Moody's Investors Service said it has downgraded the rating on Manatee County School Board, Fla.'s $192.2 million outstanding certificates of participation to Baa1 from A2.

Concurrently, Moody's has downgraded to A3 from A1 the rating on the school district's $36.8 million of sales tax bonds outstanding. The outlook for both ratings is negative.

The COPs are payable from annually appropriated lease payments made by the board, typically paid from (not secured by) a portion of the board's 1.50-mill capital outlay levy. The sales tax bonds are secured by revenues derived from a voter-approved one-half cent infrastructure sales tax levied and collected for a 15-year period through January 1, 2018.

Legal provisions include an additional bonds test of 1.25 times coverage and a debt service reserve funded by a below investment-grade surety provider. The district's sales tax rating is cap at the implied general obligation rating of the district.

The downgrade to Baa1 rating on the COPs incorporates the board's significantly weakened financial condition, characterized by narrowed liquidity and overdrawn general fund reserves. Negative fiscal 2012 year-end position is the second consecutive year where fund balance is below state-required levels. The Baa1 COP rating also considers the continued devaluation of the sizable tax base, albeit less severe, and the moderate debt profile.

The downgrade to A3 rating on the sales tax bonds reflects the sizable taxable base, broad nature of the half-cent sales tax security, sufficient bondholder protections, recovering though volatile revenue collections, and adequate 1.44 times debt service coverage in fiscal 2012.

Moody's caps the special tax rating at the GO (or implied-GO) level due to economic overlap, likely treatment in bankruptcy, and co-mingling of special tax revenue.

Negative outlooks reflect uncertainties related to the district's ability to make budgetary adjustments to return to positive operations.

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