Fitch Ratings said in a report Wednesday that it has downgraded the Baldwin Park Financing Authority’s sales tax and tax allocation bonds to BB from BBB as it plans to dip into reserves to make debt payments.
The rating agency said the Baldwin Park, Calif., redevelopment agency plans to tap its debt service reserve to make payments in August and September on three of four outstanding tax-allocation bond issuances.
The rating change affects $4 million of bonds.
The city, as the “successor agency” to its redevelopment arm, has been forced to draw on the reserves because it has received less tax increment than expected from Los Angeles County since the dissolution by the state of redevelopment agencies in California, according to Fitch.
“If issues between the county and successor agency remain unresolved, further draws on the [debt-service reserve fund] to pay non Fitch-rated bonds are likely, putting overall downward pressure on the rating,” analysts wrote.