Honolulu recently announced the successful sale of $271 million in general obligation bonds to support its capital improvement program and ongoing construction of the Honolulu Authority for Rapid Transportation’s rail project. The bonds were sold on Tuesday with an average interest rate of 3.71% and received a “AA+” rating from Fitch and Standard & Poor’s, both with a “stable” outlook.
The city received over $477 million in total retail and institutional orders, including orders from individual Hawaii residents. This high demand for the bonds can be attributed to the city’s comprehensive investor outreach effort through a print and digital retail advertising campaign in Hawaii.
Leading the bond offering was BofA Securities, with Morgan Stanley and Piper Sandler serving as co-managers. Mayor Rick Blangiardi expressed that the bond proceeds will be used to fund the city’s capital improvement priorities and the replacement of equipment to better serve the community. Additionally, the bond sale will also help refinance the city’s Series 2019E GO bonds, resulting in approximately $11 million in present value savings for the Skyline rail project.
The remaining 2019 bond debt to be refinanced is around $180 million, including interest. This debt principal serves as bridge financing for rail construction until it is repaid by the state’s general excise tax and transient accommodations tax.
It is important to note that the proceeds from these GO bond sales, initially estimated at $257.1 million, will be allocated to fund the city’s $1.34 billion-plus capital improvement program and equipment budgets as funding is required. However, there is no direct connection between the bond sales and specific projects at the time of the sale, as clarified by Andrew Kawano, the city Department of Budget and Finance director.
Regarding the ongoing construction of the nearly $10 billion rail project, Kawano explained that the GO bonds are not specifically designated to a particular part of the rail line, such as the 5.2-mile segment from Aloha Stadium to Middle Street. Instead, they act as bridge financing for the overall rail construction.
In conclusion, Honolulu’s successful bond sale will provide crucial funding for its capital improvement program and the ongoing rail project. The city’s diligent investor outreach efforts contributed to the high demand for the bonds, demonstrating confidence in Honolulu’s financial stability and future development.
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