TEXT-Fitch removes Pittsburg RDA, Calif. rating from negative watch
Jan 24 - Fitch Ratings has affirmed Pittsburg Redevelopment Agency, California's tax allocation bonds (TABs) as follows: --$129 million senior non-housing TABs, series 1999, 2002A, 2003A at 'A'. Fitch has removed the bonds from Rating Watch Negative and assigned a Stable Rating Outlook. SECURITY The TABs are secured by all tax revenues allocable to the Successor Agency (SA) collected within the sole project area, minus the 20% housing set-aside, and a county administrative fee. SENSITIVITY/RATING DRIVERS DSRF HAS BEEN REPLENISHED: The removal of the Rating Watch Negative reflects the confirmed replenishment of the senior non-housing TABs' debt service reserve fund (DSRF). The DSRF had been drawn down due to a one-time cash flow timing issue related to AB 1X 26 (RDA dissolution legislation). STRONG DEBT SERVICE COVERAGE: The 'A' rating reflects the senior TABs' strong coverage of maximum annual debt service (MADS), estimated at 2.6x in fiscal 2013. Fitch estimates AV could drop over 50% before coverage would fall to 1.0x. PARTIAL HOUSING MARKET STABILIZATION. AV is benefiting from a degree of stabilization in the housing market, which is exhibiting substantially lower foreclosure levels and more favorable home price changes compared to recent years. Further, recent pending appeals are small as a percentage of total AV and do not pose a material risk to AV. CREDIT PROFILE In August 2012 the city of Pittsburg, as SA to the RDA, drew down $10 million from the senior TABs' DSRF due to a one-time cash flow timing issue caused by AB 1X 26. Upon notification of this event, Fitch placed the TABs on Rating Watch Negative pending replenishment of the reserves. On Jan. 10 the SA remitted to the trustee sufficient surplus tax increment revenues to replenish the DSRF. Fitch believes the DSRF will not be drawn upon again due to the one-time nature of the initial drawdown and the senior TABs' strong Fitch-estimated maximum annual debt service coverage (MADS) of 2.6x in fiscal 2013. In late December a stipulated agreement between the SA and the California Department of Finance was approved by a judge, which eliminated the SA's AB1484 true up payment liability of $3.5 million. The prior existence of the contingent liability did not materially impact the bonds, as Fitch believed unsuccessful resolution of the SA's judicial strategy would not impact debt service repayment. For more information see the press release 'Fitch Downgrades Pittsburg RDA, CA Sub TABs to 'BB-'; Outlook Negative; Senior TABs on Watch' dated Aug. 10, 2012. 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. Applicable Criteria and Related Research: --'Tax-Supported Rating Criteria' (Aug. 14, 2012); --'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012). Applicable Criteria and Related Research: Tax-Supported Rating Criteria U.S. Local Government Tax-Supported Rating Criteria
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