Moody's Investors Service said it has downgraded to A1 from Aa3 the underlying rating on Bristol Township School District, Pa.'s outstanding $5.9 million general obligation bonds.

Concurrently, Moody's has assigned an A1 underlying rating with a negative outlook and an A1 enhanced rating with a stable outlook to the district's $123 million general obligation bonds, Series 2013.

The current issue is secured by the district's general obligation property tax pledge, as limited by Special Session Act 1 (Taxpayer Relief Act), which restricts the school district's ability to increase property tax millage beyond an annual index without seeking specific exemptions or voter approval. Proceeds will fund various capital improvements to the district's infrastructure.

The downgrade to A1 reflects weak financial results over the past three fiscal years, which have significantly narrowed the district's fund balance reserves and liquidity and opened up a widening budgetary structural imbalance. The rating also reflects the district's moderately sized tax base, average wealth levels, an above average debt position.

The negative outlook considers the sizeable pressures the management team faces to regain structural balance, avoid further draws on fund balance and restore reserves to adequate levels. The outlook also reflects the expectation that reserve levels saw additional declines in fiscal 2013 and are likely to show further weakening fiscal 2014 due to continued structural imbalance, which could further weaken financial flexibility and limit the district's ability to offset potential budget variations.

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