Moody's Investors Service said it has downgraded the rating on Huber Heights City School District, Ohio, general obligation bonds from Aa2 to Aa3, affecting $79.6 million of outstanding general obligation debt.

Concurrently, Moody's downgraded the rating on the district's certificates of participation from Aa3 to A1. A negative outlook has also been assigned.

The downgrade to Aa3 reflects the district's consecutive operating deficits, resulting in significantly narrowed fund balance and cash reserves. The rating also reflect the district's sizeable tax base, average socioeconomic indicators and manageable debt burden.

The A1 rating on the certificates reflects appropriation risk, the essentiality of the financed facilities, satisfactory legal provisions, dedicated revenues stream, as well as the credit characteristics inherent in the Aa3 general obligation rating. The certificates are secured by the district's pledge to annually appropriate base rental payments in an amount equal to debt service.

The negative outlook reflects the district's pressured finances and the uncertainty surrounding the district's ability to regain structural balance by adequately reducing expenditures or successfully raising new revenues.

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