LOS ANGELES — Moody's Investors Service downgraded to A1 from Aa3 and assigned a negative outlook to the underlying rating of the general obligation bonds of Kootenai County School No. 273 in Post Falls, Idaho, affecting $8.5 million in debt.

Post Falls, a town of 27,574, located in northwestern Idaho 24 miles east of Spokane, Wash., has a local economy that has traditionally been dependent upon lumber products, agriculture, and tourism.

The bonds are secured by the district's full faith, credit and unlimited property tax pledge. The district's Series 2005 bonds are also backed by the Idaho School Bond Guaranty Program, rated Aaa.

The downgrade "reflects the weakness in the district's finances characterized by thin general fund reserves and no near-term plan to restore fund balances," according to the Moody's report.

The A1 rating recognizes the stabilization in the district's tax base, below-average socioeconomic measures, ample liquidity, and rapid debt repayment.

The negative outlook reflects Moody's expectations that the district's finances will remain challenged and will likely fall further behind those of its rated peers, Moody's analysts said.

Strengths were cited as the district's moderately sized tax base that appears to have stabilized and resumed growth and the amortization of debt principal.

An improvement in the district's financial position, including the general fund reserves, or growth in the district's full valuation, could move the rating up.

A protracted decline in the district's full valuation or failure to improve the district's financial position relative to its rated peers could result in a further downgrade, according to the report.

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