(The following statement was released by the rating agency) July 20 - Fitch Ratings has removed from Rating Watch Negative the following tax allocation bonds (TABs) for the Arcadia Redevelopment Agency, CA (the RDA): --$6.7 million TABs, series 2001A, 'A+'. The Rating Outlook is Stable. SECURITY The bonds are secured by a pledge of the agency's tax increment revenue collected within the sole project area. This is net of the county administrative fee, tax sharing payments to overlapping taxing entities, and the standard 20% set-aside for low and moderate income housing. KEY RATING DRIVERS PROGRESS ON AB 1X26 IMPLEMENTATION: The City of Arcadia (the city) has been recognized as the successor agency (SA) to the RDA. The recognized obligation payment schedules (ROPS), which include calendar 2012 debt service, have been approved by the oversight board and state. The SA has received sufficient payments, along with available cash reserves, 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 represents that it did not owe a repayment to the county auditor-controller. HOUSING REVENUE AVAILABILITY: The lack of distinction between former housing set-aside revenue and total tax increment under AB 1X26 did not affect Fitch's assessment of credit quality. The aggregation of tax increment results in higher calculated debt service coverage levels for Fitch-rated bonds. However, this is inconsistent with the bond indenture, which specifies that only non-housing increment is pledged. Fitch believes further clarification as to the availability of revenue not pledged under the indenture is needed before factoring this increased coverage into the rating. Additional information on the RDA is available in Fitch's May 6, 2011 release, available at 'www.fitchratings.com'. (Caryn Trokie, New York Ratings Unit)
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