Honolulu bond counsel warns rate cuts could breach covenants as council debates phased sewer‑fee increases

Honolulu — Bond counsel and city finance officials told the Budget Committee that the city’s wastewater bonds include a legally binding “rate covenant” that requires sewer rates be set at levels sufficient to pay operation, maintenance and debt service plus a cushion. Committee members considered a proposed CD2 that paces increases and shifts more of the monthly charge from a fixed fee to a volumetric (per‑gallon) charge to reward lower water use.

John Wong, partner and the city’s bond counsel, said the council’s authority to set rates is central to investors’ confidence. “Investors view the city’s commitment to set rates to meet the rate covenant as a critical and almost sacred component of their evaluation,” Wong told the committee, warning that a material failure to meet the covenant “could lead to a default under the resolutions and entitle bondholders to pursue legal remedies.” He noted the city has roughly $2.5 billion in wastewater bonds outstanding and that ratings and borrowing costs could be harmed by a failure to…