As the Dayton City School District struggles with historically low reserves, the defeat of a proposed levy, and a troubled local economy, Moody’s Investors Service revised its outlook on the district to negative.

The district has $224 million of outstanding general obligation debt that Moody’s rates at A2 and $15.6 million of outstanding certificates of participation that are rated A3.

Centered in the city of Dayton and serving several surrounding communities in Montgomery County, the school district has struggled over the last several years with low revenues, rising costs, as well as additional costs from taking on new programs to improve academic performance.

Meanwhile, Dayton has suffered from major manufacturing job losses, and faces the likely layoff by the end of the year of another 2,300 employees from the closing of several Delphi plants.

A new levy that would have provided additional operating revenue for the district was defeated by 58% of the voters in a referendum last May. The district for five straight years has drawn on its reserves, which by the end of fiscal 2007 had dipped to $4.9 million, or 2.3% of all receipts.

While noting the district’s increasing financial pressures, analysts praised management’s various measures to control spending, including the reduction of 500 positions.

“The negative outlook reflects Moody’s expectation that continued financial pressures and the difficulty of rebuilding reserves will diminish overall credit quality in the medium term,” wrote Moody’s analyst Thomas P. Schuette in a report on the revision.

The school district’s tax base is buoyed by the presence of several large institutions, including the University of Dayton and Wright Patterson Air Force Base.

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