook for the city — based on a review of the city’s finances and credit worthiness, the city said.
“The bond ratings will help the city to issue general obligation bonds at very
favorable interest rates and help maintain lower debt service costs,” Kawano said.
Mayor Rick Blangiardi also praised the city’s latest credit rating report.
“The outstanding execution and collaborative work for the departments of (BFS) and Corporation Counsel, as well as the HART Board of Directors and executive team, not only signifies our ability to meet our financial obligations but also opens the doors to new opportunities for growth and development,” Blangiardi said in a written statement.
According to the city, both rating agencies noted Honolulu’s “stable revenue base, supported by its solid real property tax program; the broader, more diverse island economy relative to other counties; high median income; low unemployment; and responsible, conservative budgeting and fiscal policies as the basis for their ratings.”
In addition, the rating agencies “stressed the continued requirement of maintaining budgetary balance and managing the growth of its fixed costs and long-term liabilities, including subsidies to cover operating and fixed costs related to the mass transit system,” the city said.
Although it claims its creditworthiness remains strong and stable, city officials divulged earlier this year
that another credit ratings business had downgraded Honolulu’s bond rating —
typically, an indication of a city’s ability to repay its debt.
During the Council’s
Committee on Budget
meeting March 6, Kawano announced Moody’s changed the city’s bond
rating from Aa to Aa2.
“Moody’s explained
that the bond rating went through review because of a bond rating methodology change,” Kawano said at the meeting.
Saying Fitch Ratings still had the city at AA+, Kawano further noted in March that the review by Moody’s of the city’s credit worthiness was equivalent to the state of Hawaii.
“We’re all disappointed that it happened but we all feel that we’re in a much better shape financially than we were a year ago or two years ago,” he said.
Kawano added that the city “would work on getting back to where we were in terms of ratings and the process moves on.”
