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Rating Action:

Moody's upgrades rated TABs of Successor Agency to Riverside County RDA (CA)

14 Sep 2015

Actions affect $290M of non-housing and $112M of housing TABs

New York, September 14, 2015 -- Moody's Investors Service has upgraded multiple tax allocation bond (TAB) obligations of the Successor Agency to the Riverside County Redevelopment Agency (RDA).

The rating actions included upgrades to A3 of the Desert Communities Redevelopment Project Area 2010 TABs Series D; to Baa1 of the Jurupa Valley Redevelopment Project Area 2007 TABs, the 2004 A-T Housing TABs, the 2005 A Housing TABs, the 2010 A & A-T Housing TABs, and the 2011 A & 2011 A-T Housing TABs; and to Baa2 of the Interstate 215 Corridor Redevelopment Project Area 2010 TABs Series E. Moody's has upgraded to Baa1 the 2005 TABs (Riverside County Redevelopment Projects), 2006 Series A TABs (County of Riverside Redevelopment Projects), and 2006 Series B TABs (Redevelopment Project Area No. 1 and Mid-County Redevelopment Project). All of the TABs had previously been rated Ba1.

On June 24, 2015, in connection with the release of our Tax Increment Debt methodology, we placed the ratings for nearly all California TABs on review for upgrade, including this successor agency's (SA) TABs. This rating action completes our review for this SA.

Three years post-dissolution, the administrative risks related to the payment of debt service have significantly lessened, so we are now placing greater weight on the fundamental project area characteristics and certain positive features of the dissolution legislation, including the closed lien status of the debt and the availability of the 20% of tax increment (TI) revenues previously restricted for use on affordable housing to pay debt service.

RATINGS RATIONALE

The upgrades reflect the generally large incremental assessed value (AV) of the five project areas individually, as well as the diverse and stable profile of the project areas in the aggregate; the recent healthy rates of growth in incremental AV experienced in each project area; and the average socioeconomic profile of Riverside County. The ratings reflect varying but satisfactory levels of debt service coverage on the basis of the pre-dissolution legal pledge, with these coverage ratios supported by post-dissolution pooled cash flows and the closed lien status of the bonds.

The ratings additionally factor in the SA's successful adaptation to post-dissolution processes and administrative procedures and our expectation that this will continue. The rating also incorporates our generally positive assessment of the implementation of the legislation that dissolved RDAs by most successor agencies, leading to timely payment of debt service on California TABs. In 2012, state legislation dissolved all California RDAs, replacing them with "successor agencies" to serve as fiduciary agents. Dissolution effectively changed the flow of funds and processes around the payment of debt service on TABs. TI revenue is placed in trust with the county auditor-controller, who makes semi-annual distributions of funds sufficient to pay debt service on TABs and other "enforceable obligations" approved by the state.

The pooled financing ratings are based upon the structural features of the financings and the composition of project area bonds which generate their repayment. The bonds are secured by revenue deriving from bonds issued by each of the five individual project areas; each of these project area bonds is secured by net tax increment from the respective project area. Each of the project area bonds has its own reserve; there is no shared reserve or cross-collateralization within each pooled financing. Therefore, the pools constitute unenhanced pools and are scored on the weak-link plus approach, although we have given practical consideration to the total TI revenues allocated on a pooled basis to SA post-dissolution, that are therefore available to support these obligations.

OUTLOOK

The stable outlook reflects the general trend of growing incremental AV and pledged TI revenues across the project areas, a closed lien, and strong management. These factors support our expectation of healthy and gradually expanding debt service coverage going forward.

WHAT COULD MAKE THE RATING GO UP

• Sizeable increase in incremental AV in the project areas, leading to greater debt service coverage

WHAT COULD MAKE THE RATING GO DOWN

• Protracted decline in incremental AV

• Erosion of debt service coverage ratios

• Additional legislative or administrative changes that create uncertainty as to the timely payment of debt service

OBLIGOR PROFILE

The Successor Agency to the Riverside County Redevelopment Agency is a separate legal entity from the County of Riverside. The SA is responsible for winding down the operations of the former RDA, making payments on state-approved "enforceable obligations" and liquidating any unencumbered assets to be distributed to other local taxing entities.

LEGAL SECURITY

The legal security for bonds is tax increment revenue from the project area(s) net of housing set asides and senior pass-through payments. While not legally pledged, the dissolution laws permit TAB debt service to be paid from TI revenues deposited in the SA's Redevelopment Property Tax Trust Fund (RPTTF), less amounts disbursed for pass-through payments and certain administrative charges. This includes the 20% of TI revenue previously considered restricted housing set aside. The SA has subordinated certain statutory pass-through payments and is responsible for notifying the county auditor-controller of any shortfall in TI revenue expected to be deposited in the RPTTF needed for the payment of TAB debt service that would result from the disbursal of the monies for subordinated pass-through payments, so that the necessary subordination can be effected through changes to the usual flow of funds.

USE OF PROCEEDS

N/A

PRINCIPAL METHODOLOGY

The principal methodology used in this rating was Tax Increment Debt published in June 2015. The additional methodology used was Public Sector Pool Financings published in July 2012. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Moses Kopmar
Analyst
Public Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Lori Trevino
Analyst
Public Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's upgrades rated TABs of Successor Agency to Riverside County RDA (CA)
No Related Data.
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