Standard & Poor's Ratings Services said it has revised the outlook on all of Hawaii's debt to stable.
In addition, it assigned a AA long-term rating to the state's following
planned bond issues: $575 million series 2014 EO general obligation (GO) bonds; $503.3 million series 2014 EP GO refunding bonds; and $25 million series 2014 EQ taxable GO bonds.
At the same time, S&P affirmed its AA long-term rating and underlying rating (SPUR) on Hawaii's GO bonds and the AA-minus long-term rating on the state's certificates of participation (COPs), reflecting appropriation risk.
The outlook revision reflects a change in circumstances that reduces the likelihood the agency will raise the rating within a one-to-two year timeframe.
"One such change is the strengthening U.S. dollar, which makes Hawaii a more expensive destination for tourists with international origins," said Standard & Poor's credit analyst Gabriel Petek. "Other signs of potential softening are reflected in Hawaii's arrivals, which dipped during the final quarter of 2013 and the first quarter of this year after 17 quarters of growth."
The state's construction industry, which will continue increasing in importance to the state economy, has shown some mixed signals in recent quarters. Reflecting these developments, state tax revenues underperformed what the state's Council on Revenues had forecast for fiscal 2014 (although, not by as much as officially reported). In addition, the state's fiscal outlook -- while still strong -- is less robust than last year at this time.
"Finally, a change in administration that will take place when a new governor is inaugurated in January introduces some uncertainty with regard to the state's budget management. The current administration built its financial plan around a policy objective to maintain combined ending and rainy day fund balances of 10% or more of general fund revenues. We have viewed this as favorable for the state's credit outlook, but given that the policy was informal, we make no assumption about whether a new administration will adhere to this," added Petek.