Moody's Investors Service said it has downgraded Conejo Valley Unified School District, Calif.'s general obligation rating to Aa3 from Aa2.

Concurrently, Moody's has maintained the negative outlook.

The downgrade affects $57.1 million in Moody's rated general obligation debt.

The downgrade to Aa3 reflects the district's ongoing structural imbalance and narrowing general fund reserves, as well as exceedingly narrow liquidity resulting from state revenue deferrals. While the district's revenues and cash flow are expected to improve somewhat in the coming years due to new funding formula and reduction in apportionment deferrals from the state, the structural imbalance is expected to persist at least until fiscal 2015.

Moody's expects the cash position will remain narrow, which will limit the district's financial flexibility. The rating also incorporates the district's low debt burden and a large, wealthy tax base, which has shown resilience in the recent recession.

The GO rating 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. 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 general obligation bonds.

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