Moody's Investors Service said it downgrades Brea-Olinda Unified School District's, Calif.'s general obligation bond rating to Aa3 from Aa2.
An unlimited property tax pledge of the district secures the bonds.
The rating downgrade primarily reflects the district's lower than average liquidity and reserve balance for its current rating level. Despite credit strengths like the district's median family income wealth levels and strong $7.2 billion tax base, the district has experienced five years of operational imbalance. State revenue cuts and deferrals have adversely affected district finances as FY13 reserve balance (at $2.9m, or 6.8% of revenues) has dwindled significantly from 2009 levels ($5.96m, or 12.7% of revenues).
Net cash has likewise become exceedingly narrow at the end of FY12 (at 1.9% of revenues) and is inconsistent with a higher rating category. Historical declines in fund balance and cash have weakened the district's ability to manage unforeseen expenditures, particularly as the district expects to maintain similar reserve levels going forward in FY14 through FY16.
The GO rating reflects the strength of the voter approved, unlimited property tax pledge that secures the bonds and the well-established levy and collection history for the levy.
