Standard & Poor's Ratings Services has suspended its BBB long-term rating on San Bernardino Joint Powers Finance Authority, Calif.'s series 2010A, 2010B, and 2006 tax allocation bonds (TABs), reflecting a lack of timely information from the successor agency.
The agency may reinstate the rating after timely receipt and analysis of the information needed to maintain the rating.
"On July 6, 2012, we had placed the ratings on CreditWatch with negative implications, reflecting our view of the provisions of Assembly Bill 1484, which we believe could cause continued shortfalls in cash available for debt service or otherwise require the city, as successor agency, to continue to deplete its debt service reserve funds for the authority's outstanding TABs," said Standard & Poor's credit analyst Li Yang. "In addition, the CreditWatch listing reflected repeated attempts by Standard & Poor's to obtain timely information of satisfactory quality to maintain our rating on the securities in accordance with our applicable criteria and policies. To date, Standard & Poor's has not received timely information from the successor agency," added Yang.
The authority drew on its debt service reserve (DSR) funds to cover a shortfall in tax increment revenues for the 2010A and 2010B non housing TABs, which had an interest payment due on Oct. 1, 2012. The 2010A and 2010B TABs had total interest payments of $269,500 and $96,250, respectively, due on Oct. 1, 2012.
The 2010A TABs were issued as federally taxable recovery zone economic development bonds, making them eligible to receive a 45% federal subsidy on interest payments toward repayment.
The trustee received the federal interest subsidy on Oct. 1, 2012 for the 2010A bonds. The interest payment due on the 2010A bonds on Oct. 1, 2012, net of the federal subsidy, comes to roughly $147,977.
Based on a disclosure report published Oct. 11, 2012, the authority withdrew $147,971 and $96,250 from the series 2010A and 2010B DSR funds to make each respective debt service payment on Oct. 1, 2012. The 2010A and 2010B DSR funds have $539,926 and $213,404 respectively remaining after this transfer.