Moody's cuts Hawaii bond outlook to negative as revenue drops
Bloomberg News
Hawaii, the third-most indebted U.S. state, had the outlook on $4.7 billion of general-obligation bonds lowered by Moody�s Investors Service because it�s depleting budget reserves as declining tourism reduces revenue.
The state closed a $2.7 billion deficit for fiscal 2009 through 2011 partially with reserves and faces another $1.2 billion gap as tax collections fall, Moody�s said today in changing its outlook to negative from stable.
Reserves that equaled 8 percent of general revenue at the end of fiscal 2008 will be 2.4 percent when fiscal 2010 ends June 30, it said.
�Strong reserve levels are important for Hawaii given the state�s heightened vulnerability to national and international shifts in its essential tourism-based economy,� New York-based analysts Nicole Johnson and Nicholas Samuels said in a report.
The U.S. recession curbed travel to Hawaii, causing the number of visitors to fall 10.6 percent in 2008 and 4.5 percent in 2009, Moody�s said, citing state figures that call for 2 percent growth this year. Tourism accounts for about 17 percent of non-farm jobs in Hawaii, nearly twice the national average.
Revenue is forecast to decline 2.5 percent in fiscal 2010 before a 7.6 percent gain in fiscal 2011, Moody�s said. �Tax revenues are not expected to recover to the 2008 pre-recession peak until fiscal 2012,� the ratings company said.
Moody�s assigned its Aa2 rating, the third-highest, to $537 million of general obligation bonds being sold next week in two series including taxable Build America Bonds. Some proceeds will be used to refund debt outstanding to save $88 million of interest cost over the next two fiscal years, Moody�s said.
Gov. Linda Lingle has proposed $284 million of cost reductions for fiscal 2010 and $600 million next year, Moody�s said. The state shifted a $130 million pension payment to 2010 from 2009 and proposed delaying tax refunds until 2011 to conserve cash, it said.
Hawaii�s 2009 debt per capita of $3,675 is the third-highest among the 50 states and more than four times the $865 median, Moody�s said.