Standard & Poor's Ratings Services said it lowered its underlying rating on the Menominee Area Public Schools, Mich.'s series 2009 limited-tax general obligation bonds to BBB from BBB-plus.
At the same time, it affirmed its BBB-plus underlying rating on the school's existing unlimited-tax GO bonds. The outlook on all rating is stable.
The district has pledged its limited tax full faith and credit for payment of principal and interest on the series 2009 limited-tax GO energy conservation improvement bonds. The series 2013 unlimited-tax GO bonds are secured by a pledge of ad valorem taxes without limitation on rate or amount.
"The district's overall financial profile has been improving, evidenced by its emergence from its deficit elimination plan in 2014 with a positive general fund balance, but we feel the district's budgetary pressures will persist in part due to declining enrollment that is tied directly to state aid, which is the district's largest source of its general fund revenues," said Standard & Poor's credit analyst Errol Arne. "However, we feel this will continue to put pressure on the district's general fund balance so we have distinguished between the unlimited- and limited-tax pledges on the district's bonds by downgrading the series 2009 bonds by one-notch to BBB."
The stable outlook on the underlying rating reflects the view that the agency will not change the rating in the next two years because it expects the district will take the necessary steps to manage the budget gap. Although it does not expect the rating to change in the next two years, it could consider a lower rating if the district's budgetary performance weakens significantly during fiscal years 2015 and 2016 returning to negative reserve position. It could consider a higher rating if the district builds and sustains significantly stronger available reserves.
The district encompasses 87.4 square-miles in Menominee County in southern Michigan and includes all of city of Menominee and portions of the townships of Ingallston and Menominee. The district serves an estimated 12,186 residents.
