NEW YORK–(BUSINESS WIRE)–
Fitch Ratings has affirmed and removed from Rating Watch Negative the
following tax allocation bonds (TABs) for the San Diego Redevelopment
Agency, CA (the RDA):
–$16 million outstanding North Park Redevelopment Project TABs series
2000, 2003A and 2003B at ‘A+’;
–$158 million Centre City Redevelopment Project subordinate TABs series
1999C, 2000A B, 2001A, 2003A, 2004A and 2006A at ‘AA-’;
–$139 million Centre City Redevelopment Project tax allocation housing
bonds (taxable) series 2004C D, 2006B and 2008A at ‘AA-’ ;
–$20.5 million Centre City Redevelopment Project subordinate parking
bonds series 2003B at ‘A’;
–$5.2 million City Heights Redevelopment Project housing set-aside TABs
series 2003A and 2003B at ‘A+’ ;
–$15 million Horton Plaza Redevelopment Project subordinate TABs series
2000 at ‘A-’;
–$6.3 million Horton Plaza Redevelopment Project subordinate TABs
series 2003A at ”A-’;
–$8 million Horton Plaza Redevelopment Project tax allocation housing
bonds series 2003C (taxable) at ‘A-’.
The Rating Outlook is Stable.
SECURITY
Centre City:
The subordinate TABs are special obligations payable from Centre City
project area gross tax increment revenues. This is less the 20% housing
set aside, statutory pass-through payments and the county’s
administrative fee and subordinate to senior lien bonds (approximately
$30 million outstanding, not rated by Fitch).
The tax allocation housing bonds are special obligations payable from
the Centre City project area’s 20% of gross revenues set aside for
housing, net of the county’s administrative fee.
The subordinate parking bonds are secured by operating revenues (net of
operation and maintenance costs) of the parking facilities and a pledge
of the City of San Diego parking meter revenues (which is subordinate to
senior parking revenue bonds, not rated by Fitch). The bonds are also
secured by a third lien pledge of tax increment revenue up to the
parking bonds’ maximum annual debt service (MADS).
North Park:
The senior tax allocation bonds are special obligations payable from
North Park project area gross tax increment revenues. This is less the
20% housing set aside, statutory pass-through payments and the county’s
administrative fee. Additional security is provided by the ability of
the 20% housing set-aside to pay 24.5% of senior lien debt service.
City Heights:
The senior TABs are special obligations payable from North Park project
area gross tax increment revenues, less the 20% housing set aside,
statutory pass-through payments and the county’s administrative fee.
Additional security is provided by the ability of the 20% housing
set-aside to pay 24.5% of senior lien debt service.
Horton Plaza:
The subordinate TABs are special obligations payable from Horton Plaza
project area gross tax increment revenues, less the 20% housing set
aside, subordinate to senior lien bonds.
The tax allocation housing bonds are special obligations payable from
the Horton Plaza project area 20% of gross revenues housing set-aside
revenues.
KEY RATING DRIVERS
PROGRESS ON AB1X26 IMPLIMENTATION: The City has been recognized as a
successor agency (SA) to the former San Diego Redevelopment Agency (the
Agency). A recognized obligation payment schedule (ROPS), including 2012
debt service on the bonds, has been approved by the county and the
state. The SA has received sufficient payments 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.
REVENUE COMMINGLING ACROSS PROJECT AREAS: Tax increment revenues for
2012 were received on a commingled basis without detail across project
areas. The SA applied revenues to debt service and respected
senior/subordinate indenture provisions. Funds received were combined
with available reserves to meet debt service in March and September
2012. The SA has requested guidance from the DOF and county on how to
maintain project area details in the future.
Historically, gross tax increment for all project areas has provided
significant coverage of TAB debt service and marginal coverage of all
debt service including ROPS approved loans and notes payable. If future
revenues remain commingled, it may be appropriate to evaluate coverage
on a commingled basis rather than by project area. Combined coverage
levels will be highly reflective of the Centre City project area. Reason
being is the project area generated 65% of the total agency tax
increment revenues and accounts for 68% of total TAB debt outstanding.
CREDIT PROFILE:
In February 2012, the City of San Diego became the Successor Agency (SA)
for the Redevelopment Agency. The City’s Office of the Mayor is charged
to coordinate all former RDA activities and maintain funds separate from
City funds. The SA has received ROPS approval for the January-June 2012
and July-December 2012 periods which included TAB debt service for 2012.
Prior to dissolution, the Agency received sufficient funds from San
Diego County in January 2012. Together with available cash reserves, the
funds were used to fund debt service payments for March and September
2012.
The SA has received approved ROPS for 2012 but received limited funds
from the county given the funds already received in January 2012. The SA
expects to receive sufficient funds in the January-June 2013 and
July-December 2013 ROPS to cover all SA TAB debt service requirements
for 2013 (approximately $57 million). SA reserve balances are
significant and likely to be directed to be used for future debt service
payments or transferred to another governmental entity.
To date the SA has received commingled funds (housing and non-housing
increment and project areas are not separately identified) to apply to
its ROPS. As such the SA anticipates first applying funds to ROPS
approved TAB debt service and expects to continue to respect various
senior and subordinate lien priorities. While the SA is treating funds
as commingled and project areas as merged, they have asked the DOF for
guidance and for project area detail information. Fitch does not rate
all project areas given the significance of Centre City to overall
revenues and debt. That said, Fitch believes it is able to analyze
appropriately the economics of the overall San Diego RDA. All
Fitch-rated TABS benefit from a cash-funded debt service reserve funded
at the lower of MADS, 125% AADS or 10% outstanding principal.
PROJECT AREA CREDIT PROFILES:
NORTH PARK:
SOUND DEBT SERVICE COVERAGE LEVELS: Annual debt service coverage for the
senior TABs has exceeded 3.40 times (x) the past three years, including
coverage of 4.34x in fiscal 2011. All-in coverage including subordinate
TAB debt service is also sound at over 2.3x the past two years and
estimated to be 2.49x for 2011. Under various Fitch designed stress
scenarios, coverage levels of senior TAB maximum annual debt service are
forecasted to remain strong.
SOLID PROJECT AREA TAX BASE GROWTH: While small at only 555 acres, the
project area experienced significant growth between 2002 and 2009 which
increased AV by 100% to a peak of $1.17 billion in 2009. Despite recent
assessed valuation (AV) declines of 4.6% or 7.3% IV in total over the
two years, the project area experienced small growth of 0.7% in 2012 to
an estimated $1.1 billion. The incremental value (IV) to base year AV
ratio remains good at 1.65x. Estimated pending AV appeals are moderate
at 7% of total AV and not expected to materially negatively impact AV or
coverage.
DIVERSE TAXPAYERS WITH CONCENTRATED LAND USE: Located five miles from
San Diego’s downtown next to Balboa Park, the project area land use is
concentrated with residential properties a high 74% of AV. Top ten
taxpayers are diverse at a low 10.9% of IV in 2011, with the leading
taxpayer a low 1.09%.
CENTRE CITY:
SOUND DEBT SERVICE COVERAGE LEVELS: Annual debt service coverage for
both the subordinate TABs and subordinate parking bonds have exceeded
3.00 times (x) the past three years, including coverage of 3.73x and
3.31x respectively in fiscal 2011. Housing TAB annual debt service
coverage has been over 1.74x over the past three years and 1.65x in
fiscal 2011. Under zero AV growth scenarios for each, coverage levels of
maximum annual debt service are forecasted to remain sound and all bonds
perform well under various Fitch stress tests.
MATURE PROJECT AREA TAX BASE: The project area experienced significant
growth between 2004 and 2009 which increased AV by 150% to a peak of
$13.2 billion in 2009. Assessed valuation (AV) has declined modestly
(7.5% in total over the past three years to 2012). However, the
fully-developed 1,400 acre project area tax base remains sizable at
$12.67 billion with a very high incremental value (IV) to base year AV
ratio in fiscal 2011 at over 9.6x.
DIVERSE PROJECT AREA TAXPAYERS: Located in the core of San Diego’s
downtown, the project area includes waterfront locations and diverse
economic activities. Among them are a government center, financial and
legal services, culture, performing arts, visitor and tourism
industries, mass transit, air and sea transport and a Major League
Baseball (MLB) stadium. Based on most recently available data, top ten
taxpayers are moderately concentrated relative to other special tax
districts at 22% of IV in 2011, with the leading taxpayer a low 3.2%.
PARKING REVENUE BONDS: While the indenture permits use of tax increment
to cover only 1x debt service on a third-lien basis, the base from which
this revenue is drawn generated coverage of over 3.20x 2008-2011. The
approved 2012 ROPS included debt service for the parking revenue bonds.
Parking revenue bonds are also supported by a second lien pledge on
parking garage revenue at two facilities as well as parking meter
revenue appropriated by the City of San Diego. These revenues have
historically been very strong, generating over $3 million annually and
individually providing over 2.0x coverage of MADS. However, annual
operational and financial performance could impact future parking
revenue coverage levels. Parking revenue bond debt service is level
around $1.5 million with a final maturity in 2026.
CITY HEIGHTS:
SOUND DEBT SERVICE COVERAGE LEVELS: Annual debt service coverage for the
housing set-aside TABs was over 2.0 times (x) the past three years. This
includes coverage of 2.8x in fiscal 2011, notwithstanding the voluntary
prepayment of $600,000 for a parity promissory note. Under various Fitch
designed stress scenarios, coverage levels of housing set-aside TAB
maximum annual debt service are forecasted to remain strong.
SOLID PROJECT AREA TAX BASE GROWTH: Established in 1992, the project
area is large at 1,984 acres and experienced significant growth to a
solid $2.1 billion AV in 2011. Recent assessed valuation (AV) declines
have been moderate at 2.7% or 5.1% IV in 2011. The incremental value
(IV) to base year AV ratio remains low at 1.10x. Estimated pending AV
appeals are moderate and not expected to materially negatively impact AV
or coverage.
DIVERSE TAXPAYERS WITH CONCENTRATED LAND USE: The project area is
located two miles from San Diego’s downtown and three miles from the San
Diego Airport. The project area land use is concentrated with
residential properties a high 80% of AV. Top ten taxpayers are diverse
at a low 5.61% of AV in 2011, with the leading taxpayer under 1.00%.
HORTON PLAZA:
SOUND DEBT SERVICE COVERAGE: Annual debt service coverage for both the
subordinate and housing TABs has exceeded 1.93 times (x) the past four
years, including 2.03x and 1.95x respectively in fiscal 2011. Under a
zero AV growth scenario, coverage of maximum annual debt service is
forecasted to remain above 2.02x and 1.90x for the subordinate and
housing TABs respectively and both perform well under various Fitch
stress tests.
MATURE BUT CONCENTRATED PROJECT AREA: Located in the core of San Diego’s
downtown, the project area is small in size and highly concentrated
among the top ten taxpayers at 77% of IV in 2011, with a large component
consisting of a major regional shopping center. Assessed valuation (AV)
has declined 7% in total over the past four years. Despite this modest
decline, the fully-developed tax base is stable at $805 million with a
very high incremental value (IV) to base year AV ratio in fiscal 2011 at
over 45x.
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,
SP/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
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND
DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING
THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS.
IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE
AVAILABLE ON THE AGENCY’S PUBLIC WEBSITE ‘WWW.FITCHRATINGS.COM‘.
PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS
SITE AT ALL TIMES. FITCH’S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS
OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES
AND PROCEDURES ARE ALSO AVAILABLE FROM THE ‘CODE OF CONDUCT’ SECTION OF
THIS SITE.
Article source: http://www.sandiego6.com/news/local/story/Jeff-Jer-Radio-Team-Returning-to-Morning-Radio/hyA4Bya8GUGz5rQiaQSH8A.cspx?rss=800
