Bonding companies give Kaua’i “A” rating

LIHU’E—The county has received “A” ratings from two bonding companies that

evaluated proposed general obligation bonds amounting to $27.5

million.

Mayor Maryanne Kusaka, in a written statement from her office

yesterday, announced that the “A”rating means the county’s financial outlook is

stable.

The bonding agencies, which include Standard & Poor’s, said the

rating reflects Kauai’s stable tourism base, very low debt burden and

satisfactory financial operations.

The agencies’ evaluation reported the

following analysis:

In spite of the economic weakness suffered in Asia,

Kauai’s visitor count has risen annually since 1993 with visitor activity

dominated by North American and European tourists. As of September 1999, the

average daily room rate has risen 16 percent to $157 and occupancy is at 74.3

percent.

While dominated by tourism, the economy is experiencing some

significant diversification. Kaua’i’s major agricultural products include

sugar, cattle and other livestock, fruits, flowers, corn and coffee. While the

sugar industry has shrunk on Kaua’i as in the rest of the state, revenues from

unprocessed cane was $46.5 million compared to $51.8 million in 1998.

The

next largest crop is coffee, with 1998’s crop valued at over $10.4 million.

Private sector high-technology companies are working with the on-island U.S.

Navy Pacific Missile Range Facility and film work also boasts a growing

industry,

Despite Kaua’i’s flat property value trend, the county has been

able to maintain healthy reserves. Year-end unreserved general fund balances

have averaged 10. 3 percent of expenditures between fiscal years 1996 and

1999.

The county ended fiscal 1999 with a solid total general fund balance

of almost $8 million, or 17.4 percent of expenditures, and an unreserved

balance of $6.2 million (13.7 percent of expenditures).

The adopted budget

for fiscal 2000 is austere with minimal capital improvements and a conservative

small equipment budget.

Kaua’i’s finances show sound general fund year-end

balances despite operating losses in three of the last four fiscal years.

Recently, operations have been challenged by the state’s reduction in hotel tax

distribution to local counties. To counter this action, the county increased

property taxes in fiscal 1999 by 31 cents per $1,000 AV and again in fiscal

2000 by 50 cents per $1,000 AV to offset losses in TAT and to pay for statewide

negotiated pay raises.

The county will raise two other rates effective Jan.

1, which along with continued economic development should result in balanced

positive operations.

Due to declining revenues, the county has reduced

expenditures over the past three years. General fund expenditures were $48.1

million in fiscal 1997 compared to fiscal 2000 budgeted $43.1 million, a 10.4

percent decrease.

The county eliminated vacant positions and restructured

departments to reduce costs. One example of its successful reduction of costs

is with its workers’ compensation program. The county reduced paid losses to

$79,660 in fiscal 1999 (with an average claim cost of $1,106) versus $476,363

in fiscal 1993 (when the average claim cost was $5,438.)

Education and

focusing attention on workplace safety has helped the county save money through

its Risk Management Program.

Along with the tax rate increases, strong

management is indicated by the county’s success in having a $15 million Federal

Emergency Management Agency (FEMA) loan reclassified as a grant, and the

recognition of (Ho’olokahi) volunteer work as the required local match for

federal highway funds and other county grants.

Kaua’i’s outlook is stable.

The county’s continued prudent financial management in conjunction with its

recovering economy, provides stability to its rating.

“The challenges over

the past five years have required stepping outside from the boundaries of

‘doing business as usual’ to a broader scope of management and fiscal

efficiency,” said Kusaka.

“Just as I am grateful for an administration who

rose to address the challenges with innovative problem solving, I have our

community to thank for its tremendous support and service with outstanding

volunteerism. I believe we have a proven record of community teamwork – a

genuine partnership between government, the private sector and community at

large which has truly served to strengthen us all.”