ALAMEDA, Calif. – Standard & Poor’s Thursday placed Bell, Calif.’s redevelopment agency bonds on negative CreditWatch, marking the latest setback for the small Southern California city in the wake of revelations of its unusual financial practices, which included paying its former city administrator almost $800,000 a year.
At least for now, Standard & Poor’s retains its BBB-plus rating on the Bell Community Redevelopment Agency’s tax allocation bonds.
The agency downgraded the city’s general obligation bonds to BB from A-minus on Aug. 10 after it emerged that Bell faced a November bullet maturity for an unrated $35 million taxable lease-revenue bond, with no clear plan to repay it. Uncertainty over that bullet payment is now weighing on the redevelopment bonds, according to Standard & Poor’s.
“We base the CreditWatch placement on our assessment of the potential of co-investment of funds between the redevelopment agency and the city of Bell,” credit analyst Michael Taylor said in a release Thursday. “Given that the agency is a component unit of the city of Bell with financial activity included within the scope of city financial statements, we believe [the ratings could be pressured downward] should the city prove unable to fund the $35 million bullet payment on its series 2007 taxable lease revenue bonds in November, possibly exposing the redevelopment agency funds to material risk.”
According to the Municipal Securities Rulemaking Board’s EMMA website, the Bell Community Redevelopment Agency most recently sold $27.9 million of tax-allocation refunding bonds in 2003. Standard & Poor’s supplied the only underlying rating for the bonds, which carried Radian Asset Assurance insurance.
Radian currently carries below-investment-grade ratings from Standard & Poor’s and Moody’s Investors Service.