Moody's Investors Service said it has downgraded to Aa3 from Aa2 the underlying rating on Warren Consolidated School District, Mich.'s outstanding general obligation debt.
Concurrently, Moody's has assigned a negative outlook.
The Aa3 underlying rating and negative outlook apply to $45.0 million of outstanding rated general obligation debt.
The district's outstanding rated debt is secured by its general obligation unlimited tax pledge. While the majority of the district's unrated debt is secured by the GOULT pledge, outstanding 2010 refunding bonds are secured by the district's general obligation limited tax pledge payable from all operating revenues, subject to constitutional and statutory limitations.
The downgrade to Aa3 reflects the district's ongoing structural imbalances which have resulted in general fund reserve levels no longer consistent with the Aa2 rating.
Also incorporated in the rating is the district's sizable tax base in metro Detroit (GO rated Caa1/negative outlook) experiencing significant valuation declines; flat student enrollment trends; affordable eight-year teacher contracts; average socioeconomic characteristics; and slightly above average debt profile with slightly below average principal amortization.
The negative outlook reflects the likely budgeted fiscal 2014 general fund operating shortfall and the uncertainty that the district will be able to materially add to general fund reserves over the medium term.
