LIHU‘E — An upgraded bond rating and cheap federal stimulus funds have Kaua‘i County ready to plunge into the bond market later this year, the county Finance Department head said. Standard & Poor’s recently raised its bond rating for Kaua‘i
LIHU‘E — An upgraded bond rating and cheap federal stimulus funds have Kaua‘i County ready to plunge into the bond market later this year, the county Finance Department head said.
Standard & Poor’s recently raised its bond rating for Kaua‘i County’s outstanding general-obligation bonds, to AA- from A+, and county leaders look to save over $3 million in debt service by utilizing the inexpensive federal funds, said Wallace Rezentes Jr., county finance director.
“The county will likely receive better bond pricing when we enter the bond market later this year, (which will) result in lower debt-service payments,” Rezentes said in an e-mail.
Mayor Bernard Carvalho Jr. earlier said the county would look to raise money for various capital projects through a bond float.
“It also means that Standard & Poor’s has recognized the good job both the administration and council are doing by being fiscally responsible and conservative,” Rezentes said.
“This bodes well for us as we prepare to enter into the bond market in this very challenging economic period.
“The county also anticipates receiving improved bond pricing and lower debt-service payments as a result of two U.S. Treasury financing programs, the Recovery Zone Economic Development Bonds (RZEDBs) and Build America Bonds (BABs),” Rezentes said.
“The County of Kaua‘i has received an allocation of $12,166,000 as part of the RZEDBs program. This program is a part of the American Recovery and Reinvestment Act of 2009,” he said.
“RZEDBs are taxable bonds in which the county as the issuer would receive a credit equal to 45 percent of the interest. There are certain requirements and restrictions that the county would have to follow to be in compliance with the terms of these bonds,” he said.
“The BABs program will allow the county to sell taxable bonds and receive either a direct payment from the Treasury or give investors a transferable tax-credit equal to 35 percent of the interest of the bonds. This program has been available since April 2009, and over $11 billion in BABs have been issued nationally to date,” he said.
“The county could end up saving approximately 40 basis points (0.4 percent) in true interest costs by utilizing the RZEDBs and BABs programs. As an example, based on present market conditions, the county could save upwards of $3.3 million in debt service when we compare these programs to conventional tax-exempt, general-obligation bonds,” he said.
Regarding the Standard & Poor’s upgrading, Paul Dyson, S&P credit analyst, said in a press release: “The raised rating reflects our view of the county’s consistent and very strong reserve position maintained over several years, as well as its continued low debt burden.”
For fiscal year 2009, Kaua‘i projected an additional $4.9 million surplus, bringing the unreserved fund balance to $40.5 million, or 44 percent of expenditures, Dyson said.
• Paul C. Curtis, staff writer, can be reached at 245-3681 (ext. 224) or pcurtis@kauaipubco.com
