Moody’s Investors Service upgraded to Baa1 from Ba1 the rating on the successor agency of the Santa Monica Redevelopment Agency’s earthquake tax-allocation bonds, affecting $39.8 million of outstanding long-term debt.
The bonds are secured by a pledge of tax increment revenues from the former redevelopment agency’s earthquake redevelopment project area.
The upgrade to Baa1 reflects the project area’s strong credit factors that surpass the thresholds outlined in a report released in February, the rating agency said in a report last week.
The project area’s total assessed value is slightly less than half of the city’s total assessed value, analysts said. The city’s solid wealth indicators helped to strengthen the credit quality of the project area, according to Moody’s.
“The strength of the pledge is reflected in the Department of Finance’s (DOF) approval of all bond and bank loan debt-service payments as enforceable obligations,” analysts said.
The state Legislature’s willingness to modify the cash flows available for debt service were deemed a considerable source of uncertainty by analysts and a major factor for not placing the rating in the A category, they said.
The earthquake project area represents a significant component of Santa Monica’s economic activity and benefits from the favorable economic conditions existing within the city. The project area was created in response to the Northridge earthquake of January 1994.