CHICAGO --Moody’s Investors Service has dropped Macon County School District 61 in Decatur’s general obligation rating by two notches to A3 and warned of further action by assigning a negative outlook.

The action comes ahead of the district’s sale of $7 million of taxable GO bonds and $1.5 million of GO refunding bonds. The district will have $91 million of debt outstanding after the issue but $75 million is expected to be repaid with sales taxes.

Proceeds of the taxable issue will go to replenish the district’s working cash fund, while the smaller series will refund a portion of district’s 2007 bonds.

“The downgrade to the A3 rating incorporates the district’s narrow general fund reserves following several years of operating deficits in key funds, along with its limited revenue raising flexibility and below average demographic trends,” Moody’s wrote.

The negative outlook is based on the district’s reliance on state funds for almost half of its operating revenues and the potential for additional state aid cuts and/or increased expenditures related to the district’s pension contribution.

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