Ratings Agency Downgrades Philadelphia Authorities' Bonds

Fitch Ratings recently downgraded the following Philadelphia Housing Authority and the Redevelopment Authority of the City of Philadelphia capital fund bonds:

• $85 million Philadelphia Housing Authority capital fund program (CFP) revenue bonds, series A of 2002—to AA- from AA; and

• $65 million Redevelopment Authority of the City of Philadelphia capital fund program revenue bonds series B of 2002 and series C and D of 2003—to AA- from AA.

The bonds are secured by the public housing capital fund annual appropriations, as well as debt service reserve fund sureties to cover any timing delays in appropriations.

According to the Fitch agency, the Philadelphia Housing Authority's appropriation amounts have drastically decreased in recent years, falling 24 percent and 15 percent in fiscal years (FY) 2011 and 2012, respectively.

Decreased debt service coverage also drove the downgrade. Due to the declining appropriation amounts, debt service coverage levels have fallen in FY 2012 to 4.10 times before Fitch's stressed scenarios and 3.31 times after Fitch's stressed scenarios are placed.