Moody's Investors Service said it has downgraded Millcreek Township School District, Pa., to A2 from Aa3 affecting $8.7 million of rated general obligation debt.
The rated bonds are secured by the district's general obligation unlimited tax pledge. The district has a total of $55 million GO debt.
The downgrade to A2 reflects the district's significantly weakened financial position, limited financial flexibility after six years of operating deficits, narrow general fund balance composed entirely of non-spendable assets, negative unassigned general fund balance, and historically weak financial management.
The rating also incorporates the district's large tax base, above-average socioeconomic profile, and manageable debt burden, as well its recent change in management and its commitment to rebalance financial operations.
The negative outlook reflects Moody's expectation that the district's financial position will remain pressured as a result of increasing fixed costs related to pensions, personnel, and debt, as well as the district's limited ability to raise new revenue due to Act 1 property tax limitations. The outlook also reflects the new management's untested ability to create balanced operations and to rebuild fund balance.