State plans bond sale to pay legal settlement

By William Selway
Bloomberg News Service

Hawai'i, with the third-highest debt burden per capita among U.S. states, plans to sell $225 million of bonds this week to pay for a legal settlement with Native Hawaiians, school construction and other projects.

The general obligation bonds, in a sale to be managed by UBS Financial Service, carries a rating of Aa3 from Moody's Investor's Service, the credit rating company's fourth highest. The sale is expected to be completed tomorrow, Moody's said.

Hawai'i's tax revenue increased 4 percent during the past fiscal year, reversing a drop from the year before, as the state recovered from the decline in tourism that followed the Sept. 11 terrorist attacks, Moody's said. The credit rating company said its rank of Hawai'i reflects the state's "fiscal conservatism" as it holds state spending to the growth in its economy.

The money will be used to pay part of the state's 1990s legal settlement with Native Hawaiians, under which it agreed to pay $30 million a year for 20 years, as well as for parks, libraries and schools. When measured as a percentage of personal income, Hawai'i has the highest debt among U.S. states.

Hawai'i has $3,101 of debt per resident, placing it third behind Connecticut and Massachusetts, according to Moody's.