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TEXT-Fitch keeps Chico Redevelopment Agency's TABs on watch negative
December 18, 2012 / 10:16 PM / 5 years ago

TEXT-Fitch keeps Chico Redevelopment Agency's TABs on watch negative

Dec 18 () - Fitch Ratings maintains the Rating Watch Negative for the
following Chico Redevelopment Agency, CA (RDA) tax allocation bonds (TABs):

--$65.3 million Chico Amended and Merged Redevelopment Project TABs, series 2005
'A+';

--$ 19.2 million Chico Amended and Merged Redevelopment Project refunding TABs,
series 2007, 'A+'.

SECURITY

The bonds are secured by tax increment revenues generated within the sole
project area, Chico Amended and Merged Redevelopment Project Area, net of the
20% housing set-aside and senior statutory pass-throughs.

KEY RATING DRIVERS

AB 1484 DISPUTE CONTINUES: The City of Chico (the city) has been recognized as
the successor agency (SA) to the RDA. The bonds remain on Rating Watch Negative
pending resolution of the on-going dispute between the SA and the state's
Department of Finance (DOF) regarding the repayment by the SA of property tax
distributions from December 2011 and January 2012 that the state believes should
have been directed to other taxing entities. The SA disputes the amount due
($11.2 million), but did make a partial payment of $961,207 in July 2012.

POTENTIAL RESOLUTION: DOF has stated that they currently do not intend to
enforce non-payment penalties while the matter is in dispute. DOF further stated
it is working on a process for handling the disputes on a case by case basis
with more details expected to be released in the near-term. Fitch views this as
a potentially positive development, depending on the process' details, but notes
that until the dispute is resolved, risks to bondholders are elevated.

OCTOBER 2012 DEBT SERVICE PAYMENT MADE: The SA made the full October 1st debt
service payment from available funds. Funding for the payment was approved under
the July 1, 2012 to Dec. 31, 2012 recognized obligation payment schedules
(ROPS). Funding for the next debt service payment, due April 1, 2013, was
approved under the Jan. 1, 2013 to June 30, 2013 ROPS.

WHAT COULD TRIGGER A DOWNGRADE

A final resolution with DOF leaving the SA without sufficient funds to continue
to pay debt service could result in a downgrade, possibly to below investment
grade.

CREDIT SUMMARY

The city is located 90 miles north of Sacramento and 174 miles northeast of San
Francisco and is the major retail, recreational, educational, financial, and
commerce center for Butte County and the surrounding area. The project area is
large and encompasses 16 square miles and about 40% of the city and portions of
unincorporated Butte County.

The project area's taxable value represents a good mix of residential,
commercial, and industrial properties and AV growth has historically been very
sound. For fiscal 2011, the project area experienced its first decline in total
AV as AV dropped 3.1% compared to fiscal 2010 due to a combination of successful
property appeals and Proposition 8 reductions. AV declined again in fiscal 2012,
but at a lower rate (1.6%). Debt service coverage, however, remains strong with
fiscal 2011 tax increment revenue coverage of maximum annual debt service at
2.42x, and coverage of 2.38x reflecting a 1.6% decline.


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. 14, 2012);
--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
U.S. State Government Tax-Supported Rating Criteria

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