Standard & Poor's Ratings Services said it lowered its rating on Cazenovia Central School District, N.Y.'s general obligation debt one notch to AA-minus from AA.
The outlook is negative. At the same time, Standard & Poor's assigned its SP-1-plus rating to the district's series 2015 GO bond anticipation notes.
"The lowering of the GO debt rating reflects our view of a substantial decline in the district's reserves following several years of drawdowns," said Standard & Poor's credit analyst Steve Tencer.
The district has posted five consecutive operating shortfalls since fiscal 2010. This has significantly drained its reserves, according to the ratings service, from $6.68 million in fiscal 2009, to $2.81 million as of the most recent audit (fiscal 2014).
Percentagewise, this translates to a reserve decline from 28% of expenditures in fiscal 2009, to 11% in fiscal 2014. The operating shortfalls have been driven primarily by state aid reductions coupled with an increase in employee benefits.
"Although reserves have declined sharply in recent years, the district appears to be making changes designed to ameliorate the recent trend. If the issuer can implement permanent -- rather than one-time -- changes to restore balanced operations, we could revise the outlook to stable," Tencer added. "Conversely, if the district is unable to produce balanced operations, or if the reserve draws continue at a more-than-nominal pace, additional rating pressure is likely."
The 112-square-mile Cazenovia Central School District is principally located in Madison County, with a small western portion in Onondaga County. The cities of Syracuse and Utica are 20 miles and 40 miles to the northeast, respectively.
