Moody's Investors Service said it has downgraded to Aa3 from Aa2 the general obligation unlimited tax and general obligation limited tax ratings of Eaton City School District, Ohio.
Concurrently, Moody's has assigned a Aa3 rating to the district's $3.8 million school improvement refunding bonds, Series 2014 (general obligation unlimited tax). Debt service on the Series 2014 bonds is secured by the district's general obligation unlimited tax pledge. Proceeds will be used to refund the district's outstanding general obligation Series 2010 Build America Bonds for expected interest savings. Following the current sale, the district will have $30.3 million of GOULT debt and $1.7 million of GOLT debt outstanding.
The Aa3 rating incorporates the district's modestly-sized and stable tax base located west of the City of Dayton (GOLT rated Aa2/stable), below average socioeconomic characteristics, high direct debt burden and exposure to underfunded pension liabilities of two cost-sharing retirement plans.
The rating further incorporates expected maintenance of a healthy financial position though at a level that puts the district's credit profile more in line with the Aa3 rating category given estimated and expected draws on reserves.
The lack of rating distinction between the district's general obligation unlimited and limited tax debt reflects the state requirement that Ohio municipalities use all available revenues, including available property tax millage currently assigned to operations or overlapping entities under the ten mill limitation statutory code, for the payment of debt service prior to any other uses.
