2014 CFD Rating Analysis

Transcription

1 214 CFD Rating Analysis ITEM NUMBER CFDs issued (1) 1,51 CFDs with Reserve Fund draws (1) 32 CFDs with Reserve Funds draw for administrative reasons (2) 7 Reserve Fund draws for credit reasons 25 Payment defaults 2 (1) Source: CDIAC data base (2) Reserve Fund draws based on administrative delays or temporary oversights by issuer or others. February 28, 214 2

2 CFDs Issued Reserve Fund Draw Same Period ISSUER CFD DATE / SERIES ISSUER CFD DATE / SERIES Borrego Water District CFD 27 1 Murrieta, City of CFD 2 2 Chino, City of CFD 26 2 Murrieta, City of CFD 25 1 Chino, City of CFD 25 1 Northstar Community Services District CFD No. 1 Series 25 Corona, City of CFD 22 1 Northstar Community Services District CFD No.1 Series 26 Corona, City of CFD 24 1 Perris, City of CFD No. 2 Elk Grove, City of CFD 25 1 Perris, City of CFD No. 1 Gilroy, City of CFD No. 1 San Diego, City of CFD No. 2 Greenfield Union School District CFD 25 3 Sulphur Springs Unified School District CFD No. 1 Ione, City of CFD 25 2 West Patterson Financing Authority CFD No. 1 January 22 Lathrop, City of CFD 26 1 West Patterson Financing Authority CFD No. 1 July 23 Merced, City of CFD 25 1 West Patterson Financing Authority CFD 21 1 Merced, City of CFD 26 1 West Patterson Financing Authority CFD 24 1 Murrieta, City of CFD No. 1 Western Hills Water District CFD No. 1 July 21 Murrieta, City of CFD 21 1 Western Hills Water District CFD No. 1 December 22 Murrieta, City of CFD 23 4 Western Hills Water District CFD No. 1 April 24 Murrieta, City of CFD 23 4 Western Hills Water District CFD No. 1 January 25 NOTE: Highlited CFDs indicate Reserve Draw for administrative reasons NOTE: Highlighted CFDs indicate default in payment to bondholders February 28, 214 3

3 2 18 CALIFORNIA CFD BOND SALES BY YEARS CATEGORIES NO DRAWS AND DRAWS CDIAC DATA STATISTICS COMPILED BY EMPIRE ECONOMICS BONDS SOLD DRAWS BONDS SOLD; NO DRAWS February 28, 214 4

4 1,4 CALIFORNIA CFD BOND SALES BY YEARS 2 213; GEOGRAPHICALLY TOTAL BONDS SOLD AND DRAWS CDIAC DATA STATISTICS COMPILED BY EMPIRE ECONOMICS 1.2% RATE 1,2 13 1, % RATE Northern California Southern Calif. Bonds Sold; Draws Bonds Sold February 28, 214 5

5 7 CALIFORNIA CFD BOND SALES BY COUNTIES CATEGORIES NO DRAWS AND DRAWS CDIAC DATA STATISTICS COMPILED BY EMPIRE ECONOMICS BONDS SOLD DRAWS BONDS SOLD; NO DRAWS February 28, 214 6

6 12% 1% 8% 6% 4% 2% % CALIFORNIA CFD BOND SALES BY COUNTY NUMBER OF BOND SALES AND DRAWS CDIAC DATA STATISTICS COMPILED BY EMPIRE ECONOMICS 8 64 NUMBER OF BONDS SOLD High Draw % Low Draw % No Draws 4% 38% 2 25% 4 14% 7% 4% 2% 2% 2% 1% 1% 1% % % % % % % % % % % % % % % % % % % % % % % 6 8 Merced Stanislaus Amador Santa Clara Kern Placer San Joaquin San Bernardino Sacramento Riverside Los Angeles San Diego Orange Yolo Alameda Contra Costa Ventura Imperial El Dorado Marin Solano San Francisco San Mateo Yuba Santa Cruz Multiple Nevada Sonoma Calaveras Fresno Madera Mono Monterey Sutter February 28, 214 7

7 214 CFD Analysis Special Assessment Bonds Standard & Poor s expects investment grade special assessment bonds to be able to at least withstand two separate sensitivity analyses: (1) a multi year tax delinquency by the two to five largest special assessment tax parcels, and (2) a permanent delinquency by all special assessment taxpayers with under a 5:1 value to lien overlapping debt ratio, absent special circumstances. (page 7) February 28, 214 8

8 214 CFD Analysis Some Selected Common Characteristics of Special Assessment & Mello-Roos Bonds (page 14) A District is fully or close to fully developed (8% or better), diverse taxpayer base; strong economic location; good maximum annual debt service coverage; debt service reserve may be fully or partially funded, but should ideally cover the loss of the top five taxpayers for life of the bonds; high value to lien ratios of greater than 2 to 1; strong legal protections regarding additional debt issuance, and prompt property foreclosures. February 28, 214 9

9 214 CFD Analysis Some Selected Common Characteristics of Special Assessment & Mello-Roos Bonds (page 14) BBB District is mostly developed (7% or better); some taxpayer concentration but expected to be reduced as development continues; adequate economic base with good prospects for continued economic growth; adequate maximum annual debt service coverage of at least 1.x; debt service reserve may be fully or partially funded but should cover the loss of the top five taxpayers for seven to ten years; moderate overall value to lien ratios of at least 1 to 1; strong legal protections regarding additional debt issuance, and prompt property foreclosures. February 28, 214 1

10 214 CFD Analysis Some Selected Common Characteristics of Special Assessment & Mello-Roos Bonds (page 14) Non investment Grade District is only partially developed; significant taxpayer concentration with the top ten taxpayers accounting for more than 5% of assessed value; developing economic base with uncertain prospects for economic growth in the future; failure of the debt service reserve to cover the loss of the top five taxpayers for at least 1 years; low overall value to lien ratios of at less than 1 to1 and a significant amount of properties with value to lien ratios of 5 to 1 or less; adequate legal protections regarding additional debt issuance, and prompt property foreclosures. February 28,

11 214 CFD Rating Analysis Summary Out of 1,51 CFD bond issues, 32 had Reserve Funds draws (2.1%) but only two missed payments to bondholders. Seven of 32 issues (22%) drew on Reserve Funds for short time periods due to administrative oversight, delaying transfer of payment. Most CFDs that had Reserve Fund draws were essentially undeveloped and in non urban areas. Reserve Funds draws were typically fully replenished within twelve months. February 28,

12 214 CFD Rating Analysis General Observations For Districts that had trouble, empirical data to support elements of the rating criteria not found. Based on the 32 Districts reviewed, value to lien thresholds within Common Characteristics section appear to lack meaningful correlation to these Districts and their reason for draws. There is no evidence that property owners of developed or undeveloped property that miss a tax payment remain delinquent for an extended period. Strong payment history (low delinquency) is often a high indicator of credit quality. Delinquency history and recovery seems undervalued. Importance of urban versus rural location and demographics. February 28,

13 214 CFD Rating Analysis Next Steps Request rating agencies provide a general overview of their methodology and types of empirical analysis utilized to formulate their rating criteria. Review value to lien thresholds for meaningful correlations to potential draws or defaults. Identify the weighting of criteria in the rating evaluation. February 28,