S&P Global Ratings raised its rating on the Successor Agency (SA) to the Upland Community
"The upgrade is based on continuous assessed value appreciation leading to increases in debt service coverage," said S&P Global Ratings credit analyst Michael Stock.
The 'A+' rating reflects what we view as the SA's:Strong 2.8x maximum annual debt service (MADS) coverage by pledged net tax revenues Fully funded debt service reserves; Good trust indenture provisions, which require the set-aside of full annual debt service from first available tax revenue and a general SA covenant in the indenture that it will include on its recognized obligation payment schedule (ROPS) all payments necessary to satisfy trust indenture requirements, as well as replenishment of debt service reserve accounts; Proven effective management of its ROPS to reserve pledged revenue to first meet annual debt service obligations as required by the trust indenture; A mature, diverse tax base with a volatility ratio of 0.20, which indicates modest sensitivity in incremental revenues to overall AV fluctuations;Stabilization and improvement in project area assessed value (AV) since fiscal 2010; andProject area economy, with strong income levels and access to the greater Los Angeles metropolitan statistical area (MSA). These strengths are mitigated somewhat by our opinion of:Uneven semiannual senior debt service payments, which require the SA to include reserves on its future ROPS to make timely debt service payments without accessing debt service reserves; andModerate concentration among the leading 10 taxpayers in the project area. The stable outlook reflects our view of strong MADS coverage by pledged revenue. Given the strong coverage, stabilization of project area AV, and moderately low volatility ratio, we don't expect to change the rating in the next two years.
An upgrade is possible if there is significant improvement in wealth levels and increases in AV leading to increased debt service coverage.
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