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Home My WebLink AboutCOM 0383.001 1998-2000 ~p~Ntr ar ~l~ .S ~h~0~ NL~•` r 99 JUL 28 f,f~ 8 15 Stephen K. Yamashiro Harry A. Takahashi Mnyor I• ~ - - Director County of Hawaii CourdTi~~ Hi~,v~iaii DEPARTMENT OF FINANCE S.K. Schulte Deputy 25 Aupuni Street, Room 118 • Hilo, Hawaii 96720-4252 (808)961-8234 Fax (808)961-8248 July 27, 1999 To: Aaron Chung, Chair Committee On Finance From: Harry A. Takahashi, Finance Director Subject: Refunding Bond Issues Pursuant to Committee on Finance discussions of today relating to resources for Bill 109 appropriating funds for repairs to parks facilities, we submit for information our inquiry to our bond counsel for the forthcoming bond issuance. We have recently forwarded them information regarding how bond proceeds from the refunded bonds have been allotted. Hopefully, there are enough facilities still in use which have useful life extending beyond the refunding period which will enable us to be exempt from the mandatory redemption requirements. Comm. Na ~I r`:le NQ. CC C ~ F.ef. To: U F"i Ref. Date JUL 3 0 1999 J~ '~O! M'~ Stephen K. Yamashiro Harry A. Takahashi Mayor Direcmr County of Hawari DEPARTMENT OF FINANCE S.K. Schulte ~vaty ZS Aupuni Sheet, Room 118 • Hilo, Hawaii 96720-0252 (808) 961-8234 • Fax (806) 961-6248 May 17, 1999 Mr. Craig Scully, Esq. Mr. John P. MacMaster, Esq. Winthrop, Stimson, Putnam & Roberts One Battery Park Plaza New York, NY 10004-1490 Thank you for your April 26, 1999, letter. After reviewing your comments, we have some follow-up questions and concerns: During Council discussions, we have been asked if it is possible to refund the 1978 Refunding Bonds but leave the 1978 Sinking Fund intact, invested in repurchase agreements. If the repurchase agreements remain, would the interest earnings be subject to arbitrage restrictions? In your letter, you discuss mandatory redemption requirements for the new refunding bonds if the County has excess amounts on hand. Is there a limitation on the accumulated amount of bonds subject to early redemption? Can we assume that the limitation would be to the amount of the Sinking Fund released as a result of the Refunding? Assuming that in year 1, the County realizes a $15 million fund balance and five percent of the operating expenditures amounted to $7 million. Under the formula, we would then redeem $8 million of the new bonds. If we end the second year with a $14 million fund balance and the five percent calculation for the previous year is $7.5 million, what would our bond redemption requirement be? Since the Sinking Fund will be transferred to the General Fund, shouldn't the 5% limitation be applicable only to the General Fund? For information, the General Fund does provide subsidies to Special Funds. The second paragraph, under B, Mandatory Early Redemption of the New Bonds, makes reference to "costly restrictions". Please describe the nature of the "costly restrictions". Mr. Craig Scully, Esq. Mr. John P. MacMaster, Esq. May 17, 1999 Page 2 In the third paragraph, under B, the first sentence makes reference to "The outcome to be avoided....". Please be specific as to what is meant when addressing "outcome". Is it referring to "costly restrictions"? In the third paragraph, reference is also made to the County having to make certain representations about fts financial distress. Where would these representations be made? In the official statement for the bonds or where else? In your opinion, what effect can we expect these representations to have on the County's credit rating and ability to insure bonds? In the fourth paragraph, under B, what is meant by "working capital reserve"? Referring to operating expenditures, are operating transfers out (on a GAAP basis) considered operating expenditures for this purpose? Which of the County's funds are to be included when determining the "working capital reserve" and "operating expenses"? Utilizing the County's 1998 Comprehensive Annual Financial Report, what would you say would be the County's working capital reserve and operating expenditures? How do we determine "available amounts"? Is it just, say, our fund balance at the end of the year? If it does tie in to fund balance, is it only our unreserved, undesignated fund balance? In paragraph 7, under B, your example makes reference to "non-working capital purposes". Please define "non-working capital purposes". The first paragraph, under B, you state that "The County may wish to investigate whether the capital projects refinanced by the 1978 Refunding Bonds actually have longer economic lives, in which case the restrictions could be relaxed." We interpret this to mean that if our records indicate a number of existing capital projects still exist which were initially funded by those bonds which were subject to the 1978 Refunding Bonds, then we could possibly be preempted from the balance of the restrictions. Is there a percentage or dollar value of capital projects refunded by the 1978 Refunding Bonds that must pass the economic life test for the Mandatory Early Redemption of New Bonds restriction to be relaxed? If so, what would be the extent of the relaxation? Please comment. Mr. Craig Scully, Esq. Mr. John P. MacMaster, Esq. May 17, 1999 Page 3 Lastly, Mayor Yamashiro is still interested in securitizing the delinquent taxes and we have not received any indication from you as to whether this County is able to do it under existing provisions. If we need further legislative actions, please elaborate. He is expecting to be able to do it within the next year. Sincerely, C~-~P a..Qi~--~' H rry A. Pakahashi Director of Finance cc: Frank Manalili, Treasurer Dixie Kaetsu, Comptroller Gary Takamura, Budget Administrator