Maui Secures Highest Bond Rating in the State
The County of Maui successfully closed its $73.7 million Series 2010 G.O. bond issue last week. Proceeds of the transaction were used to fund Capital Improvement Projects (CIP) throughout the County, as well as refinance approximately $25 million in outstanding General Obligation (G.O.) bonds.
The ability to secure lower interest rates resulted in the County saving approximately $2.95 million on a present value basis.
In addition, the County took advantage of a federal subsidy program under the American Reinvestment and Recovery Act, which resulted in an expected federal subsidy of 45% of interest paid on G.O. bonds issued under this program.
The County issued $23.375 million of G.O. bonds with this expected federal subsidy, which was the maximum limit allowed for the County. As a result of a lower interest rate environment and the Federal subsidy program, the County secured an overall interest cost of 2.49%, taking into account the expected federal subsidies.
“Considering that the County of Maui has paid as much as 5%- 6% interest on past bond issues, this very low interest will mean very low costs to repay the debt over the next 20 years,” said Mayor Charmaine Tavares. “This is the largest bond issue with the cheapest interest costs in the history of the County. I am pleased that we have been able to provide Maui County with this extraordinary opportunity to finance important water, wastewater and renewable energy projects, as well as significant upgrades and renovations at parks and other County facilities.”
CIP projects that will be financed by the recent bond sale include the South Maui Park, Lahaina Watershed Flood Control, Waiohonu Bridge Replacement, Lahaina Recycling Center, water and sewer rehabilitation projects, improvements to War Memorial Football Stadium and to community centers throughout the County, and the design of Haiku Fire Station.
In addition to the low interest cost for the G.O. bonds, the County recently was granted a Standard and Poor’s rating upgrade to AA+, which County Finance Director Kalbert Young said was a significant factor in generating strong investor interest for the bond offering. All three qualified bond-rating agencies now rate the County’s bonded debt at the next-to-highest category for safety. Maui County’s bond rating is the highest of any city, county or state jurisdiction in the state of Hawaii.
“The County of Maui is very pleased with the results of the transaction, and I am very pleased that the timing of the sale provided for the County to take advantage of what has proven to be historically low interest rates through this sale,” Young said.
(Information contained in this report is provided courtesy of the County of Maui) *** If you enjoyed this report, you may also like our story on the recent selection of Maui Budget Director Fred Pablo as the incoming Director for the state Department of Taxation.