Fitch Maintains San Rafael Redevelopment Agency, CA's TABs on Rating Watch Negative

SAN FRANCISCO--(BUSINESS WIRE)-- Fitch Ratings maintains the Rating Watch Negative for the following San Rafael Redevelopment Agency (RDA), CA tax allocation bonds (TABs):

--$4.6 million TABs, series 1999, 'AA-'.

SECURITY

The bonds are secured by a first lien on gross tax increment on all taxable property within the agency's sole project area, less a 20% set-aside for low and moderate-income housing.

KEY RATING DRIVERS

AB 1484 DISPUTE CONTINUES: The City of San Rafael (the city) has been recognized as the successor agency (SA) to the RDA. The bonds remain on Rating Watch Negative pending resolution of the on-going dispute between the SA and the state's Department of Finance (DOF) regarding the repayment by the SA of property tax distributions from December 2011 and January 2012 that the state believes should have been directed to other taxing entities. The SA disputes the amount due ($1.7 million) and has instead made a payment of about $148,000.

POTENTIAL RESOLUTION: DOF has stated that they currently do not intend to enforce non-payment penalties while the matter is in dispute. DOF further stated it is working on a process for handling the disputes on a case by case basis with more details expected to be released over the next few weeks. Fitch views this as a potentially positive development, depending on the process' details, but notes that until the dispute is resolved, risks to bondholders are elevated.

SUFFICIENT FUNDING FOR DEC. 1 DEBT SERVICE PAYMENT: The next debt service payment on the TABS is due Dec. 1, 2012. Funding for the payment was approved under the July 1, 2012 to Dec. 31, 2012 recognized obligation payment schedules (ROPS). As with the June 1, 2012 debt service payment, it is expected that the County of Marin will make the payment directly to the bond trustee from available funds.

WHAT COULD TRIGGER A DOWNGRADE?

A final resolution with DOF leaving the city without sufficient funds to continue to pay debt service could result in a downgrade, possibly to below investment grade.

For more information on the RDA, please see Fitch's latest release dated July 20, 2012. It is available on Fitch's web site at 'www.fitchratings.com'.

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, and National Association of Realtors.

Applicable Criteria and Related Research:

--'Tax-Supported Rating Criteria' (Aug. 14, 2012);

--'U.S. Local Government Tax-Supported Rating Criteria' (Aug. 14, 2012).

Applicable Criteria and Related Research:

Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686015

U.S. Local Government Tax-Supported Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=685314

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.