Council upset by bond request

By Johnny Brannon
Advertiser Staff Writer

The City Council's budget committee balked yesterday at a request by Mayor Jeremy Harris' administration to borrow up to $250 million through general obligation bonds.

Members of the committee said they were alarmed because the administration had stated in writing in May — when the city budget was being hotly debated — that it planned to borrow $100 million this year.

Acting city budget director Chris Diebling said the administration did not necessarily know then that it would later seek more than double that amount, but council members questioned whether they had been misled.

"If you're telling me that the city did not know that it was going to ask for $150 million more in bonds, then we are in bad-ass shape and it scares the hell out of me," Councilman Duke Bainum said.

Diebling said the bonds would pay mostly for construction projects that the council had already authorized. They would also pay off more than $50 million in older debt and reimburse $70 million to special sewer and garbage accounts the administration tapped two weeks ago for other needs, he said.

Bainum said the city may need to save money by postponing some construction work if it has not already begun, and called for a detailed breakdown of what the bonds would pay for. The committee deferred a decision on the bonds until the administration provides more information.

"Tough times call for tough choices," Bainum said.

Diebling said he believed most projects had been completed or were well under way, but that some may still be in the design phase. Bainum said he wants to know if any projects had expensive cost overruns that would be covered by the bonds.

Committee chairwoman Ann Kobayashi said she was concerned that annual city spending to pay back debts with interest would grow too heavy. Council members had sharply questioned the administration about debt when the year's budget was under consideration.

"We were assured that it would be $100 million, because of the increased debt service we were worried about and the increased maintenance cost of projects that have been completed," Kobayashi said. "We were told that was needless worrying and there was no need to make cuts because we're in fine financial shape. Now, instead of $100 million we're at $250 million, and it's kind of frightening."

Councilman John Henry Felix noted that the administration's own financial projections show that annual debt service spending would more than quadruple if the city continues borrowing at such a rate, from $104 million in 2002 to $457 million in 2027.

"Those are staggering numbers," he said.

Diebling said it was more likely that the city would borrow far less in future years.

The city avoided paying $52.8 million in debt principal and interest this year by borrowing more money that would in turn be paid back with money raised by the new bonds. The bonds would be paid off over the next 25 years.

Reach Johnny Brannon at jbrannon@honoluluadvertiser.com or 525-8070.