Moody’s Investors Service downgraded the Dayton City School District’s $219 million of outstanding general obligation debt to A3 from A2 and revised the outlook to stable from negative. It also downgraded the district’s $15.4 million of outstanding certificates of participation to Baa1 from A3.

The downgrade reflects the district’s limited fiscal position due to limited reserves, as well as a tax base that includes below-average income levels and above-average debt levels, Moody’s said. At the same time, its finances have recently stabilized under a series of budget cuts and a new levy that is expected to generate $9.3 million in additional annual revenue.

Officials said they expect a $1 million shortfall in fiscal 2010 — smaller than in recent years — and a small surplus in 2011, according to Moody’s. The district — which has no borrowing plans —could face additional pressure from state funding, which supplies two-thirds of its general fund revenue.

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