In the course of reviewing California tax allocation bonds (TABs) as outlined in Fitch Ratings' release on Jan. 24, Fitch has placed the following bonds on Rating Watch Negative:
--$9.7 million Belmont Redevelopment Agency (Los Costanos Community Development Area Project), senior tax allocation refunding bonds, series 1999A, rated 'A+';
--$6.9 million Belmont Redevelopment Agency (Los Costanos Community Development Area Project), subordinate TABs, series 1999B, rated 'A';
--$14.5 million Rohnert Park Community Development Commission (Rohnert Park redevelopment project) tax allocation bonds, series 1999, rated 'A'; and
--$24.4 million Vista Community Development Commission (Vista redevelopment project area) TABs, series 1998A, 1998B, and 2001, rated 'BBB+'.
As described in the Jan. 24 release, the Rating Watch Negative reflects Fitch's belief that recently implemented state legislation creates a heightened risk at all rating levels that the flow of funds to holders of TABs may be inconsistent with the requirements of bond indentures. This concern is a result of the short timeframe to create guidelines to implement the legislation and the apparent lack of progress in resolving a number of inconsistencies and uncertainties contained therein.
The Rating Watch Negative further reflects the uncertainty during the next several weeks of transition about the mechanics of administering the revenues, including those pledged to bond repayment. While the intent to uphold existing obligations is clearly stated in the legislation, the mechanics of implementation are not.
For more information and for a complete list of TABs on Rating Watch Negative, please see the release dated Jan. 24, 'Fitch Places All CA TABs on Rating Watch Negative'.
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, Zillow.com, 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);
--'Fitch Places All CA TABs on Rating Watch Negative' (Jan. 24, 2012).
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
Fitch Places All CA TABs on Rating Watch Negative
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=668991
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