LOS ANGELES -- Baldwin Park, Calif. sales tax and tax allocation bonds retain their junk status from Fitch Ratings, though Fitch removed them from negative ratings watch Wednesday.

The outlook remains negative on the bonds’ BB rating. Fitch downgraded them in July from BBB.

The July downgrade came after the city announced it planned to tap its debt service reserve to make payments in August on three of four outstanding tax-allocation bond issuances. Fitch’s actions affect $4.1 million of outstanding sales tax and tax allocation refunding bonds.

The draw was required due to a combination of much lower than expected tax increment distributions in June 2012 from Los Angeles County following the statewide dissolution of redevelopment agencies, and delayed distribution of $600,000 in housing set-aside funds that was subsequently reversed, according to Fitch.

Although one reserve draw of $401,998 has been fully replenished and one reserve draw partially replenished to $157,000 of $451,861, analysts said that revenue vulnerability remains for 2013 debt service requirements. If total payments received from redevelopment tax increments in 2013 are not sufficient, the city could again draw on reserves to make bond payments.

Baldwin Park is located in western Los Angeles County, approximately 20 miles east of downtown Los Angeles.

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