NEW YORK - Standard & Poor's Ratings Services said it raised its underlying rating (SPUR) to A-plus from A-minus on Oakland Redevelopment Agency, Calif.'s series 2006C and 2006C-T (MacArthur/Broadway/San Pablo project areas) tax allocation bonds. Standard & Poor's also assigned its A-minus rating to the agency's series 2010-T second-lien tax allocation revenue bonds (MacArthur/Broadway/San Pablo Redevelopment Project). The outlook on all ratings is stable.
"The rating actions are based on our view of the closure of the first lien, which prevents additional dilution of coverage from new debt, combined with strong current coverage of maximum annual debt service," said Standard & Poor's credit analyst Matthew Reining.
The series 2006C and 2006C-T bonds are secured by tax increment revenue collected from the agency's MacArthur/Broadway/San Pablo project area net of the 20% required to be set aside for low- and moderate-income housing projects. All statutory pass through payments have been subordinated to debt service.
As a result of the current financing, the lien on the series 2006C and 2006C-T bonds is closed, except for refunding. The series 2010-T bonds are secured by second-lien tax increment revenues from the MacArthur/Broadway/San Pablo Project, net of low- and moderate-income housing set-asides.
Series 2010-T will be issued as Recovery Zone Economic Development Bonds with a 45% interest subsidy from the federal government. The agency has pledged the interest subsidy payment to the bonds; however, the agency is obligated to pay the full debt service regardless of whether it receives the subsidy.
Senior-lien maximum annual debt service (MADS) coverage (the series 2006C and 2006C-T bonds), not including the interest subsidy pledged to the subordinate bonds, is 3.3x MADS. Coverage of the senior and subordinate bonds is 2.3x MADS when including the subsidy as revenue, as pledged. If the agency were to not receive the subsidy (whether due to a late federal payment or otherwise), coverage of the gross senior and subordinate debt service is 2.1x MADS. Given that the senior lien is closed to additional bonds, at the current 3.3x MADS coverage, the agency could withstand the loss of 37% of total assessed value (AV) and still provide 1.0x MADS senior-lien coverage.
Located roughly 7 miles from downtown San Francisco, Oakland serves as the major employment enter in the Bay Area's East Bay. The 676-acre MacArthur/Broadway/San Pablo Project encompasses two noncontiguous areas along the major commercial corridors of Telegraph/Broadway and San Pablo avenues in northern Oakland. The project area was formed relatively recently, in July 2000. Taxable property comprises a mix of land uses, the majority of which are residential (48% of fiscal 2011 AV) and commercial (39%).
