Fitch Upgrs Santa Monica Redev Agency, CA (Ocean Park Redev Proj) $12.5MM Bonds to 'A-'

--$49.9 million tax allocation refunding bonds, series A;

--$9.4 million taxable tax allocation refunding bonds, series B.

The Rating Outlook is Stable.

The upgrade to 'A-' reflects the Ocean Park redevelopment project's premier location, strong assessed valuation (AV) gains providing solid debt service coverage, and closed lien, balanced against its high taxpayer concentration and small size coupled with the area's vulnerability to earthquake damage.

The Ocean Park project area is located along the Pacific Ocean and near Santa Monica's premier commercial areas. The tax base is highly concentrated, with the top taxpayer - owner of two luxury apartment towers - and the top 10 taxpayers representing 27% and 34% of AV, respectively. Offsetting this concentration risk is the high proportion of land value within the total AV. Land totals 66% of AV and the buildings and improvements 34%. Current year coverage of debt service is estimated at 2.0 times (x), well above the 1.7x projected for fiscal 2009 upon issuance. While the AV for fiscal 2010 is not available and many areas in Los Angeles County are experiencing tax base contraction, Santa Monica's (the city) low level of sub-prime and negative amortization loans and low foreclosure rates point to stability in the Santa Monica market. Furthermore, even if the project area sustained a loss of 34%, debt service coverage would remain strong at 1.3x.

The 'A+' rating on the earthquake recovery redevelopment project area reflects its very high debt service coverage, desirable location and importance to the city (44% of total city AV), strong AV growth, and limited total debt outstanding as well as the taxpayer concentration, vulnerability to earthquakes and potential for the city to leverage tax increment on a subordinate basis.

The earthquake recovery redevelopment project area was established in 1994 following the Northridge earthquake to stimulate and assist redevelopment of damaged areas. The project area covers 2.9 square miles and includes much of the city's commercial and residential base. The project area is concentrated, with the top 10 taxpayers representing 22% of AV; however, no single taxpayer represents more than 6% of AV and 9.8% of incremental AV. Current year coverage of debt service is estimated at 9.8x, well above the 8.0x projected at issuance. Again, while the AV for fiscal 2010 is not yet available, should the project area sustain a decline in value as large as 50%, debt service coverage would remain at 2.0x.

Fitch has withdrawn its 'A+' long-term rating on the Santa Monica Redevelopment Agency (CA) (Earthquake Recovery Redevelopment Proj Area) tax allocation bonds series 1999. The rating withdrawal is in conjunction with the advanced refunding of the above-referenced bonds.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.

SOURCE: Fitch Ratings

Fitch Ratings, San Francisco 
Karen A. Ribble, 415-732-5611 
Amy S. Doppelt, 415-732-5612 
or 
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Email: cindy.stoller@fitchratings.com