LOS ANGELES — Standard & Poor's revised its outlook to negative and affirmed its AA long-term rating on Kauai County, Hawaii's outstanding general obligation bonds Sept. 16.
"The negative outlook is based on our view of the county's continued use of fund balance to balance its budget," said Standard & Poor's credit analyst Jen Hansen.
It also reflects S&P analysts' view of Kauai's tourism-based economy, as well as their anticipation that the county will continue to have operating deficits and will need to continue adjusting revenues and expenditures to restore balance, according to the report.
S&P cited the county's strong management, very strong liquidity, and adequate debt and contingent liabilities in affirming the county's rating.
If the county continues to draw on reserves and budgetary flexibility diminishes significantly, S&P analysts said they could lower the rating.
"With available reserves at 27.6% of operating expenditures in fiscal 2013, Kauai County's budgetary flexibility is very strong in our view," S&P analysts said. "However, the county has drawn on reserves during the past several years to offset declines in tax revenues."
Reserves have fallen from 68% of expenditures in fiscal 2010 and continue to decline, S&P analysts said.
Kauai County, which consists of the islands of Kauai, Niihau, Lehua, and Kaula, is located northwest of Honolulu.
