SAN FRANCISCO — Moody's Investors Service downgraded a Contra Costa County, Calif., school district citing deteriorating finances.

The issuer rating of Antioch Unified School District, which serves approximately 19,000 students in Antioch and part of Oakley, was downgraded by Moody's to A1 from Aa3.

The agency also downgraded the rating of Antioch Unified's School Facilities Improvement District to A1 from Aa3, affecting $65.8 million of general obligation bonds.

"The downgrade reflects the district's weakened financial position evidenced by large operating deficits, resulting in significant draw down in fund balance levels and weak liquidity position," Moody's analysts said in a report.

Antioch Unified School district has average wealth levels and a below average principal amortization rate, while still facing declining enrollment levels, Moody's said.

The agency also assigned a negative outlook, citing the budgeted drawdown of reserves in fiscal 2015, as well as the narrowing of reserves in subsequent years to still-unknown levels that could put additional pressure on the ratings.

Credit strengths include a manageable debt burdens and a moderately-sized tax base which has begun to stabilize and is expected to continue growing in assessed value.

"The GO rating also reflects the strength of the voter-approved, unlimited property tax pledge securing the bonds and the well-established levy and collection history for the debt service levy," Moody's said. "This supports the credit quality of these bonds, somewhat offsetting the risk of any future financial weakness."

The county rather than the district levies, collects, and disburses the district's property taxes, including the portion constitutionally restricted to debt service on GO bonds.

Moody's said the rating could be further downgraded if reserves narrow to levels below medians for the rating category or if tax base declines continue.


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