Moody's Investors Service said it has downgraded DeKalb County School District, Ga.'s $33 million outstanding general obligation bonds to A1 from Aa3.
The bonds are ultimately secured by the district's general obligation pledge but are expected to be paid from the proceeds of the district's Special Purpose Local Option Sales Tax (SPLOST).
At this time, Moody's has also downgraded to A2 from A1 the rating on outstanding certificates of participation, affecting $102 million in outstanding debt. The outlook on the district's outstanding debt is stable. At this time, Moody's has taken the district's rating off review for possible downgrade.
The downgrade to A1 reflects the district's weakened financial profile, including its draft unaudited results of negative fund balance in fiscal 2012, pending accreditation status and several ongoing lawsuits.
The rating also incorporates the district's sizable tax base with above average, albeit weakening, socioeconomic factors and manageable debt burden. The stable outlook reflects the expectation that the district's financial position will remain narrow over the next few years given limited revenue raising flexibility and the likelihood of minimal future expenditure cuts following significant reductions over the last three years.
These limitations are somewhat mitigated by estimates of a return to positive fund balance in fiscal 2013 and a conservative fiscal 2014 budget. The outlook also acknowledges recent financial and managerial changes in the district.
