Standard & Poor’s cuts Arroyo Grande’s credit rating
August 30, 2012
S&P reduced its outlook on Arroyo Grande’s long-term and underlying rating on its Redevelopment Agency series 2007 taxable tax allocation bonds from A- to BBB, according to a statement today. At the same time, S&P placed the city’s long-term and underlying rating on “CreditWatch with negative implications.”
Following the elimination of its redevelopment agency, the city became the successor agency responsible for the debt.
“We base the downgrade on the successor agency’s failure to set aside sufficient pledged revenue to meet annual debt service before release for any lawful purpose, as described in the trust indenture and after the passage of Assembly Bill 1484, which disrupted agency cash flow,” said S&P’s credit analyst Sussan Corso
By not directing all available pledged property tax revenue to debt service and reserve replenishment first, as agreed to in the contract, the S&P said it believes the city could violate legal obligations. Should the city receive such a notice exposing the bonds to accelerated principal repayment, the S&P said they could lower the rating even further.