Business Editors
CHICAGO--(BUSINESS WIRE)--Aug. 25, 2003
Fitch Ratings has assigned a 'BBB-' rating to the Community Redevelopment Financing Authority of the Los Angeles Community Redevelopment Agency, California's $4,650,000 pooled financing bonds, series K-taxable (Laurel Canyon and East Hollywood/Beverly-Normandie Projects). Stone & Youngberg LLC will lead the underwriting expected on or about August 26. Dated the date of delivery, the bonds will pay interest each Sept. 1 and March 1, beginning March 1, 2004. The bonds will mature Sept. 1, 2004-2033.
The agency will use bond proceeds to make loans to two project areas and will make debt service payments solely from available tax increment revenues. Bondholders have a first lien on tax increment revenues generated solely in the individual project areas. Tax revenues from one project area are not pledged to other project areas. The agency has no power to levy and collect taxes.
The 'BBB-' rating reflects the economic diversity and fairly strong coverage of projected debt service by existing tax increment revenues. Although potential tax appeals, fees and other revenue deductions can reduce available revenues for debt service, both projects have significant margin above base valuations and have grown at a strong pace in recent years. Additional parity debt is anticipated, but the additional bonds test requires 1.75 times (x) coverage of maximum annual debt service on planned and outstanding debt; however, if incremental assessed value equals or exceeds 25% of total assessed value, the additional bonds test changes to 1.25x maximum annual debt service. The rating also reflects the weaker economic standing of these development areas.
Laurel Canyon area is an earthquake disaster assistance redevelopment project located near the North Hollywood project and the San Fernando Valley. Divided fairly evenly between residential and commercial taxpayers, its incremental assessed value is 24% of total current assessed value. Net incremental revenues with 2% growth are expected to have minimum debt service coverage of 2.12x. The largest ten taxpayers represent 34.9% of total assessed values.
East Hollywood/Beverly-Normandie is a diverse, heavily populated community with several health care facilities, including Kaiser Permanente and Children's Hospital of Los Angeles. With residences representing 77% of land use, incremental value is 14% of total current assessed value. Net incremental revenues with 2% growth are expected to have minimum debt service coverage of 6.08x. The largest ten taxpayers represent 8.7% of total assessed values.
The Los Angeles City Council and state law formed the agency in 1948 to reverse economic blight in the city's most distressed neighborhoods. A seven-member Board of Commissioners, appointed by the Mayor and confirmed by the council, oversees the agency. Currently, the agency operates 33 redevelopment projects and 1 revitalization project area.
