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The Honolulu Advertiser

Posted at 4:25 p.m., Wednesday, December 20, 2006

Big Island bonds rated A+ by Fitch

News Release

Fitch Rates Hawaii County, HI's $317MM GO Bonds 'A+'

Business Editors

SAN FRANCISCO—(BUSINESS WIRE)—Dec. 20, 2006—Fitch rates Hawaii County, HI, $119.1 million general obligation bonds, 2007 series A, B, and C 'A+', and assigns an 'A+' rating to $198.3 million in outstanding parity bonds. The new issue will be sold on or about Jan. 8, 2007 by A. G. Edwards. The Rating Outlook for all bonds is Stable.

The rating reflects the strong attraction driving the county's tourism-based economy and sound growth along with a strong financial position and low debt burden. These strengths are balanced against the vulnerability inherent to tourism-based economies as well as the county's shorter history as a strong tourist draw than neighboring islands. Also, Fitch believes the recent dramatic rise in property values presents a potential vulnerability to loss, particularly if nationwide real estate conditions deteriorate. Fitch notes strong management practices such as multi-year financial planning and a proactive effort to begin to fund retiree health care costs.

Hawaii County's economic strength derives from the island's natural beauty and solid development by private sector interests. All tourism indicators show strong gains, including visitor count, hotel room availability, rates, and occupancy, and average length of stay. Total employment on the island has risen an average 3.1% per year from 1995-2005, and unemployment levels show near full employment. Nonetheless, the job base is dominated by tourism-related sectors, with construction also a key area, indicative of future growth. Taxable value has risen a remarkable 14.5% per year since fiscal 2001. The county prudently expects growth to slow, and Fitch believes that this extraordinary rise presents some vulnerability to loss should the local or national real estate climate deteriorate. The county is aggressively working to diversify its economy, focusing on agribusiness and specialty products as well as scientific research and development.

The county's financial operations are marked by high year-end reserves, with operations fueled by rising property tax revenue. Expenditures show sizable gains as well, driven by the area's economic development, market-driven salary increases, and rising pension costs. The fiscal 2005 general fund balance rose to $24.0 million, a sound 10.9% of spending. Unaudited results for fiscal 2006 show a very strong year with a sizable fund balance increase. Fitch views the rising and sound fund balance levels as prudent given the economic vulnerability. Like all counties in the state, Hawaii County is constrained somewhat by statewide bargaining with labor groups, as well as state management of pensions and other post employment benefits. The county's revenue basis consists largely of property taxes and state-shared hotel taxes.

The county's debt burden is low, the result of the sizable state role in infrastructure financing and the county's rapid amortization. Debt ratios likely will rise as the county continues to address its capital plan, but will remain below average.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.


CONTACT: Fitch Ratings

Amy S. Doppelt, 415-732-5612 (San Francisco)

Karen Ribble, 415-732-1756 (San Francisco)

Media Relations:

Christopher Kimble, 212-908-0226 (New York)