NEW YORK - Moody's Investors Service said it has downgraded to Aa3 from Aa2 the rating on Lansing School District, Mich.'s general obligation unlimited tax debt (GOULT) and downgraded to A1 from Aa3 the rating on the district's general obligation limited tax (GOLT) debt.

The district has $58.7 million in outstanding general obligation unlimited tax debt, of which $50.8 million in rated by Moody's, and $130,000 in outstanding Moody's rated general obligation limited tax debt. The outlook remains negative.

The downgrade to Aa3 from Aa2 reflects the district's narrowing financial profile with limited financial flexibility and declining enrollment, sizeable tax base with significant state government and auto industry presence that has experienced significant declines in full valuation over the last several years, and a manageable debt burden supported by rapid principal amortization.

The general obligation limited tax debt is payable from all legally available funds of the district and does not benefit from a dedicated levy, resulting in a one-notch rating distinction between the general obligation unlimited tax rating.

The negative outlook reflects the district's declining enrollment and narrowing General Fund reserve. Moody's expects that, while the district has implemented significant expenditure reductions and closed four schools in the last several fiscal years, the district's General Fund reserves will remain narrow in the medium term.

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