BRADENTON, Fla. — Moody's Investors Service downgraded Hampton County School District No. 2, S.C. six notches to Ba3 from A3 due to the small district's deficit fund balance.
The lower rating affects $5.4 million of rated general obligation bonds. The outlook is negative, Moody's said June 23.
The downgrade is also due to several consecutive years of operational imbalance and failure to enact timely expenditure cuts to offset declining revenues.
"The downgrade further factors in a reliance on the recent utilization of deficit financing and an emergency loan from Hampton County to cover delinquent cash-flow notes," said analyst Kristina Piccarreto.
The lower rating also reflects sharply declining enrollment for what is already a small school district with a limited tax base, below average socioeconomic characteristics, and above average direct debt burden with slow payout, Piccarreto said.
"The negative outlook reflects the absence of a long-term plan for achieving and maintaining structural balance and rebuilding reserves," she said.
An emergency loan from Hampton County secured repayment of the district's outstanding fiscal 2014 cash-flow notes, and the county assumed control of the district's operations, though no long-term recovery plan has been created, according to Moody's.
The district has a "history of weak financial management practices and unwillingness to match revenue losses with expenditures cuts" as well as limited revenue-raising ability, the rater said.
The district in Estill, 93 miles west of Charleston, has three schools serving 942 students, and has experienced a sharp decline in enrollment.
For fiscal 2013, expenditures exceeded revenues by $3.9 million, the total fund balance was negative $91,432, and the unassigned general fund balance was negative $774,301. The district received a clean audit opinion that did not disclose any other financial problems or assistance.
