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Marysville SD, Ohio, Downgraded to A1 by Moody's

Moody's Investors Service said it has downgraded to A1 from Aa3 the rating on Marysville Exempted Village School District, Ohio's outstanding general obligation debt and assigned a negative outlook.

Concurrently, Moody's assigns an A1 underlying rating and Aa2 enhanced rating to the district's $11.1 million school improvement refunding bonds (general obligation unlimited tax), Series 2012.

The A1 rating and negative outlook applies to $88.7 million post-sale general  The Series 2012 bonds are secured by the district's general obligation unlimited tax pledge. Proceeds of the Series 2012 bonds will be used to current refund the district's outstanding Series 2002 bonds and advance refund the district's Series 2006 bonds for an estimated net present value savings of $1.3 million or 11.1% of refunded par.

The downgrade of the district's underlying GO rating to A1 from Aa3 reflects the district's narrow and declining year-end cash balances; outsized exposure to levy cycle; conservative management team; above average debt burden and $2.0 billion tax base located 35 miles northwest of Columbus (general obligation rated Aaa/stable outlook).

The assignment of the negative outlook reflects the district's pressured financial operations, evidenced by their heavy reliance on state revenues, elevated dependence on voter-approved operating levies, narrowing cash position, and continued projected draws on reserves.

While district reserve levels had historically been narrow, their ability to successfully pass levies to maintain stable reserves was a key credit factor. The failure of the district to pass a new money levy in the most recent election, combined with the upcoming expiration of existing levies, exposes the district to significant renewal risks over the near term.

Should the renewal levy fail and if the district is unable to make necessary reductions to balance operations, it may cause further downward pressure on the district's credit quality.

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