Fitch Upgrades Redevelopment Agency of Rocklin, California TABs to 'A-'; Rates $15.9MM TABs 'A-'.
The upgrade to 'A-' reflects the solid debt service coverage even under severe stress scenarios, reduced taxpayer concentration, and additional protection provided by an enhanced additional bonds test (ABT). The rating also reflects the project area's balanced land use and its established and expanding tax base, the strong growth in incremental value, and its location in a rapidly growing area along a major interstate. Prospects for continued growth, especially in retail developments to serve the new population, are very good and many projects are underway. Offsetting credit factors include above average but declining concentration of top taxpayers. Concerns about a softening in the housing market in the Sacramento region are mitigated somewhat because the project area's residential portion is in the older part of the city where assessed valuations are likely well below recent market prices.
Taxpayer concentration has declined substantially in recent years; in fiscal 2007 the 10 taxpayers account for 31% of incremental valuation compared to 40% in fiscal 2005. Meanwhile the top taxpayer represents 9% of incremental valuation in fiscal 2007, down from 14% in fiscal 2005. Reduced concentration is largely the result of recent developments and strong assessed valuation (AV) gains. AV has increased by 10% on average since fiscal 2002, and incremental assessed valuation growth averaged a strong 17% annually since fiscal 2002.
Rocklin is located approximately 20 miles northeast of Sacramento in Placer County with an estimated population of about 51,000. Until recently a bedroom community for the greater Sacramento area, the city is benefiting from the job growth in south Placer County, fueled by vacant affordable land attractive for office and retail developments. The project area was established in 1986 with a total of 635 acres in the downtown area and was later expanded to include 1,015 less-developed acres adjacent to Interstate 80, the major west-east interstate in northern California. The project now encompasses about 17% of the city and consists of a balanced mix of commercial/retail, representing 22% of (AV), industrial (23% of AV), and residential (32% of AV) land uses.
Proceeds from the bonds will refinance a portion of the outstanding 2002 tax allocation bonds and finance portions of several road projects to enable planned development to proceed. Tax increment revenue from the existing tax base, net of senior statutory payments to overlapping entities, covers maximum annual debt service (MADS) on these bonds and parity obligations a good 1.71 times (x) in fiscal 2007. Without the top 10 taxpayers, debt service coverage would decline to a still strong 1.26x MADS in fiscal 2008. The ABT is strong, requiring current revenues, less 50% of requested appeals and an adjustment for dominant taxpayers, to cover MADS 1.35x.