Moody's Investors Service has downgraded to Baa1 from A2 the underlying rating on Avondale School District, Mich.'s general obligation tax pledge and removed the negative outlook.
The Baa1 rating applies to $43.6 million of outstanding rated general obligation debt.
The outstanding rated bonds are secured by the district's general obligation unlimited tax pledge. All outstanding general obligation debt held by the district is further secured by the State of Michigan's School Bond Qualification and Loan Program (SBQLP). Under the program, the state has a constitutional obligation to provide a school district with sufficient funds to make timely debt service payments, if necessary. Series of bonds rated by Moody's carry the enhancement rating of Aa2/stable outlook due to this program qualification.
The downgrade to the Baa1 rating reflects the district's deficit general fund position which is projected to improve in coming years should the district realize operating surpluses as outlined in its current Deficit Elimination Plan (DEP).
Also incorporated in the rating change is the district's sizable, depreciating tax base in Oakland County (GO rated Aaa/stable outlook); above average socioeconomic wealth indicators; flat to modestly declining student enrollment; and elevated debt profile with below average principal amortization and reliance on cash flow borrowing and the State of Michigan's (Aa2/stable outlook) revolving loan fund to service outstanding debt.