Fitch Rates Kauai County, HI $49.1MM GO Bonds 'A '
SAN FRANCISCO--(BUSINESS WIRE)--Oct. 19, 2005--Fitch Ratings rates the County of Kauai, Hawaii's $49,110,000 general obligation bonds (GO), series 2005A, 'A+'. The bonds will be sold via negotiation with UBS Financial Services Inc. on Oct. 27. Fitch also upgrades the rating to 'A+' from 'A' on $44.1 million in outstanding GO bonds. The Rating Outlook is Stable.
The rating upgrade is based on Kauai's good economic performance, strong and sustained financial results including high general fund balances, and its prudent and proactive fiscal policies. The rating also reflects a very low debt burden.
The rating considers some uncertainty regarding property tax revenue collected on 10%-15% of the county's real property tax base. Currently, taxes are levied under a county-imposed ordinance put in place in response to a voter-approved charter amendment, which was subsequently ruled unconstitutional. The amendment's proponents have appealed the decision to the Hawaii Supreme Court. The current ordinance in fact grants more in tax relief than the amendment, covering all owner-occupied residential real property, about 15% of the tax base, while the amendment covered only a subset of this group or about 10%. Fitch views the county's proactive actions in adopting a property tax relief ordinance as a sound management response to residents' concerns while minimizing the potential revenue loss. Under the ordinance, the county retains ample flexibility to increase tax rates, which, coupled with strong building activity on the island, should continue to provide a sustainable revenue base for county operations. Also, a property tax reform and simplification measure is pending before the county council, incorporating recommendations made by a broad-based task force. The measure is designed to be revenue-neutral. Fitch will continue to follow these developments.
Kauai's economy benefits from a strong and stable tourism sector that accounts for 50% of the island's employment and roughly 80% of its earnings. Kauai's visitor count has risen annually from 2000 to 2004, with about 89% of the county's tourists coming from the U.S. mainland. Most other tourism indicators -- including hotel occupancy, room rate, and average revenue per available room -- also have risen. The rising occupancy rate is notable given the additional inventory recently made available. Signs of economic diversification continue to be evident with development of high technology jobs related to the presence of the U.S. Navy's Pacific Missile Range Facility. The agricultural sector also is experiencing growth and crop diversification, suggesting a successful transition from its historical plantation-style sugar processing. Employment data indicates good job growth with the unemployment rate continuing its downward trend, reaching 3.3% in 2004, and 2.5% in August 2005. Wealth levels, though, remain at or below state and national averages.
Financial operations are strong with the general fund posting operating surpluses in the last five audited fiscal years. The general fund ended fiscal 2004 with a $17.1 million fund balance, or 26.7% of spending. Estimates for fiscal 2005 indicate similar results. Real property taxes account for the lion's share of general fund revenues (76% in fiscal 2004) with transient accommodation taxes accounting for almost 18%. Assessed valuations grew by 12.2%, on average, since fiscal 2000 and rose by 25.3% in fiscal 2005. This growth enabled the county to lower its real property tax rates in fiscal 2005 and still realize a 12% growth in real property tax revenues. Transient accommodation tax revenue, collected by the state and shared with the counties, continues to be a stable source of revenues.
Bond proceeds will fund various capital improvement projects in the county and refund certain maturities of the county's outstanding general obligations bonds, series 1997B and 2001A. Kauai's debt levels are very low at 0.9% of market value and $1,386 per capita.
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.
The rating upgrade is based on Kauai's good economic performance, strong and sustained financial results including high general fund balances, and its prudent and proactive fiscal policies. The rating also reflects a very low debt burden.
The rating considers some uncertainty regarding property tax revenue collected on 10%-15% of the county's real property tax base. Currently, taxes are levied under a county-imposed ordinance put in place in response to a voter-approved charter amendment, which was subsequently ruled unconstitutional. The amendment's proponents have appealed the decision to the Hawaii Supreme Court. The current ordinance in fact grants more in tax relief than the amendment, covering all owner-occupied residential real property, about 15% of the tax base, while the amendment covered only a subset of this group or about 10%. Fitch views the county's proactive actions in adopting a property tax relief ordinance as a sound management response to residents' concerns while minimizing the potential revenue loss. Under the ordinance, the county retains ample flexibility to increase tax rates, which, coupled with strong building activity on the island, should continue to provide a sustainable revenue base for county operations. Also, a property tax reform and simplification measure is pending before the county council, incorporating recommendations made by a broad-based task force. The measure is designed to be revenue-neutral. Fitch will continue to follow these developments.
Kauai's economy benefits from a strong and stable tourism sector that accounts for 50% of the island's employment and roughly 80% of its earnings. Kauai's visitor count has risen annually from 2000 to 2004, with about 89% of the county's tourists coming from the U.S. mainland. Most other tourism indicators -- including hotel occupancy, room rate, and average revenue per available room -- also have risen. The rising occupancy rate is notable given the additional inventory recently made available. Signs of economic diversification continue to be evident with development of high technology jobs related to the presence of the U.S. Navy's Pacific Missile Range Facility. The agricultural sector also is experiencing growth and crop diversification, suggesting a successful transition from its historical plantation-style sugar processing. Employment data indicates good job growth with the unemployment rate continuing its downward trend, reaching 3.3% in 2004, and 2.5% in August 2005. Wealth levels, though, remain at or below state and national averages.
Financial operations are strong with the general fund posting operating surpluses in the last five audited fiscal years. The general fund ended fiscal 2004 with a $17.1 million fund balance, or 26.7% of spending. Estimates for fiscal 2005 indicate similar results. Real property taxes account for the lion's share of general fund revenues (76% in fiscal 2004) with transient accommodation taxes accounting for almost 18%. Assessed valuations grew by 12.2%, on average, since fiscal 2000 and rose by 25.3% in fiscal 2005. This growth enabled the county to lower its real property tax rates in fiscal 2005 and still realize a 12% growth in real property tax revenues. Transient accommodation tax revenue, collected by the state and shared with the counties, continues to be a stable source of revenues.
Bond proceeds will fund various capital improvement projects in the county and refund certain maturities of the county's outstanding general obligations bonds, series 1997B and 2001A. Kauai's debt levels are very low at 0.9% of market value and $1,386 per capita.
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.
posted by ams at 12:20 PM
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