Moody's Investors Service has downgraded to Baa3 from Baa1 the underlying general obligation rating of Brighton Area School District, Mich.

The district has a total of $134 million of general obligation unlimited tax and $3.8 million of general obligation limited tax debt outstanding. The Baa3 underlying rating applies to $87 million of outstanding general obligation unlimited tax debt. The outlook remains negative.

Outstanding general obligation unlimited tax debt is secured by the district's unlimited tax pledge as authorized by voters.

The downgrade to Baa3 reflects the district's large and sustained negative general fund balance with preliminary fiscal 2013 estimates indicating a further decline in reserves. Also incorporated in the rating action is the district's sizable yet declining tax base, above average socioeconomic characteristics, recent enrollment growth from shared services agreements and elevated debt burden.

The negative outlook reflects the expectation that district operations will remain pressured within the near term and the deficit fund balance may not be eliminated within a timely manner. District projections for financial improvement are dependent upon unproven growth in enrollment and operating revenue, increasing the likelihood of negative budget variances should expectations not be met.

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