Moody’s Investors Service last week downgraded to Baa1 from A2 its rating on Romulus Community Schools, a suburban Detroit district with declining enrollment and pressured financial position.
The system has just under $42 million of outstanding general obligation bonds.
The downgrade comes as the district prepares to come to market this week with $11 million of refunding bonds. The outlook is negative even at the lower rating.
The bonds feature an enhanced rating of Aa2 with a stable outlook based on the security provided by Michigan’s School Bond Qualification and Loan program, Moody’s said.
“The downgrade of the district’s underlying general obligation rating to Baa1 primarily reflects a significantly weak financial position inclusive of management’s expectation to close the current fiscal year with a deficit general-fund balance,” Moody’s wrote in the downgrade report.
The negative outlook reflects expectations that the district’s fiscal position will remain challenged, due mostly to falling enrollment.
“An inability to sufficiently offset future revenue loss with expenditure reductions will result in further weakening of the district’s finances and likely place additional downward pressure on the credit rating,” analysts said.
