State Budget Director Georgina Kawamura yesterday disputed a Bloom- berg News Service report on auction-rate securities, saying the story contained inaccuracies and improper wording.

She disputed the accuracy of some quotations in the story but acknowledged the article correctly noted that the fair value of the securities had dropped by about $250 million in the state's last fiscal year.

That will result in the state writing down the market value of the investments to $752 million from the about $1 billion they had been worth.

The loss is on paper only, since the state plans to hold the securities until they mature, state officials said. The $752 million reflects the estimated price Hawai'i would have gotten for the securities if the state had sold them at the end of the state's fiscal year.

"The fact of the matter is we look at our holdings as $946 million (the securities' face value today) and not $752 million," Kawamura said.

Kawamura said some of the issuers have paid off principal, resulting in the investment total declining, while the state continues to get interest payments from the bonds.

The state's options include holding the bonds until they mature over the next several decades and possibly pursuing a lawsuit, such as Maui County recently did.

Kawamura said the state bought the securities only from Citigroup because the firm offered the best rates. The state also shifted large amounts of its investments into the bonds even as the auction rate market started to tighten in second half of 2007 because of their high rate of return, she said.

Even now, the interest paid on the bonds averages about 1.8 percent, or more than some other investments, Kawamura said.