Ka Wai Ola - Office of Hawaiian Affairs, Volume 11, Number 6, 1 June 1994 — Legislature OKs OHA bonds [ARTICLE+ILLUSTRATION]

Legislature OKs OHA bonds

Money raising measure likely to be boon for native Hawaiian programs

by Patrick Johnston Legislation passed this session has the potential to revolutionize OHA's ability to create and fund programs for native Hawaiians. Senate Bill 2261 authorizes OHA to issue revenue bonds: revenue-generating certificates

■ sold to 9 investors 1 to raise I money for spec if ie projects. The bill is important because it a 1 1 o w s OHA to

start programs for Hawaiians without dipping into and diluting the large pool of trust funds OHA has just received from the state. OHA chairman Clayton Hee explains, "The authority to issue bonds is a natural progression for OHA because it allows us to leverage our portfolio. By doing so it immediately gives OHA the ability to expand projects for Hawaiians without depleting the corpus."

Programs, Hee explains, might include developing commercial office space for Hawaiian businesses, putting up affordable housing for kūpuna, adding infrastructure for housing developments, or building cultural or educational centers. "It brings dreams closer to reality," says Hee. The money would not eome for

free. The nature of revenue bonds is that the money generated from their sale must be used for projects that will pay back the interest on the bonds. If OHA starts a

housing project or builds a shopping center. these projects must generate enough money to pay the interest on the bonds.

"The authority to issue bonds is a natural progression for OHA because it allows us to leverage our portfolio. By doing so it immediately gives OHA the ability to expand projects for Hawaiians without depleting the corpus." - Clayton Hee

The interest paid to investors would depend to a large degree on OHA's credit rating. If a eompany or government is seen as a safe bet, then they ean pay a lower interest on their bonds. "People will buy on your credit rating," explains OHA deputy Administra-tor Sesnita Moepono. "Your rating is based on risk. The

lower the risk, the lower the interest." Credit ratings range from a high of AAA to a low of D. The state of Hawai'i has an A rating. A few years ago New York City was a D. Moepono believes OHA is in good shape in this regard. Unlike the state, OHA has no deficits and does not have the obligatory outlays of cash for things like schools or road repair that the state does. It ean only spend what it's got. Also, OHA's revenue comes primarilv from lease rents

from ceded lands, ineome whieh is far more stable than ineome from taxes. "I see OHA as being a good risk," says Moepono. "We have money, we're going to be around."

Risk would also depend on the type of investment. Building housing units would be seen as a safer investment in housing-shon Hawai'i than building a convention center, whieh would have to compete with closer-to-home options on the Mainland. Another way of lowering interest charges is to use the bond funds for tax-exempt projects.

OHA could also buy insurance to guarantee payment. One feature of these revenue bonds that will make them less expensive for OHA is that they will be tax-free. This could bring down costs for OHA by as mueh as 2.5 percent, a considerable savings on millions of dollars worth of bonds. OHA officials stress that any decisions on the issuance of revenue bonds must go through the Board of Trustees, and no action has been taken in this regard. "It is just an option that we didn't have before," says Moepono.

And, Moepono adds, bonds are not the only option. If it is eheaper to borrow money from the bank for certain projects, then OHA could go that route. Money from revenue bonds could only go into revenue-gen-erating projects. However, trust funds not spent on these projects could then be used for social projects that could not be expected to generate mueh, if any, ineome. According to Moepono, funds raised through the issuance of bonds could be used for all Hawaiians and would not be restricted by blood quantum.

Clayton Hee

Homes on the Wai'anae Coast: Bond bill could mean more affordab!e mortgages and better infrastructure. Photo by Deborah Ward