NEW YORK - Moody's Investors Service said it has assigned a Aa2 rating to San Diego County Regional Transportation Commission's sales tax revenue bonds (limited tax bonds), 2012 Series A, and downgraded. the long-term rating on outstanding bonds to Aa2 from Aa1. The outlook on these ratings is stable.
The rating reflects San Diego County's large and diverse economy with diverse sales tax base, strong projected coverage levels and the absence of operating risk.
Strong additional bonds test and the structural requirement to transfer pledged revenues from the state directly to trustee also figure favorably in the rating.
These strengths largely offset the weakness posed by the absence of a debt service reserve and a notable but manageable variable rate exposure. Also reflected in the rating are the generally improving but somewhat volatile pledged revenues.
The downgrade primarily reflects the demonstrated volatility of those pledged sales tax revenues, particularly in the most recent downturn, when revenues had fallen more than would have been expected of a Aa1.
This revenue volatility is more in line with Aa2s, particularly in the context of the Commission's variable rate debt exposure and very large capital program.
The size of the capital program will likely require regular additional borrowing, potentially lowering debt service coverage from its currently very strong level.
The bonds are secured by the Commission's pledge of gross revenues received from a county-wide, half-cent sales tax approved by county voters in 1987 and extended with a vote in 2004. The original authorization expired in 2008, while the 2004 voter authorization extended the sales tax to 2048.
Proceeds of the current offering will provide funds for the ongoing capital program and refunding of $100 million of variable rate debt.