Moody’s dropped all TABs rated Baa3 or above to Ba1, citing uncertainty over timely cash flows for debt service payments after the state eliminated local redevelopment agencies this year.
The downgrades affect $11.6 billion of debt.
The agency said all California TAB ratings remain on review for possible withdrawal because of a lack of information.
Moody’s said the new cash distribution procedure for the property tax increment of former redevelopment agencies eliminates bond indentures’ flow of funds, and is clearly subject to different interpretations.
“These differing interpretations can, without warning, give rise to potential debt service defaults that did not exist prior to the passage of this law,” Moody’s said.
Late last year, the state Supreme Court upheld a law dissolving California’s 400 redevelopment agencies. Since then, there has been a scramble by the “successor agencies” — in most cases the municipalities that created redevelopment agencies — to tally their debts and assets.