Standard & Poor's on Friday removed from credit watch and suspended its long-term and underlying ratings on various bonds for Hercules Public Financing Authority, Calif., and the Hercules Redevelopment Agency.
All of the ratings were placed on credit watch with negative implications June 12, 2013.
"The suspension reflects our view of Hercules' lack of a fiscal 2011 audit," said Sussan Corson, an S&P credit analyst, in the report.
The suspension impacts the following bonds: Hercules PFA's series 2010 wastewater bonds, issued for the city of Hercules; Hercules PFA's series 2010 electric system project revenue and revenue refunding bonds, series 2003B lease revenue bonds, and series 2009 taxable Bio-Rad project lease revenue bonds, issued for the city; Hercules RDA's series 2005 and 2007A nonhousing tax allocation bonds; and Hercules RDA's series 2007A and 2007B housing TABs.
Hercules voters approved a measure on June 4 that would increase the city's utility tax two percentage points to 8% for five years, and expand it to include cable television. The successful tax increase will raise about $1 million annual to help the city close a $1.27 million structural deficit in its general fund.
The city of 26,000, located northeast of San Francisco, has been battered by financial problems, including allegations of misuse of bond money, poor record keeping and other problems.
S&P could reinstate its ratings on the above-referenced Hercules PDA and RDA bonds after public release and analysis of financial statements that, in the opinion of an independent auditor, fairly present Hercules' financial position, according to the S&P report.