Bangkok--5 Feb--Standard & Poor's
Standard & Poor's Ratings Services raised its rating to 'A-' from 'BBB+' on Hawaiian Gardens Redevelopment Agency, Calif.'s series 1999 tax allocation bonds. Standard & Poor's also raised its underlying rating (SPUR) to 'A-' from 'BBB+' on Hawaiian Gardens Public Financing Authority, Calif.' series 2004 tax allocation bonds. The raised rating reflects our view of the project area's strengthened and diversified tax base. The outlook is stable.
"The raised ratings are based on our view that tax increment revenues will continue to provide solid coverage of maximum annual debt service," said Standard & Poor's credit analyst Matthew Reining. "We also believe the project area will be able to withstand further declines in incremental assessed value if further Proposition 8 reductions are realized."
Although incremental assessed value (AV) increased by an average rate of 11% annually from 2006 to 2009, it dropped by 8% in 2010 because of declining home values and Prop. 8 reductions, according to management. Still, we believe the project area can likely withstand a decline of 18% in incremental AV, which is equivalent to nine of the top 10 taxpayers, and still maintain 1.0x maximum annual debt service (MADS) coverage. In our view, the project area also has a low volatility ratio, which indicates to us that the tax increment revenues are not very sensitive to overall AV change. Current MADS for 2010 is approximately 1.85x.
The bonds are secured by tax increment revenues collected from the agency's Redevelopment Project Area No. 1, net of the 20% set-asides for low- and moderate-income housing and passthroughs. The project area's boundaries are approximately coterminous with the City of Hawaiian Gardens.
RELATED RESEARCH
USPF Criteria: Special-Purpose Districts, June 14, 2007
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Media Contact:
David Wargin, New York (1) 212-438-1579,
[email protected]
Analyst Contacts:
Matthew Reining, San Francisco (1) 415-371-5044
Gabriel Petek, CFA, San Francisco (1) 415-371-5042