LOS ANGELES — Moody's Investors Service downgraded Coachella Valley Unified School District, Calif.'s general obligation bonds to A2 from A1 July 7 ahead of plans to refund $30 million on July 24.
The downgrade affects $182 million in GO debt.
The Riverside County school district's outlook remains negative.
The GO bonds are secured by an unlimited property tax pledge of the district. Bond proceeds will be used to refund the district's general obligation bonds, 2005 Election, Series A and portions of the 2005 Election, Series B.
Moody's analysts said the downgrade reflects "the rapid narrowing of the district's financial position within the last two fiscal years and our expectation that this trend will continue, at least for the near-term."
The district will benefit from the state of California's improving finances and new revenue formula for school districts, but recent expenditure increases have far outstripped revenue growth and restoring balance will constitute a major challenge for management, according to Moody's. The rating also reflects modest improvements in the district's underlying economy, its large tax base and manageable costs associated with its leases, pension and OPEB liabilities. Analysts described the district has having "very weak resident wealth levels."
The rating also reflects the fact that the 2014 bonds are secured by an unlimited property tax pledge of the district. Under California law, the county must raise property taxes by whatever amount necessary to repay the obligation, irrespective of the school district's general financial position.
The negative outlook reflects the recent weakening of the district's finances and the near-term challenge the district will face in regaining balance, managing liquidity and rebuilding its fund balance.
