Moody's Investors Service said it has downgraded to Baa1 from Aa3 and to Baa2 from A1 the rating on Fitzgerald Public School District, Mich.'s general obligation unlimited tax and general obligation limited tax pledges, respectively.

Concurrently, a negative outlook is assigned to the district. Baa1 and Baa2 ratings and negative outlook apply to $27.5 million and $3.8 million in outstanding GOULT and GOLT debt, respectively

Outstanding rated GOULT bonds are secured by the district's general obligation unlimited tax pledge. Outstanding Series 2004 school building and site bonds are secured by the district's general obligation limited tax pledge, though debt service payments are expected to continue to be serviced by proceeds from the district's 3.5-mill sinking fund levy which was renewed in November 2010 and does not expire until 2025.

The rating downgrades reflect the district's weakened financial position and limited General Fund reserves; declining trends in student enrollment; modestly sized and depreciating tax base in the metro Detroit (GO rated B3/rating under review -- possible downgrade) region; and elevated debt profile with above average principal amortization.

The affirmation of the negative outlook reflects our expectation that the district will struggle in the near term to maintain adequate general fund reserves to provide cushion against negative budgetary variances, particularly in the areas of per-pupil based state aid and future enrollment trends.

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