Fearing potential interruptions in bond interest payments with the dissolution of redevelopment agencies across California, Moody’s Investors Service on Wednesday downgraded by one notch all redevelopment bonds in the state with a rating of Baa2 or better.
But the move is unlikely to have any impact on Santa Clarita’s redevelopment bond rating – because Moody’s doesn’t rate Santa Clarita’s redevelopment bonds.
Instead, Santa Clarita’s redevelopment bonds are rated by Standard & Poor’s, which has assigned them an underlying, investment-grade rating of A-, said Carmen Magana, the city’s finance manager.
Moody’s initially gave Santa Clarita’s redevelopment bonds an Aa3 rating in 2008, but it downgraded them and eventually stopped rating them all together in 2009 when the company that insured them, Ambac Assurance Corp., went bankrupt, Magana said. Today they’re insured by a different company.
Moody’s move does affect 95 other redevelopment agencies up and down the state. Under the legislation recently upheld by the state Supreme Court, cities have until Feb. 1 to name a “successor agency” – usually themselves – to manage their outstanding redevelopment debt.
The law calls for all outstanding debt to continue to be paid according to the same schedules that were in place prior to dissolution, but Moody’s is worried that the transition to the successor agencies could tie things up.
“In the new law, county auditor-controllers are given … administrative responsibilities that may initially conflict with existing bond indentures,” Moody’s reported. “The resolution of any such conflicts according to the new law’s property tax reallocation process could take a substantial amount of time, and it is entirely untested.”
Moody’s said it expects “implementation guidelines” for the transition to successor agencies to be adopted in time for it to reevaluate its downgrade within its usual 90-day time frame.