Maui County, Hawaii General Obligation Bonds New Issue Report

From http://www.fitchratings.com  

Ratings

New Issue General Obligation Bonds, Series 2012 -- AA+

Outstanding Debt General Obligation Bonds -- AA+

Rating Outlook Stable

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New Issue Details

Sale Information: $71,795,000 General Obligation Bonds, Series 2012, via competitive sale on Oct. 30.

Security: The full faith and credit of Maui County and an unlimited property tax levied on all taxable properties within the county.

Purpose: To fund various capital improvements and reduce outstanding debt for net present value savings.

Final Maturity: June 1, 2032.

Key Rating Drivers

Strong Financial Position: The ‘AA+’ rating reflects the county’s strong financial position, exhibited by a high general fund balance, three consecutive years of structurally surplus-to balanced operations before one-time expenditures, demonstrated revenue flexibility, and prudent management practices. 

Most Economic Indicators Rebounding: Maui’s economy has shown signs of recovery, with improvements to unemployment, building permits, number of visits, hotel occupancies, and room rates. Fitch Ratings views these as healthy indicators in an economy that is highly concentrated in the tourism sector and was deeply affected during the recession. 

Tax Base Contraction Slowing: Assessed valuation (AV) has  continued contracting as the housing market recorded its fifth consecutive year of price declines, although the fiscal 2013 AV loss was just 1% following two years of sizable contractions. Rising building permits should provide a boost to AV as should recent and modest home price gains, if sustained.

Mixed Debt Profile: The county benefits from a very low debt burden due to the large and active state role in education and other provisions. Debt amortization is rapid, and the county’s large capital improvement plan (CIP) ought to be manageable, given its history of pay-as-you-go financing and manageable debt issuances. However, the county does participate in the poorly funded state pension plan. Its other post-employment benefit (OPEB) liability is also large, although it prudently pays the actuarially required cost (ARC).