State sells $1.28 billion in bonds to tackle debt

By Jim Mendoza - bio | email

HONOLULU (HawaiiNewsNow) - "This is the referee coming in, making the call at the end of our first quarter," Gov. Neil Abercrombie said.

He was referring to good rating's reports from Fitch Ratings, Standard & Poor's Ratings Service and Moody's Investors Service after the state sold $1.28 billion in General Obligation Bonds last week in New York.

"The public is going to get full value for its tax dollar," Abercrombie said.

Budget and Finance director Kalbert Young said more than $488 million will finance existing bonds, while $800 million will pay for improvement projects at schools, state buildings and other sites.

"We are essentially paying off a credit card, and taking the savings, and rather than spending it we are intending to pay down our long-term mortgage," he said.

The state will retire debt it would owe from 2015 through 2018. The re-financing saves $59 million and lessens pressure lawmakers may feel to raise taxes.

"If this money can be used wisely to generate not only additional services or put back some services that we took away and create the jobs that our state needs, then it's a good thing," said Lowell Kalapa, president of Tax Foundation of Hawaii.

"It will take people that are unemployed now and put them to work," Chamber of Commerce of Hawaii chair Virginia Pressler said. "There will be opportunities to invest in infrastructure and things that have been put off because of the poor economy."

Investors bought the bonds at a premium. Young said the money will pay back funds taken from the Hurricane Relief and Rainy Day reserves.

"We will not be re-capitalizing the reserve in 2014 with borrowed money through sale of bonds," he said. "We will be re-capitalizing the reserves starting in this fiscal year with cash."

Abercrombie said the bond sale shows investors believe in Hawaii.

"I invite comparisons with any other state in the union, at this stage compared to a year ago, as to whether or not we've zoomed right to the top," he said.

Bank of America, Merrill Lynch and Goldman Sachs managed the bond sale, which is the biggest in Hawaii's history.

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