Moody's Investors Service said it has assigned an A1 rating to El Monte Union High School District, Calif.'s election of 2008 general obligation bonds, Series B in the approximate amount of $35.0 million, and downgraded the rating on the district's outstanding parity debt totaling approximately $131.1 million to A1 from Aa3.

The current offering is secured by an unlimited property tax pledge of the district. Bond proceeds will be used to refund the district's outstanding bond anticipation notes issued in May 2011.

The downgrade reflects recent and projected deterioration in the district's financial position. Considerable expenditure reductions will be required to regain budgetary balance and rebuild reserves to historic levels.

The district is planning to make significant expenditure reductions in fiscal 2014, but these reductions still require board approval and some will require negotiations with bargaining units to be enacted. The district has conservatively budgeted for mid-year state funding cuts in the current fiscal year.

If the governor's proposed tax measure is successful in November 2012, the district's ending general fund balance for fiscal 2013 would likely be stronger than budgeted, though it would still be notably weaker than the district's historically maintained position.

The A1 rating also reflects the district's large, mixed-use tax base; residents' below-average socioeconomic profile; and modest direct debt burden composed almost entirely of general obligation bonds.

The general obligation bonds are secured by the district's voter-approved unlimited property tax pledge. Los Angeles County rather than the district will levy, collect, and disburse the district's property taxes, including the portion constitutionally restricted to pay debt service on general obligation bonds.

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