by Mark Hyde
Maui’s bond rating is rightfully touted as a point of pride: Moody’s assigns the county an AA1 rating, which is near the top. While this keeps the county’s cost of borrowing low, we need to look at an array of economic data to get a complete picture of our economic circumstances.
According to the United States Department of Commerce’s Bureau of Economic Analysis, Maui County’s GDP (gross domestic product) for the most recent period (2014 compared to 2013) placed the County in the lowest tier of categorization (fifth out of five), comparing our economic performance to that of other metropolitan areas in the nation. (See http://www.bea.gov/newsreleases/regional/gdp_metro/2015/_images/gdp_metro0915.png.)
Data from this report depicting Maui County in the red was recently published (Summer 2016) in Charles Schwab’s OnInvesting magazine under the title “Geography, Growth and Municipal Bonds, Location matters when investing in munis,” noting that “Cities and states with strong, expanding economies are often in healthy fiscal shape, which supports their ability to make debt payments.”
The Schwab article also counsels investors to consider investing in areas not dominated by one industry. According to Maui County’s website, the visitor industry is Maui County’s primary industry. Tourism, it should be noted, is economically sensitive.
In terms of personal income, Maui County scores poorly, with per capita personal income in 2014 equal to $39,049 compared to a U.S. average of $46,049. Maui also ranks third out of 4 counties in the state in personal income. (See http://bea.gov/newsreleases/regional/lapi/2015/pdf/lapi1115.pdf.)
We all know Maui has one of the highest costs of living in the country, borne out by national data and personal experience. Hawaii ranks 50th out of fifty states in this category. (See https://www.missourieconomy.org/indicators/cost_of_living/.)
In terms of pension funding, Hawaii has one of the biggest pension deficits in the nation (Pacific Business News, December 23, 2015); Maui County shares a portion of that liability, equal to about$300 million, not to mention another roughly $300 million in unfunded retiree health care costs.
So when local government highlights the county’s municipal bond rating, consider the whole story. The county has work to do to develop a diverse economy with better paying jobs.