Moody's Investors Service said it has downgraded to Baa1 from A3 the underlying rating on Frazier School District, Pa.'s general obligation bonds, Series of 2012 ($24.4 million outstanding).
Concurrently, Moody's downgrades the enhanced rating on the district's bonds to A2 from A1. The bonds are secured by a limited tax general obligation pledge as the bonds are subject to Act 1 tax limitations. A negative outlook is assigned to both the underlying rating and the enhanced rating.
The downgrade to Baa1 and negative outlook reflects material deterioration in reserves to levels no longer consistent with the A rating level.
Moody's believes that the district's ability to strengthen its financial position will continue to be challenged by its limited revenue raising ability and trend of increasing fixed costs. The Baa1 rating also incorporates the district's limited tax base, below average wealth levels, and high debt burden.
The A1 enhanced rating is based upon the additional security for the district's general obligation bonds provided by the Commonwealth of Pennsylvania's Act 150 School District Intercept Program. The Act provides for undistributed state aid to be diverted to bond holders in the event of default. The negative outlook of the enhanced rating reflects the negative outlook assigned to Frazier School District's underlying rating.
