Maui fires won’t affect the county’s or state’s credit rating, Moody’s says

Maui public finance issuers are expected to maintain credit quality despite the immense challenges and costs associated with rebuilding from the recent deadly wildfires, according to Moody’s Investors Service.

The August 8 fire, believed to be the deadliest U.S. blaze in the past century, leveled the town of Lahaina leaving 115 people dead, and hundreds still missing, according to state officials.

Hawaii Gov. Josh Green announced Tuesday the U.S. Army Corp of Engineers will lead efforts to remove fire-damaged debris from the multiple areas affected by the fires.

“In discussions with FEMA, we reached an understanding that extra consideration will be given to embedding Hawaii’s cultural experts into the mission,” Green said in a statement. “There will also be a focus on utilizing local businesses and paying prevailing wages for the debris removal effort.”

The state’s and county’s generally strong finances and sound fiscal governance combined with federal aid will help them withstand adverse budgetary effects, said Joseph Manoleas, a Moody’s assistant vice president, and lead author of a report released Tuesday.

The federal government has declared the event a major disaster, making impacted areas eligible for Federal Emergency Management Agency reimbursement equal to 75% of most direct costs associated with debris removal, repair and rebuilding of public infrastructure, according to the Moody’s report.

“A subsequent declaration will expand FEMA reimbursement to 100% of costs for a 30-day period of the state’s choosing, meaning the county will be eligible for full reimbursement for the most costly of the first four months of recovery,” Moody’s analysts wrote.

Hawaii Airport Enterprise and the Port Facility are also well positioned to manage reduced traffic given their revenue diversity, healthy finances and considerable rate-setting flexibility, Manoleas said.

Moody’s Investors Service

The one caveat is the devastation wrought by the fire will exacerbate housing and demographic issues facing Maui and the state given the area’s very high cost of living, Manoleas said.

“The recovery process will likely be more costly and extended than rebuilding after natural disasters that have hit the U.S. mainland in recent years because of difficulties in getting building materials to Maui, high labor costs and inflation,” he said.

Municipal entities could also face litigation for negligence, he said, and any litigation, irrespective of ultimate legal liability or settlements, can be costly. 

The investor-owned Hawaiian Electric Company, Inc. faces significant litigation exposure, including from the county, and the company may require some form of intervention or assistance, Moody’s analysts wrote.

“With the selection of the Army Corp of Engineers, Maui will be in a good position to have the critical and extensive work of debris removal paid for with federal resources,” Maui County Mayor Richard Bissen said in a statement.