Victorville, Calif., agency rides default cure to ratings boost

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The Southern California Logistics Airport Authority saw $96 million in tax allocation revenue bonds upgraded by Moody's Investors Service after it cured nearly a decade of defaults.

Victorville, California became current Dec. 1 on bond payments that left a seven-year trail of defaults and forced the city to settle a bond fraud case brought by the Securities and Exchange Commission.

SCLAA, the issuer of the bonds, is a joint powers authority comprised of the City of Victorville and the Victorville Water District.

Moody's upgraded SCLAA’s $59.6 million in subordinate TABs to Ba2 from B3, $35.4 million in housing TABs to Baa2 from Ba1, and assigned a stable outlook.

“The upgrade to Ba2 incorporates the recent strong growth in the tax base that generated excess revenues to cure all past defaults as of December 1,” Moody’s analysts wrote.

Moody’s cited growth in the successor agency's sizeable tax base in the boost to Ba2. Analysts also noted that the tax base is poised for continued growth albeit at a lower rate than in previous years; that area residents have a weak socioeconomic profile, and weak debt service coverage is improving yet still relatively weak on the non-housing TAB.

The rating also incorporates a low incremental to total assessed valuation ratio and high concentration in the top ten taxpayers, according to analysts.

“The upgrade to Baa2 on the Series 2007 bonds (housing set aside) reflects improved debt service coverage that we expect to remain strong and a track record of timely debt service payment that we anticipate will continue,” analysts said. “The Baa2 incorporates our expectation that assessed valuation will continue to grow at a moderate rate and tax base volatility, as measured by the ratio of incremental to total project area AV, is likely to remain much higher than average for the foreseeable future.”

The Series 2007 housing TABs are legally secured by the 20% housing set aside of tax increment receipts.

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Ratings Bond defaults Tax increment financing district California