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The Honolulu Advertiser

Posted at 11:53 a.m., Monday, July 21, 2003

Honolulu keeps ‘AA’ credit ratings

By Sean Hao
Advertiser Staff Writer

A dip in tourism caused by the severe acute respiratory syndrome scare and the war in Iraq hasn’t hurt Honolulu’s credit rating.

Two of the nation’s top credit rating companies, Standard & Poor’s Ratings Services and Fitch Ratings, upheld the city’s rating for $250 million in general obligation bonds that will be sold through Citigroup and UBS Financial Services next week.

A high rating saves the city money by allowing it to borrow funds at a lower cost.

Standard & Poor’s affirmed its “AA-” rating, the fourth highest, on Honolulu’s debt and said the outlook for Honolulu is stable “based on strong finances and growing property values, among other factors.”

“Honolulu’s financial management remains strong and is currently benefiting from robust trends in the property tax base,” said Standard & Poor’s credit analyst Gabe Petek in a statement.

Fitch gave Honolulu its “AA” rating, the third highest.

Fitch attributed the credit rating to a sound tourism market, strong fiscal management and a low debt burden among other things. Overall, Honolulu has $1.77 billion in outstanding general obligation bonds. The city’s new series 2003A “AA” bonds, to be priced on July 28, will fund a variety of capital improvement projects.

In affirming the city’s bond rating Fitch pointed to a recovering tourism sector, rising home sales and values and continued commercial construction. And despite its increasing indebtedness, the city also has kept spending in line with revenues and has had a general fund surplus in four of the past five years, Fitch said.

Honolulu, which hasn’t sold bonds for about a year and a half, is expected to seek about $150 million a year in bond financing in each of the next several years, the two bond-rating companies said.

In gauging the economy on O‘ahu, Fitch said the tourism industry is recovering from a long decline.

In another positive sign, the city’s real estate market is in good condition, Fitch said, pointing to low to moderate vacancy rates, rising home sales and prices, and significant new construction.

Reach Sean Hao at shao@honoluluadvertiser.com or 525-8093.