With tourism in coronavirus tatters, Hawaii gets a negative outlook

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Tourism-dependent Hawaii was hit with a negative outlook Wednesday as the coronavirus pandemic leaves the Aloha State largely without visitors.

Moody's Investors Service revised the state’s outlook to negative from stable and affirmed its Aa1 rating on $7.2 billion of general obligation bonds.

A view of Honolulu. Moody's assigned a negative outlook to Hawaii state general obligation bonds Wednesday.

“We expect a sudden and severe decline in the state's tax revenues as a result of the rapid downturn in visitor arrivals and the negative economic effects of the state's own efforts to stem the outbreak,” Moody’s wrote.

All residents and visitors arriving in Hawaii are now required to undertake a 14-day quarantine.

Domestic passenger arrivals at Hawaii’s airports during April are down 99% from a year ago, hitting a low of 168 April 6, according to state government data.

In April 2019, a typical day saw about 30,000 people arrive daily at the state’s airports.

“We expect that the decline in fiscal 2020 and 2021 will be more severe than in other states and the recovery beyond fiscal 2021 will be slower due to the significance of the tourism industry in Hawaii and the industry's dependence on air travel,” Moody’s wrote.

The new negative outlook also applies to other debt linked to the state’s GO rating, including $460 million of Aa1-rated highway revenue bonds and $1.9 billion of Aa2-rated certificates of participation.

The state government’s position, according to Moody’s, is supported by its strong financial position and liquidity entering the crisis, as well as its strong fiscal governance, though it will be challenged by its high fixed costs for debt service, pensions and other retirement benefits.

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