Carson (City of) CA -- Moody's affirms City of Carson's (CA) Issuer Rating at Aa2, downgrades Series 2009 Revenue Bonds (Remediation Project) rating to A1

New York, July 11, 2012 -- Moody's Investors Service has affirmed the City of Carson's (CA) Issuer Rating at Aa2 and downgraded the Series 2009 Revenue Bonds (Remediation Project) rating to A1 from Aa3.

RATING RATIONALE

The affirmation of the Issuer Rating at Aa2 reflects the city's large property tax base located in the Los Angeles metropolitan area core, low debt burden and stable financial position. The downgrade of the Series 2009 Revenue Bonds to A1 reflects increased risks related to pledged revenue from the Carson Redevelopment Agency (RDA) to pay debt service. The RDA's pledge of non-abatable installment payments from subordinate tax increment revenue, combined with the city's covenant to budget and appropriate lease payments from General Fund revenue, had been sufficient to result in the atypical one-notch distinction between the city's Lease-Revenue Bond rating and Issuer Rating. The increased risk relating to the RDA component of the security pledge is due both to the specific uncertainty of continued recognition of the Installment Payment Contract as an enforceable obligation entitled to a claim on Redevelopment Property Tax Trust Fund (RPTTF) revenue and to the more general increase in risks affecting statewide RDA obligations. In consideration of these increased risks we are lowering the rating to A1 consistent with the standard, two-notch differential for fixed asset abatement leases issued by California local governments.

Moody's standard two-notch differential for essential purpose, fixed asset leases relative to a California issuer's General Obligation (GO) Bond rating or Issuer (GO equivalent) Rating reflects the risk of abatement (and the related lack of seismic insurance coverage) and the narrower, General Fund security pledge for leases compared to the voter-approved unlimited property tax pledge securing California GO bonds.

STRENGTHS

- Project area has favorable characteristics and has routinely generated revenues sufficient to fund installment payments

CHALLENGES

- Uncertainty regarding continued recognition of Installment Payment Contract as enforceable obligation

- General increase in risks relating to cash flows/flow of funds, legal/political disputes and clarification/resolution of legislative uncertainties affecting statewide RDA obligations

WHAT COULD MOVE THE RATING UP

- Clear and continued recognition of Installment Payment Contract as an enforceable obligation allowing for disbursement of revenues to make installment payments

- Continued strong characteristics of Project Area 1 providing for surplus revenues sufficient to fully fund installment payments

WHAT COULD MOVE THE RATING DOWN

- Substantial deterioration to the city's credit profile due to decreased economic and/or financial strength and/or increased debt burden

The methodologies used in this rating were General Obligation Bonds Issued by U.S. Local Governments published in October 2009, and The Fundamentals of Credit Analysis for Lease-Backed Municipal Obligations published in October 2004. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

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Moses Kopmar Analyst Public Finance Group Moody's FIS Domestic Sales Office - San Francisco CA One Sansome St. Suite 3100 San Francisco, CA 94104 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653Eric Hoffmann Senior Vice President Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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