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Hawaii's Economic Momentum Update from the Governor

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This presentation is an abridged version of the credit presentation delivered to rating agencies and investors last month as part of the State’s most recent general obligation bond transaction.

This presentation is an abridged version of the credit presentation delivered to rating agencies and investors last month as part of the State’s most recent general obligation bond transaction.


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  • 1. Update from the Governor Hawai‘i’s Economic Momentum April 24, 2014
  • 2. A Look Back
  • 3. Hawai„i Gross Domestic Product (GDP) Shrank (U.S. Bureau of Economic Analysis) 2011 – Hawai‘i’s Economy Floundering Tourism Still Recovering • Japan earthquake and tsunami weighed on sector • Visitor arrivals grew nominally 3.5% from 2010 (UH Economic Research Organization/UHERO) • Revenue Per Available Room (RevPAR) remained low at $139, below pre-recession levels -0.2% 6.6% 7.9% 9.3% 8.5% Statewide Unemployment high Maui Hawai„i Kaua„i Construction sector down from 2010 - 18.7% Contracting General Excise (GE) tax base down - 7.9% Construction income down - 5.0% Construction job count down STILL IN RECESSION
  • 4. • Cost-Cutting Measures Implemented • Furloughs • Under-funded programs • Crippled services • Reserve Funding Ratios and Reserve Balances Poor • Credit Rating Downgraded (Moody‟s) • State Comprehensive Annual Finance Report (CAFR) for FY2009 and FY2010 produced up to a year late Budget Shortfall Forecast - $220 Million 2011 – Dire Fiscal Condition
  • 5. Economic Turnaround
  • 6. • Over $1 Billion Turnaround Achieved through spending reduction measures and increasing revenues, which resulted in increasing positive ending balances during FY11, FY12 and FY13 2013 – Fiscal Health Restored + $880 MillionPositive Balance • Public Worker Contracts Reached for FY14 and Beyond No Labor Disruptions Affordable and Sustainable Wage and Benefit Increases No Layoffs No Furloughs
  • 7. 2013 – Fiscal Health Restored • Restoring Critical Services through Strategic Targeted Process • Ceased ineffectively funded programs • Evaluated future funding based on a sustainability framework • Restored services in agricultural inspections, watershed protection, etc. • Recapitalizing Reserves to Higher Than Pre-Recession Levels • Established targeted reserve plan and fiscal ending balance targets • Recapitalization plan to begin in 2014 • Effectively Managing Liabilities • Pension reform measures passed • Other Post-Employment Benefits (OPEB) pre-funding now law
  • 8. Positive Comments from Credit Rating Agency “Due in large part to the state‟s current and projected fiscal position, as well as its recently formalized commitment to addressing its retirement liabilities, we (S&P) see Hawaii‟s credit quality poised to strengthen.” – Standard & Poor‟s Rating Review October 9, 2013
  • 9. Growing and Strengthening Economy ____________________ Source: State Policy Reports, Federal Funds Information for States, March 2014 Hawai„i Ranks 12th among states in terms of Economic Momentum Factors Rank  Personal Income 22nd  Unemployment 15th  Employment 10th  Population Change 8th
  • 10. Growing and Strengthening Economy • Tourism set record highs in 2013 for: Arrivals, Visitor Spending, Hotel Occupancy, and Revenue Per Available Room (RevPAR) • Real estate market strong with high sales velocity, stable prices and very low foreclosures • Military presence growing, contributing to Hawai„i‟s economy and security • State contributing significantly – maintaining employment levels and investing in infrastructure
  • 11. Construction Economic Driver Growing and Strengthening Economy • DBEDT First Quarter 2014 Economic Forecast • Expects the construction industry to lead as Hawai„i‟s overall economy grows each year through 2017 • DBEDT Research & Economic Analysis Division Report on Construction • Completed February 2014; first of its kind in nearly 14 years • Predicts the construction industry will grow by 12.4% in 2014 and 8.3% in 2015 As construction continues to accelerate to meet demands such as affordable housing, we can expect increased jobs, strong revenue and continued economic improvement
  • 12. Growing and Strengthening Economy • Hawai„i Asset Growth Outpaced Liability Growth for First Time in Seven Years • State Comprehensive Annual Financial Report (CAFR) for the fiscal year ending June 30, 2013, shows the state‟s net position – assets less liabilities – for primary governmental activities increased for the first time since 2006 • From $4.5 billion to $4.8 billion, a gain of $307.1 million • Represents an increase of 6.8 percent over 2012 • Council on Revenues‟ Updated Forecast (3/11/2014) Latest forecast appears to signal revenue growth has “peaked” – at least for the short term – but council acknowledged economy is stable, strong and growing  Stable in FY14  5.5% growth in FY15  Continued growth every year through 2020
  • 13. Growing and Strengthening Economy ____________________ Source: State of Hawai„i Department of Taxation 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 $3,446,385,000.00 $3,997,539,000.00 $4,434,993,000.00 $4,585,580,000.00 $4,641,872,000.00 $4,202,301,000.00 $4,364,266,000.00 $4,324,442,000.00 $4,973,895,000.00 $5,466,924,000.00 $5,466,923,000.00 $5,767,604,000.00 $6,055,984,000.00 $6,407,231,000.00 $6,804,479,000.00 $7,171,921,000.00 $7,559,205,000.00 GENERAL FUND TAX REVENUES FY2004-2013 (ACTUAL) FY2014-2020 (FORECAST)
  • 14. Tax Revenue Growing Faster than National Average Growing and Strengthening Economy ____________________ Source: “Fiscal 50: State Trends and Analysis,” The Pew Charitable Trusts.
  • 15. State Contributing to Our Economy
  • 16. State Contributing to Our Economy • State‟s improved fiscal position allows us to move forward with confidence on investing in state infrastructure and facilities through Capital Improvement Project (CIP) • Proactive CIP program also stimulating local economy and generating jobs for local residents • Administration releasing CIP funds with increased efficiency
  • 17. State Contributing to Our Economy ____________________ 3.4+ Billion in CIP Funds Released Since Governor Took Office
  • 18. State Contributing to Our Economy • Honolulu International Airport • FAA approval of the final environmental assessment has been received that will allow the commencement of a $750 million New Day Works Project Program • HNL has not undergone improvements of this magnitude in more than 20 years • Honolulu Harbor Pier 29 • $29 million project to restore harbor capacity and improve safety and efficiency • State received $24.5 million in federal stimulus funds, covering approximately 85% of the total project cost • Kapolei Interchange • $26 million project to improve traffic operations and reduce traffic congestion • Project completed in August 2012 • Saddle Road on Hawai„i Island • $30.8 million realignment project • Renamed the Daniel K. Inouye Highway CIP Highlights
  • 19. Key Indicators ____________________ Source: DLIR • Record 658,450 in Hawai„i‟s Labor Force • March 2014 – Statewide Unemployment Rate 4.5% • Improved in all counties
  • 20. Local Economy Out-Performing Nation and Other States Comparably Rated to Hawai‘i Key Indicators – Comparative State Metrics ____________________ Source: DBEDT, Bureau of Labor Statistics, U.S. Department of Labor.
  • 21. Local Economy Performed Well During the Great Recession and Out-Performed Other States Comparably Rated to Hawai‘i Key Indicators – Comparative State Metrics ____________________ Source: DBEDT, Bureau of Labor Statistics, U.S. Department of Labor.
  • 22. State Building Back Reserves Key Indicators – Comparative State Metrics ____________________ Source: “Fiscal 50: State Trends and Analysis,” The Pew Charitable Trusts.
  • 23. State Building Back Reserves Key Indicators – Comparative State Metrics ____________________ Source: “Fiscal 50: State Trends and Analysis,” The Pew Charitable Trusts.
  • 24. Honolulu Assessed Valuation (FY)(4) Days on Market(2) Comparative Foreclosure Rates(3) Median Single Family Home Prices (CY)(1) Hawai‘i’s Real Estate Market is Very Stable and Provides Support to the Overall Economy Diverse and Growing Economy – Real Estate Billions FY 2013 and FY 2014 saw a 3% increase each in assessed valuation Honolulu represents 70% of the total Hawai'i real estate market, illustrating the consistency and strength of the Hawai'i market ____________________ (1) National Association of Realtors. 2013 median single family home prices is through second quarter. (2) www.realtor.com and Honolulu Board of Realtors. Reflects July 2013. (3) www.realtytrac.com. As of July 2013. (4) Net taxable property value.
  • 25. Median Single Family Home Prices (CY)(1) Hawai‘i Real Estate Strong and Supporting Overall Economy Real Estate Industry Honolulu represents 70% of the total Hawai‘i real estate market, illustrating the consistency and strength of the Hawai‘i market ____________________ (1) National Association of Realtors. 2013 median single family home prices is through second quarter. (2) www.realtor.com and Honolulu Board of Realtors. Reflects July 2013. (3) www.realtytrac.com. As of July 2013. (4) Net taxable property value.
  • 26. Days on Market(2) Hawai‘i Real Estate Strong and Supporting the Economy Real Estate Industry Honolulu represents 70% of the total Hawai'i real estate market, illustrating the consistency and strength of the Hawai'i market ____________________ (1) National Association of Realtors. 2013 median single family home prices is through second quarter. (2) www.realtor.com and Honolulu Board of Realtors. Reflects July 2013. (3) www.realtytrac.com. As of July 2013. (4) Net taxable property value.
  • 27. Affordable Housing An Abercrombie Administration Priority
  • 28. Significant Reinvestment in the Urban Core of Honolulu Ensures Strong Demand for Labor and Future Revenue Growth for the State Case Study: New Development in Honolulu  Major developers including Alexander & Baldwin, Howard Hughes Corporation and Kamehameha Schools have large projects planned for the urban core  Honolulu‟s rail system will be incorporated into transit oriented development throughout Kaka„ako  Major expansion and renovation is underway of Ala Moana Shopping Center – the nation‟s highest grossing mall per square foot. Bloomingdale‟s will open as a new anchor tenant in 2015  The new International Market Place project in Waikiki will feature Saks Fifth Avenue as its primary tenant  The estimated value of projects approved by the Hawai„i Community Development Authority (HCDA) totals $2.2 billion  The Hawai„i Housing Finance and Development Corporation is planning 9,955 new affordable housing units statewide through 2018 (includes 7,300 in Honolulu) Supporting the Growth of Our Economy
  • 29. “…developers to play their part in delivering the 5,700 new housing units that are needed in Hawaii each year.” “…HCDA has overseen the development of 1,766 affordable and reserve housing units in the Kakaako Community Development District. An additional 1,612 reserve and workforce housing units are either under construction or will soon break ground.”
  • 30. HCDA Affordable Housing Projects Projects Under Construction Market Reserve Total Halekauwila Place* - 204 204 Waihonua 341 - 341 680 Ala Moana - 54 54 801 South Street A - 635 635 Symphony 288 100 388 Rycroft Terrace - 162 162 Total Units 629 1155 1784 Reserve = Affordable Housing *Completed in March 2014
  • 31. HCDA Affordable Housing Projects Permitted Projects Market Reserve Total Waihonua 2 - 72 72 404 Ward 49 375 424 Waiea 177 - 177 Anaha 318 - 318 The Collection 467 - 467 801 South Street B 49 361 410 803 Waimanu 24 121 145 Total Units 1133 1304 2437
  • 32. HCDA Affordable Housing Projects Projects Market Reserve Total KS Land Block A: Keauhou Lane 338 294 632 KS Land Block B 75 108 183 Total Units 413 402 815
  • 33. Mahalo governor.hawaii.gov