Moody's Investors Service downgraded the Pittsburgh, Pennsylvania, School District's issuer and general obligation limited tax bond ratings to A1 from Aa3. The outlook has been revised to stable from negative.
At the same time, Moody's assigned an A1 rating to the school district's proposed sale of $35.5 million of Series 2023 GOs. Proceeds from the sale will be used to finance some of the district's multiyear capital plan.
After the sale, the district will have around $345.4 million of debt outstanding.
"The downgrade of the district's issuer rating to A1 reflects its weakened financial position," Moody's said. "While the district's operating deficits have moderated significantly, they will persist over the next fiscal year."
Still, Moody's said reserves remain satisfactory.
"The district's substantial and growing property tax base is coterminous with the regional economic center of the city of Pittsburgh (A1/stable)," Moody's said.
"The rating also reflects the district's declining enrollment, driven by a declining population and significant competition from cyber and charter schools, along with manageable leverage that will grow as the district moves forward with its multiyear capital plan," Moody's said.
Moody's noted the lack of distinction between the district's issuer and GOLT ratings was based on the district's general obligation full faith and credit pledge.
"The stable outlook reflects our expectation that reserves will remain satisfactory in the near term due to the moderation of the district's operating deficits," Moody's said.
Moody's said factors that could lead to an upgrade would be material expenditure reductions by the district, structurally balanced operations and substantial growth in reserves.
Factors that could lead to a downgrade included further material declines in reserves and liquidity, rising fixed costs leading to inability to control expenditures and continued acceleration of the declining enrollment trend, Moody's said.
The school district is located in Allegheny County (Aa3/stable) in southwestern
In June 2022, S&P Global Ratings revised its outlook on the district to stable from negative and affirmed the A rating on the district's outstanding GOs.
"The outlook revision reflects our view of PPS' ongoing financial improvement that allowed the district to regain stability in recent years as well as federal stimulus funds, which we expect will provide additional budget stabilization over the next two years," said S&P credit
analyst Bobby Otter said at the time.
