Fitch Ratings last week completed its review of 62 ratings of tax allocation bonds issued by 36 former California redevelopment agencies, which culminated in downgrades for 12 of the credits.
The credit rating agency will maintain its negative ratings watch on seven TAB issues, and put two additional credits on negative watch, which could lead to a downgrade.
Dozens of credits were removed from negative ratings watch, with a variety of outcomes that ranged from rating affirmations and stable outlooks to rating downgrades and further negative outlooks.
Fitch also withdrew ratings on all Los Angeles Community Redevelopment Agency TABs due to insufficient information.
In January, Fitch analysts placed all California tax allocation bonds on review for potential downgrade due to risks to bond indentures stemming from a new law eliminating the state’s redevelopment agencies.
Since Fitch’s action earlier in the year, many of the successor agencies charged with overseeing the obligations of the former RDAs have struggled to unwind the obligations.
“The dissolution process has been cumbersome and seemingly inconsistent,” Fitch wrote in its news release announcing the results of its review.
A new California law meant to clean-up confusion stemming from the shutdown of the state’s redevelopment agencies may also be making things worse for some of local governments.
The statute, AB 1484, set up a short schedule for the new “successor agencies” representing the former state RDAs to make newly defined property tax payments.
“Fitch’s ratings actions reflect its believe the recognized obligation payments schedule will only improve from the somewhat chaotic experience that took place this spring,” the news release said.
The new law clarified that the redevelopment successor agencies’ payments to other local taxing entities, such as schools and fire districts, had to include tax increment revenue going back to December 2011.
Many municipalities have decided to sue the state over the payments.
Redevelopment agencies captured increased property tax revenues in designated areas.
With their cessation, their tax revenue, unless obligated by contracts such as bond payments, is supposed to be distributed to other local agencies.