Hawaii Gov. Josh Green toured the scene of Maui wildfires in August 2023. The disaster slowed visitor growth, rating analysts said.
Hawaii Governor’s Office
Hawaii will head to market in early December with double-A category rankings affirmed because it prices $750 million of taxable general obligation bonds in a negotiated deal.
Recovery of tourism, pivotal to the state’s economy, has been slow and buffeted by last yr’s Maui wildfires, based on a report published Wednesday by Fitch Rankings, which affirmed the state at AA.
“The scope of injury from the August 2023 wildfires in Maui County stays in flux, but will likely be substantial with federal and personal sector resources supporting state and Maui county efforts,” said Eric Kim, a senior director in Fitch’s U.S. Public Finance group.
The state has estimated total recovery costs will exceed $12 billion, Kim said.
“As of now, the state anticipates its own direct fiscal contributions will primarily be $633 million in recovery costs and one other nearly $900 million towards litigation settlement expenses,” he said. “All of those costs have either been spent or are built into the state’s multi-year general fund financial statement.”
Moody’s Rankings affirmed Hawaii’s Aa2 rating Thursday.
“Affirmation of the issuer rating reflects Hawaii’s solid funds, strong governance and strategic location, balanced against its very high leverage and dependence on the tourism industry that might be vulnerable to external events,” the rating agency said.
Moody’s upgraded to Aa3 from A1 the rating on $19.3 million of outstanding Department of Hawaiian Home Lands revenue bonds.
S&P Global Rankings affirmed its AA-plus rating Friday.
“The long-term rating incorporates our view of Hawaii’s proactive financial management and oversight,” said S&P analyst Thomas Zemetis.
All of the agencies assign stable outlooks.
The par amount is subject to vary depending on market conditions.
Indications of interest on the bonds are expected to be taken on or about Dec. 3, and an institutional order period will occur on or about Dec. 4, based on an investor relations notice posted on the state’s debt management website.
BofA Securities is bookrunning senior manager and can be leading the syndicate pricing the bonds via negotiated sale, based on the notice. Barclays, J.P. Morgan and Raymond James are co-managers.
Proceeds will finance capital projects and reimburse the state for prior capital expenses.
The state had $8.7 billion in GO debt as of July 1, 2023, based on its most up-to-date report on state indebtedness.
The GO bonds are general obligations of the state and carry the state’s full faith and credit pledge.
The state is receiving significant federal funding for disaster response and recovery, Kim said.
Currently, Hawaii anticipates roughly $3 billion in federal funding with $1.3 billion already spent, he said.
Visitor spending surged past 2019 levels by spring 2022 and stays comfortably ahead of pre-pandemic levels despite a slight dip in 2024, based on Fitch, but total visitor arrivals by air remain below pre-pandemic levels with international visitor volume well wanting pre-pandemic levels. Domestic volume, nonetheless, exceeded 2019 levels by spring 2021, dipped below that level after the Maui wildfires, and has modestly recovered since then, Fitch said.
The state’s “deal with prudent near-term and long-term fiscal planning will help maintain robust fiscal resilience and budgetary flexibility despite substantial long-term liabilities and related carrying costs,” Fitch analysts wrote.
Hawaii’s long-term liabilities for debt and pension advantages are well above the median for U.S. states, but changes to retiree advantages and better contributions have helped to slow the expansion and fund related liabilities, Fitch analysts said.
The state’s debt medians are high in comparison with peers, but Fitch said, the state’s direct debt includes bonds issued for the state’s public schools, that are paid for by local governments in most other U.S. states.