Hawaii plans to sell $1 billion of debt as Standard & Poor’s cites the risk that a rallying dollar will damp the enthusiasm of tourists who are visiting in record amounts and generate about 14 percent of the state’s economy.

The deal, scheduled for this week, includes tax-exempt and taxable general obligations, according to data compiled by Bloomberg. The proceeds will go toward projects such as schools and buying property for preservation, as well as for refinancing, according to Kalbert Young, director of the Department of Budget & Finance.

S&P last month revised its outlook on the state to stable from positive. The move signals there’s less of a chance it will upgrade Hawaii in the next two years, though the company noted strength in the economy and revenue. A rising dollar makes Hawaii costlier for foreign travelers, who account for a third of visitors, said Gabriel Petek, an analyst in San Francisco at S&P, which grades Hawaii AA, the third-highest rank. Moody’s Investors Service gives it an equivalent mark.

“The spending from international tourists is a bit disproportionate,” Petek said in an e-mail. The dollar’s strength “might deter some of them.”

Dollar’s Ascent

The dollar reached 115.59 yen last week, the strongest since 2007, boosted by signs of strength in the U.S. economy. The greenback has gained about 13 percent against Japan’s currency since July 1.

Japanese travelers represent about 18 percent of tourists to the islands, the largest international contingent, according to the Hawaii Tourism Authority.

The state of 1.4 million drew a record 8.2 million visitors in 2013, according to the agency.

This year “is poised to be another historical peak year for tourism in terms of number of visitors,” Young at the Department of Budget & Finance said in an e-mail. “If you look at Hawaii’s visitor mix, it is very diverse across a variety of geographic segments.”

Visitors from Asian countries outside Japan, such as China, Taiwan and Korea, are the fastest-growing segment and can compensate for any dropoff in Japanese tourists, he said.

S&P also revised the outlook because a new governor is set to take office. Democrat David Ige, a state senator, defeated Republican Duke Aiona in last week’s election.

While the current governor had an informal policy of keeping rainy-day reserves of 10 percent or more of general-fund revenue, “we make no assumption about whether a new administration will adhere to this,” Petek said in a report.

Ige didn’t respond to phone calls and e-mails to his campaign office in Honolulu.

To contact the reporter on this story: Allyson Versprille in New York at aversprille1@bloomberg.net To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Tannenbaum, Stacie Sherman.

Tags: hawaii
Photo Credit: Tourists take photos of Akaka Falls in Honomu, Hawaii. Ed Dunens / Flickr