Moody's Investors Service said it has downgraded to Ba1 from Baa2 the rating on Van Dyke Public Schools, Mich.
The outlook on the district remains negative. The Ba1 rating and negative outlook affects $34.5 million of outstanding rated general obligation debt. The district has a total of $59.4 million of outstanding general obligation debt.
The district's outstanding rated bonds are secured by its general obligation unlimited property tax pledge. Additionally, all outstanding bonds are further secured by the state of Michigan's (GO rated Aa2/positive outlook) School Bond Qualification and Loan Program (SBQLP) which provides debt service assistance through its School Loan Revolving Fund (SLRF).
Moody's has a Aa2 rating with a positive outlook on the enhancement program. Fundamental to the program's rating is its sound mechanics to ensure timely payments, which include a provision for independent third party notification to the state in the event of debt service insufficiency, and the strength of the state's general obligations, currently rated Aa2 with positive outlook.
The downgrade to Ba1 reflects the district's deficit General Fund balance which is not projected to return to positive balance until fiscal 2016.
Also incorporated is the district's modestly sized, depreciating tax base north of Detroit (GO rated Caa3/rating under review for downgrade); well below average socioeconomic characteristics typical of Detroit area residential suburbs that have historically been dependent on regional manufacturing jobs; declining enrollment, likely due to outmigration of students to other districts and charter schools as well as demographic shifts; and elevated debt burden.
The negative outlook reflects the uncertainty that the district will be able to achieve its current Deficit Elimination Plan (DEP) given recent negative budgetary variances and unstable enrollment trends.
