State of Hawai ‘ i General Obligation Bonds of 2019 $550,000,000* Investor Presentation January 28, 2019 *Preliminary, subject to change
Disclaimer This electronic Investor Presentation you are about to view is provided as of January 28, 2019 for a proposed offering by the State of Hawai‘i (the “State”) of its General Obligation Bonds of 2019 (“the Bonds”). If you are viewing this presentation after January 28, 2019, there may have been events that occurred subsequent to such date that would have a material adverse effect on the financial information that is presented herein, and neither the State, nor Bank of America Merrill Lynch as Representative of the Underwriters, has undertaken any obligation to update this electronic presentation. All market prices, financial presentation prices, data and other information provided herein are not warranted as to completeness or accuracy and are subject to change without notice. This Investor Presentation is provided for your information and convenience only. Any investment decisions regarding the Bonds should only be made after a careful review of the complete Preliminary Official Statement. By accessing this presentation, you agree not to duplicate, copy, download, screen capture, electronically store or record this Investor Presentation, nor to produce, publish or distribute this Investor Presentation in any form whatsoever. This Investor Presentation does not constitute a recommendation or an offer or solicitation for the purchase or sale of any security or other financial instrument, including the Bonds, or to adopt any investment strategy. Any offer or solicitation with respect to the Bonds will be made solely by means of the Preliminary Official Statement and Official Statement, which describe the actual terms of such Bonds. In no event shall the Underwriters or the State be liable for any use by any party of, for any decision made or action taken by any party in reliance upon, or for any inaccuracies or errors in, or omissions from, the information contained herein and such information may not be relied upon by you in evaluating the merits of participating in any transaction mentioned herein. Neither the State nor the Underwriters make any representations as to the legal, tax, credit or accounting treatment of any transactions mentioned herein, or any other effects such transactions may have on you and your affiliates or any other parties to such transactions and their respective affiliates. You should consult with your own advisors as to such matters and the consequences of the purchase and ownership of the Bonds. Nothing in these materials constitutes a commitment by the State, Underwriters or any of their affiliates to enter into any transaction. No assurance can be given that any transaction mentioned herein could in fact be executed. Past performance is not indicative of future returns, which will vary. Transactions involving the Bonds may not be suitable for all investors. You should consult with your own advisors as to the suitability of the Bonds for your particular circumstances. Clients should contact their salesperson at, and execute transactions through, an entity of the Underwriters or other syndicate member entity qualified in their home jurisdiction unless governing law permits otherwise. 1
Transaction Summary Issuer: State of Hawai ‘ i Offering: General Obligation Bonds of 2019 $550,000,000*, consisting of the Series FW, FX and FY Bonds Estimated Par Amount: All Fixed Rate Serial Bonds* Series FW ($454,265,000): January 1, 2023-2039 Financing Structure: Series FX ($50,000,000): January 1, 2020-2022 Series FY ($45,735,000): April 1, 2019 Series FW: Federal and State Tax-Exempt Tax Status: Series FX & FY: Federally Taxable and State Tax-Exempt Security: Full Faith and Credit of the State of Hawai ‘ i Call Provisions: To Be Determined S&P: AA+ (Stable) Moody’s: Aa1 (Stable) Fitch: AA (Positive) Ratings: Financing the costs of acquisition, construction, extension or improvement of various public improvement projects; including public buildings and facilities, elementary and Use of Proceeds: secondary schools, community college and university facilities, public libraries and parks Co-Senior Managers: Bank of America Merrill Lynch (Lead Bookrunner), Morgan Stanley Co-Managers: Goldman Sachs & Co. LLC, Wells Fargo Securities, Stifel Nicolaus & Company, Inc. Retail Order Period: February 5, 2019* Pricing: Institutional Order Period: February 6, 2019* Closing: February 21, 2019* * Preliminary, subject to change 2
Developments Since Last Bond Sale General Obligation Bonds of 2018 General Obligation Bonds of 2019 (January 2018) (January 2019) YTD Unemployment Rate 2.1% (YTD through Nov.) 2.3% (2018) Economy Visitor Arrivals 9.4 million (CY 2017) 9.9 million (projected 2018) Visitor Expenditures $16.7 billion (CY 2017) $18.3 billion (projected 2018) Investment Returns +13.68% (FY 2017) 7.89% (FY 2018) Actuarial Value of Assets ~$17 billion (Oct. 2017) $16.51 billion (FY 2018) Proactively Managing Pension 54.9% (FY 2017) 55.2% (FY 2018) Funded Ratio Liabilities Increased Contribution Act 17 Effective on July 1, 2017 Act 17 Effective for full Fiscal Year 26 Years 25 Years Years to Full Funding 9.5% (FY 2017) 7.3% (FY 2018) Investment Returns Commitment to Fund Balances $880 million (FY 2017) $1.3 billion (FY 2018) Funding OPEB Funded Ratio 8.6% (FY 2017) 12.1% (FY 2018) % of ARC Paid 89% of ARC Paid (FY 2018) 100% of ARC to be Paid (FY 2019) FY 2018 4.3% Projected 7.6% Actual Council on Revenues FY 2019 4.3% each year 4.2% (FY 2019) Projections FY 2020 to FY 2025 4.0% each year 4.0% each year Budget Restrictions 10% Budget Restriction (FY 2018) 5% Budget Restriction (FY 2019) Budget Controls State Treasury Pool Earning 1% Earning 1.6% as of FY 2018 EBRF Balance $310.7 million (FY 2017) $375.7 million (FY 2018) Building Reserves HHRF Balance $182.5 million (FY 2017) $182.5 million (FY 2018) ____________________ Source: State of Hawai ‘ i, Department of Budget and Finance. 3
Economic Update Hawai ‘ i Employment Base 2018 unemployment rate of 2.3% (not seasonally Annual Average CY 2018 adjusted) was the lowest unemployment rate in the nation Information Other Services Hawai‘i's labor force, employment and job count Manufacturing Trade, reached record levels in 2017 and has remained at Transportation & Private Education 1% 4% Utilities record levels for employment and job count in 2018 Financial Activities 2% 2% 17% Natural Resources, 4% Mining, Wage and salary jobs count grew 1.0% in 2017 and Construction 5% increased 1.7% in 2018 Local Government 3% The State's economy continues to diversify (see chart to the right) with growth in Private Health 10% 18% State Government Care and Professional and Business Services Leisure & Hospitality Hawai‘i military payroll jobs have remained stable over the past 15 years despite changes in the 10% federal administration Private Health 2% 12% Care Professional & 10% Business Services Federal Civilian Non-DOD Federal military incl. DOD civilians ____________________ Source: State of Hawai ‘ i, Department of Labor and Industrial Relations, U.S. Bureau of Economic Analysis, U.S. Bureau of Labor Statistics. 4
Labor Market Update Median Household Income (CY 2008 to 2017) $90,000 $81,284 $80,513 $77,273 $77,765 $80,000 $74,634 $74,511 $73,388 $73,486 $71,404 $70,951 $69,592 $68,537 $67,744 $68,020 $67,214 $66,146 $66,259 $70,000 $64,098 $63,030 $61,821 $60,336 $57,617 $60,000 $53,657 $55,775 $52,250 $52,029 $51,371 $50,221 $50,046 $50,502 $50,000 $40,000 $30,000 $20,000 $10,000 $0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Honolulu State of Hawai‘i United States Historical Unemployment Rates (CY 2008 to Present) 12% 2018 (1) United States 3.9% 10% Hawai ‘ i State 2.3% 8% 2.1% Honolulu 6% 4% 2% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Honolulu State of Hawai'i United States ____________________ Source: U.S. Census Bureau, Bureau of Labor Statistics. (1) Not seasonally adjusted. 5
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