PHOENIX – Sunnyvale Redevelopment Agency, Calif.'s series 2003 tax allocation bonds received a Standard & Poor's outlook boost to positive from stable.
The rating agency affirmed its A-minus rating, citing the likely settlement of the Silicon Valley city's court battle with the state Department of Finance.
S&P announced the actions last week, also citing strengthening fundamentals that include strong assessed value growth and resulting extremely strong maximum annual debt service coverage. Sunnyvale is acting as the successor agency to the old redevelopment agency, which was dissolved along with all of California's redevelopment agencies in 2012.
The $7.96 million of 2003 TABs were issued for a project area covers 184 acres in the city's commercial core. The project area's total assessed value, the driver of tax increment revenue, has increased consistently, S&P said, declining only in 2006. Total AV stood at roughly $1.2 billion in fiscal 2015, representing a 10.7% increase from fiscal 2014, and is expected by the county to continue to grow by an additional 3.3% to $1.3 billion in fiscal 2016.
Sunnyvale is one of a number of successor agencies that filed lawsuits against the DOF related to "enforceable obligations": contracts entered into by the former redevelopment agencies that the DOF determines the successor agencies can pay. Two transfers from the city of Sunnyvale to the former redevelopment agency totaling $9.9 million were denied as an enforceable obligation by DOF after dissolution, but Sunnyvale has said it is working out a plan of repayment it hopes to complete by 2015's end.
A DOF spokesman said he could not comment specifically on the negotiations with Sunnyvale, but confirmed that talks are ongoing.
S&P said it could raise the rating on the bonds "should the agency enter into a settlement agreement with DOF, receive its finding of completion, and continue all other business without cash flow disruptions." The city of about 146,000 has a stronger-than-average economy, S&P said.
