Harris raises bonds goal to $250 million
By Johnny Brannon
Advertiser Staff Writer
Mayor Jeremy Harris' administration will ask a City Council committee today for permission to borrow up to $250 million through bonds that would be paid off over the next 25 years.
The money would pay for construction projects and repay other debts, including about $50 million in older bonds and interest, acting city budget director Chris Diebling said.
The administration indicated earlier that it intended to borrow only $100 million this year, but Diebling said it may be prudent to borrow more because interest rates could rise.
"Of the $250 million, eventually we're going to need it all," Diebling said. "Whether we can stretch it out is a cash-flow issue, but eventually we'll need it."
Some council members question whether the city is shifting too much debt burden on to future taxpayers.
"You can't keep borrowing money to pay back borrowed money," Budget Committee chairwoman Ann Kobayashi said.
The administration retired most of the $50 million in older bonds and interest earlier this year by issuing short-term debt instruments called tax-exempt commercial paper, which would be paid off with the new bonds.
The bonds would also repay about $70 million that the administration moved this month to the general improvement and highways funds from the sewer and solid waste funds.
The city's outstanding debt for general obligation bonds, notes and loans is about $1.3 billion, well within its legal limit of roughly $10.4 billion.
Still, borrowing $250 million more puts the city in the highest of three debt scenarios that the administration outlined earlier this year, and will increase the amount spent on annual debt service.
"Just because interest rates are low is not necessarily a good reason to borrow this much," said Tax Foundation of Hawai'i president Lowell Kalapa. "When you read the city budget, debt service is the one line that just makes your eyes pop out."
The administration's financial projections show that annual spending on debt service is expected to shoot from $153.2 million in 2003 to more than $300 million in 2008.
That will leave less available for essential services such as fire and police protection, and the city should reconsider some big projects, Kalapa said.
Reach Johnny Brannon at firstname.lastname@example.org or 525-8070.