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.

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