NEW YORK - Moody's Investors Service has downgraded to Baa1 from A3 the ratings on Elk Grove Unified School District's Community Facilities District No. 1, Calif., special tax bonds. The rating applies to approximately $125 million of outstanding debt.

The rating downgrade primarily reflects the significantly narrower debt service coverage levels provided by decreased tax revenues. Between 2008 and 2011 debt service coverage decreased from 1.25x to 1.05x, largely as a result of the severe decline of the area housing market.

Although the 2012 tax levy is slightly higher than in 2011, the current debt service coverage level is more consistent with assigned rating.

The rating continues to benefit from the relatively large size and diversity of this increasingly developed CFD and the district's proven history of skillfully managing its enrollment growth.

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