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The Madera Tribune

A chance to suspend RDA dissolutions

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webmaster | 01/19/12

Moody’s, the financial rating agency, on Wednesday downgraded California’s tax allocation bonds because of the decision by the Legislature and Gov. Jerry Brown to do away with California’s redevelopment agencies.

“Moody’s cited near-term cash-flow risks jeopardizing debt-service payments as the reason for the downgrade,” according to a news release from

The next step might be to downgrade all California’s bonds, which would be a huge kick in the solar plexus for the state budget.

Municipalities and school districts would see their borrowing costs increased, regardless of the creditworthiness. That would raise the cost of building any new municipal improvements, from sewers to schools.

This turns out to be an unwelcome side-effect of the state’s plans to take RDA funds. It’s clear that the credit community is beginning to consider California as a potential deadbeat.

Besides hurting smaller communities such as Madera, who have no option but bond sales to finance municipal improvements, the rating also could make it even harder to start the California HighSpeed Rail system in the near future. Who would lend the state money for that project when it looks like the state could renege on its municipal bond debts?

There is talk in the Legislature of redoing the redevelopment agency dissolutions in such a way that they wouldn’t be dissolved, but would continue their lawful operations while providing some cash flow to the state.

A bill, SB 659, by Sen. Alex Padilla, D-San Fernando Valley, would suspend the dissolution of redevelopment agencies until April 15 to give the Legislature time to work out a compromise package. Right now, the requirement is for the agencies to dissolve themselves by Feb. 1.

The Madera Redevelopment Agency already has set dissolution in motion. It would be good for the Legislature to adopt Padilla’s bill to keep any more unintended consequences from hurting local communities and embarrassing the state.


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