LOS ANGELES — California’s former redevelopment agencies got a boost as Fitch Ratings upgraded nearly all of the $3.15 billion in their tax allocation bonds that it rates.
The state began winding down redevelopment agencies after legislation to dissolve them was upheld by the California Supreme Court in December 2011.
Though state procedures were installed to insure bond payments would be made, the complexity of the untested procedures raised concerns with Fitch and other rating agencies that payments might be missed.
Many of the ratings rose from single A to AA, though Santa Monica, Coronado and San Rafael ratings were elevated to Triple A.
While the upgrades were driven by the rating agency’s revised criteria, Fitch made note of the prohibition on issuing additional debt and assessed valuation growth, which spurred revenue and debt service coverage growth, said Karen Ribble, a senior director.
“The review was prompted by the new criteria – and that is what accounts for most of the upgrades,” she said, adding that Fitch’s April 13 commentary also highlights improvements in the sector.
Fitch adopted new U.S. tax-supported rating criteria a year ago that looks at historical criteria relative to debt service coverage and the cushion provided by such coverage.
Analysts then evaluate revenue vulnerability to maintain debt service coverage against the most recent downturn that caused fiscal stress for the credit. In most cases, Ribble said, that is the period from fiscal 2009 to 2012.
