News Column

Fitch Rates Rancho Cucamonga RDA, CA's TABs 'AA-'; Outlook Stable

June 17, 2014

SAN FRANCISCO--(BUSINESS WIRE)-- Fitch Ratings has assigned a 'AA-' rating to the following obligations of the Successor Agency (SA) to the Rancho Cucamonga Redevelopment Agency (RDA), CA:

--$183.3 millionRancho Redevelopment Area tax allocation refunding bonds, series 2014.

The Rating Outlook is Stable.

Bond proceeds will refund the RDA's outstanding TABs, series 1999, series 2001, and series 2004. The bonds will be sold via negotiation the week of June 23rd.

SECURITY

The bonds are secured by a senior lien on tax increment revenues, net of the 20% housing set-aside amount, pass-through payments, and the county's administrative expenses. The bonds are also secured by a pledge of the residual housing set-aside revenues, net of payments for housing obligations.

KEY RATING DRIVERS

STRONG DEBT SERVICE COVERAGE: Fitch calculated debt service coverage on the bonds is strong at 2.69 times (x) maximum annual debt service (MADS) based on fiscal 2014 revenues. The significant assessed value (AV) cushion should support debt repayment even under adverse conditions.

DIVERSE PROJECT AREA: The project area exhibits solid credit fundamentals with a diverse and stable tax base and relatively large geographical size.

RESILIENT TAX BASE: Project area AV increased modestly in 2014 after declining a manageable 6.3% from fiscal 2010 through 2013. Significant planned development in the area should support continued AV growth over the near to medium term.

SOUND ECONOMIC UNDERPINNINGS: The project area benefits from the city's sound economic profile, with above average wealth levels, relatively low unemployment rate, growing population, and strategic geographic location.

RDA DISSOLUTION: The agency appears to be in compliance with dissolution legislation (AB 1x 26), and the dissolution administrative processes do not pose a material credit risk to the bonds.

RATING SENSITIVITIES

The rating is sensitive to shifts in fundamental credit characteristics including debt service coverage, project area characteristics, and tax base performance. The Stable Outlook reflects Fitch's expectation that such shifts are unlikely.

CREDIT PROFILE

DIVERSE, STABLE PROJECT AREA

The Rancho Redevelopment Project area consists of an 8,500 acre area in the city of Rancho Cucamonga. Comprising approximately 33% of the city, the project area benefits from a diverse tax base consisting of residential (46.1% of AV), commercial (20.7%), and industrial (23.4%) property.

The project area was established in December 1981 and is mature, as demonstrated by its high incremental value to base year value of roughly 3000%. While largely built out, a significant amount of development is expected to take place within the project area over the next few years. Planned projects, including some already under construction, feature a large retailer, a large-scale residential development, and several commercial projects.

The project area's historical AV performance has been relatively stable. From fiscal 2010 through fiscal 2013, the project area recorded a cumulative AV decline of 6.3%. AV reversed course and increased by 2.1% in fiscal 2014.

TAXPAYER CONCENTRATION AT RELATIVELY LOW LEVELS

Taxpayer concentration is relatively low, with the top 10 taxpayers making up 12.6% of fiscal 2014 AV and 13% of incremental value (IV). The top 10 list is largely made up of apartment complexes along with the Victoria Gardens Mall, a regional retail destination, and several manufacturing and distribution businesses.

STRONG DEBT SERVICE COVERAGE

Fitch calculated MADS coverage is strong at 2.69x MADS based on fiscal 2014 AV levels. Fitch views the 55% AV reduction necessary to reach 1.0x MADS as providing a healthy cushion against adverse economic conditions.

The agency's fiscal consultant estimates that outstanding appeals may result in a manageable $280.4 million decrease in AV (3% of fiscal 2014 AV). Based on fiscal 2014 AV, the estimated loss due to appeals would reduce Fitch calculated MADS coverage to a still strong 2.59x.

SOUND ECONOMIC CHARACTERISTICS

The city of Rancho Cucamonga is located in western San Bernardino County, approximately 37 miles east of Los Angeles. The city benefits from its strategic location with good access to major ground transportation routes and close proximity to the LA/Ontario International Airport.

The city's economic characteristics are solid. Wealth indicators are above average for the city with per capita income 17% above national levels. The city's unemployment rate is relatively low at 6% (March 2014) compared to that of the state (8.4%) and nation (6.8%).

Additional information is available at 'www.fitchratings.com'.

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, National Association of Realtors, Zillow.com.

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

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=835059

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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Primary Analyst

Matthew Reilly, +1 415-732-7572

Director

Fitch Ratings, Inc.

650 California St.

San Francisco, CA 94108

or

Secondary Analyst

Karen Ribble, +1 415-732-5611

Senior Director

or

Committee Chairperson

Steve Murray, +1 512-215-3729

Senior Director

or

Media Relations:

Elizabeth Fogerty, +1 212-908-0526

elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings


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