TEXT - Fitch affirms California's San Rafael Redevelopment Agency TABs

Tue Feb 26, 2013 3:53pm EST

Related Topics

Feb 26 - Fitch Ratings has affirmed the ratings on San Rafael Redevelopment
Agency (RDA), CA's tax allocation bonds (TABs) as follows: 

--$4.6 million TABs, series 1999 at 'AA-'. 

Fitch has removed the bonds from Rating Watch Negative.  The Rating Outlook is 
Negative.

SECURITY 

The bonds are secured by a first lien on gross tax increment on all taxable 
property within the agency's sole project area, less a 20% set-aside for low and
moderate-income housing. 

KEY RATING DRIVERS 

AB 1484 DISPUTE CONTINUES: The Negative Outlook reflects the on-going dispute 
between the city of San Rafael (the city) as successor agency (SA) to the RDA 
and the state's Department of Finance (DOF). The dispute relates to $1.7 million
in property tax distributions from December 2011 and January 2012 that the state
believes should have been directed to other taxing entities. 

POTENTIAL RESOLUTION: DOF has stated that they currently do not intend to 
enforce non-payment penalties while the matter is in dispute. DOF is working on 
a process for handling the disputes on a case by case basis, and has recently 
resolved similar payment disputes with other redevelopment agencies. Fitch views
this as a positive development, but notes that until the dispute with the SA is 
resolved, potential risks to bondholders exist. 

PENDING DUE DILIGENCE REVIEW: The SA is currently working through a due 
diligence review of its non-housing funds, which is required under AB 1484 for 
all successor agencies.  The results of this review must be submitted to DOF, 
which is expected to finalize its findings in the next three months.  The SA has
indicated that resolution of the AB 1484 payment dispute would follow final DOF 
findings on the review, potentially over a three month period. 

DECEMBER 2012 DEBT SERVICE PAYMENT MADE: The SA made the full Dec. 1, 2012 debt 
service payment from available funds. Funding for the calendar 2013 debt service
payments were approved under the Jan. 1, 2013 to June 30, 2013 recognized 
obligation payment schedules (ROPS). Unlike the June 1, 2012 debt service 
payment, which the County of Marin made directly to the bond trustee, the Dec. 1
debt service payment was made by the SA from funds received from the county 
approved under the ROPS. 

STRONG SERVICE AREA CHARACTERISTICS:  The RDA benefits from its location within 
the large, diverse regional economy of the San Francisco Bay area.  The project 
area's taxable assessed value (TAV), despite modest declines in recent years, 
provides for strong tax increment coverage of debt service.

RATING SENSITIVITIES

INSUFFICIENT FUNDS FOR DEBT SERVICE: A final resolution with DOF leaving the 
city without sufficient funds to continue to pay debt service could result in a 
downgrade, possibly to below investment grade. 

SERVICE AREA CHARACTERISTICS REMAIN STRONG 

The City of San Rafael is located in the San Francisco Bay Area and is both the 
county seat and largest city within the County of Marin. It benefits from its 
participation in the diverse regional economy of the San Francisco Bay Area and 
has traditionally featured strong employment, wealth, and income indicators. The
city's redevelopment agency operates within a single project area located in the
central San Rafael business core and east San Rafael. 

TAV for the project area was $2.4 billion in 2013, nearly 14.5x the base year 
value of $163 million. In 2013, TAV declined by 1.5%. This reflects a third year
of modest decline after many years of steady increases. Fiscal year 2013 tax 
increment revenues still provide strong maximum annual debt service coverage of 
about 5x.
FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.