Moody's Investors Service has downgraded the McKeesport Area School District, Pa.'s general obligation rating to Ba1 from A3.
It also downgraded the district's post-default enhanced rating to Baa2 from A2. The outlook on both ratings is negative.
The ratings actions affect approximately $116.4 million in debt.
The downgrade of the underlying rating to Ba1 reflects the school district's small tax base with below-average wealth indices and heavily burdensome debt. With rising expenditures, the district faces increasing liquidity pressure as its limited reserve levels give little financial flexibility. The rating also reflects the district's high poverty levels and increasing charter school pressure.
The downgrade of the enhanced rating to Baa2 reflects the deterioration of the underlying credit. The enhanced rating is based on the Pennsylvania Act 150 School District Enhancement program, which is authorized under Sections 633 of the Public School Code of 1949. As a post-default program, there is no structural requirement for future debt service payments to be made prior to default. The enhanced rating recognizes that state aid is sufficient to cover debt service in the event that there are any missed payments.
