NEW YORK - Moody's Investors Service said it has downgraded to A2 from A1 the underlying rating on Lima City School District, Ohio's general obligation debt in conjunction with the district's sale of $4.2 million school facilities improvement refunding bonds, Series 2012A (GOULT) and $335,000 various purpose refunding bonds, Series 2012B (GOLT).
Concurrently, Moody's has assigned a Aa2 enhanced rating with negative outlook to both series of bonds. Post-sale, the district will have $13.2 million in general obligation unlimited tax and $335,000 in general obligation limited tax debt outstanding.
Debt service on the Series 2012A bonds is secured by the district's general obligation unlimited tax pledge. Debt service on the Series 2012B bonds is secured by the district's general obligation limited tax pledge, subject to the ten mill limitation. Proceeds from both series will be used to refund the district's outstanding general obligation bonds, Series 2001 and Series 2003, for interest savings.
The downgrade to the A2 underlying rating reflects the district's very narrow cash balance with limited ability to improve financial operations in the near term. The rating additionally incorporates the district's modest tax base in western Ohio (state general obligation rated Aa1/negative outlook) that has experienced moderate declines in value, below average income indices, persistent negative trend in enrollment, and manageable debt burden.
The lack of rating distinction between the general obligation unlimited and limited tax debt reflects the state requirement that Ohio schools use all available revenues, including available property tax millage currently assigned to operations or overlapping entities under the ten mill limitation statutory code, for the payment of debt service prior to any other uses.
The enhanced rating of Aa2 is notched from the state's Aa1 general obligation rating and negative outlook. The enhanced Aa2 rating is based on the programmatic rating and the district's satisfactory coverage of interceptable aid to debt service of approximately 49 times maximum annual debt service and compliance with program requirements for timing of debt service payments.