Standard & Poor's Tuesday lowered its ratings on $36.5 million of outstanding debt held by the Reno Redevelopment Agency.

Analysts lowered the long-term rating and underlying rating to CC from BB on the agency's senior-lien 2007A taxable and 2007B tax-increment bonds. It also lowered the underlying rating to CC from BB-plus on the agency's Series 1998F superior-lien tax-increment bonds. Analysts gave the agency a developing outlook.

"The rating actions reflect our view of declines in the agency's assessed value, which have caused annual debt service coverage to fall below one times in fiscal 2012," said analyst Bryan Moore. "The downgrade further reflects the shortfall in pledged revenue, and the receiving of new information regarding the amount and use of the agency's debt service reserve to cover a September 2011 debt service payment."

Reno RDA officials are currently disputing the formula used by Washoe County to determine the amount of property tax revenue the agency receives. The county and the agency are negotiating how much additional money the county will provide the agency to help cover the $2.9 million in bond payments it owes in four installments through next September. The agency already cashed out its bond surety to make a bond payment of $1.5 million due on Sept. 1, putting it in technical default on one set of bonds. A drop-off in assessed values has resulted in a decline in assessments to $837,000 for the agency this year from $4.4 million in fiscal 2009.

The outlook is developing, according to Standard & Poor's, because of uncertainty related to the methodology for the calculation of taxes due to a redevelopment agency. Nevada Attorney General Catherine Cortez Masto and the Washoe County district attorney have issued conflicting opinions on the issue of whether Washoe County owes the Redevelopment Agency more money.

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