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County Looking to Capitalize on Low Interest Rates

December 13, 2012, 5:17 PM HST (Updated December 13, 2012, 5:21 PM)
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Hawaii County is looking to take advantage of current low interest rates by refinancing up to $60 million of its long-term debt.

The County Council will take up the matter when it meets next Wednesday in Kailua-Kona.

A bill introduced by Councilwoman Valerie Poindexter, head of the council’s Finance Committee, would grant the county the authority to sell the new general obligation bonds.

Poindexter today said that the bill was waived from her committee to the full council.

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“Time is of the essence if we are to get the lowest interest,” she said.

Deanna Sako, the county’s deputy finance director, said the $60 million represents the portion of the county’s outstanding debt that is mature enough to be refinanced. The county holds roughly another $200 million in newer long-term debt, much of which carries lower interest rates than the bonds to be refinanced.

The two biggest bonds to be refinanced were originally for $36 million and $30 million, which were sold in 2003 and 2004, respectively. The county still owes about $48 million on those bond issues which were used for various capital improvement projects.

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Most of the remaining $12 million to be refinanced involves money the county borrowed for improvements to the county’s sewer system.

The county has been paying between 2.5% and 5.25% interest on those bond issues, Sako said.

She said the county anticipates the new bonds will be issued with an interest rate of less than 2%, which would save the county about $7.6 million over their remaining terms.

“Now seems like the right time to save the county some money,” Sako said. “The rates really have been coming down.”

The level of interest the county will pay depends largely on its bond rating. Fitch Rating in June affirmed Hawaii County’s rating of AA-, the fourth-highest rate possible.

If the bill is approved by the council, the bonds likely will be sold in January. Interest earned by purchasers of general obligation bonds, which are a type of municipal bonds, is exempt from taxes.

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