Moody's Investors Service said it has downgraded to Aa1 from Aaa the rating on Lakota Local School District's (Butler County, Ohio) general obligation unlimited tax and general obligation limited tax debt outstanding.
Concurrently, Moody's assigned a Aa1 rating to the district's $7.8 million refunding bonds Series 2013 (general obligation unlimited tax). Post-sale, the district will have $142 million general obligation unlimited tax debt outstanding and $8.27 million general obligation limited tax debt outstanding.
The Series 2013 bonds are secured by the district's general obligation unlimited tax pledge. Proceeds from the Series 2013 bonds will advance refund a portion of the Series 2005 bonds for a net present value savings.
The lack of distinction between the unlimited and limited tax rating is due to the state requirement that Ohio school districts use all available revenues, including available property tax millage currently assigned to operations for the district or overlapping entities under the ten-mill limitation statutory code, for the payment of debt service prior to any other uses.
The assignment and downgrade to the Aa1 rating reflects the district's improving financial operations with medium challenges remaining to rebuild reserves to previous levels; a negative voter history; strong management who have undertaken significant changes in the district's fiscal operations; sizable tax base in suburban Cincinnati (GO rated Aa1); recent enrollment decline with significant additional declines projected; and above average debt burden.
The district's credit rating remains under review for possible downgrade due to its Moody's adjusted net pension liability outlier status relative to its rating category. Moody's expects to resolve the review by the end of July 2013.
