NEW YORK--(BUSINESS WIRE)--Fitch Ratings has removed from Rating Watch Negative the following tax allocation bonds (TABs) for the Belmont Redevelopment Agency, CA (the RDA):
--$5.53 million senior TABs, series 1999A, 'A+';
--$2.27 million subordinate TABs, series 1999B, 'A'.
The Rating Outlook is Stable.
SECURITY
Series A bonds are secured by a senior pledge on incremental tax revenue generated in the sole Los Costanos Community Development Project Area. This is net only of the 20% housing set aside, up to an amount equaling 125% of annual debt service.
Series B bonds are secured by a subordinate pledge on incremental tax revenues from the same project area. They are net of the housing set-aside, senior bond debt service, and pass-throughs to education entities, up to an amount equaling 125% of annual debt service.
KEY RATING DRIVERS
PROGRESS ON AB 1X26 IMPLEMENTATION: The City of Belmont has been recognized as the successor agency (SA) to the RDA. The recognized obligation payment schedules (ROPS), including calendar 2012 debt service, have been approved by the oversight board and state. The SA has received sufficient payments, along with available cash reserves, to cover the debt service included in the ROPS.
IMPLICATIONS OF AB 1484: The governor signed this trailer bill to the state's fiscal 2013 budget on June 27, 2012. The bill includes what Fitch believes are improvements to the ROPs approval process and other procedures going forward. However, it required repayment by many SAs of property tax distributions from December 2011 and January 2012 that the state believes should have been directed to other taxing entities. The SA reports that it made the required repayment and that sufficient funds remain for debt service payments.
HOUSING REVENUE AVAILABILITY: The lack of distinction between former housing set-aside revenue and total tax increment under AB 1X26 did not affect Fitch's assessment of credit quality.
The aggregation of tax increment results in higher calculated debt service coverage levels for Fitch-rated bonds. However, this is inconsistent with the bond indenture, which specifies that only non-housing increment is pledged. Fitch believes further clarification as to the availability of revenue not pledged under the indenture is needed before factoring this increased coverage into the rating.
Additional information on the RDA is available in Fitch's November 11, 2010 release, available at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
In addition to the sources of information identified in Fitch's Tax-Supported Rating Criteria, this action was additionally informed by information from Creditscope, University Financial Associates, S&P/Case-Shiller Home Price Index, IHS Global Insight, and National Association of Realtors.
Applicable Criteria and Related Research:
--'Tax-Supported Rating Criteria' (Aug. 15, 2011);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 15, 2011).
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648898
U.S. Local Government Tax-Supported Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648842
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