Moody's Drops Redwoods College District Two Notches

Moody’s Investors Service downgraded Redwoods Community College District’s general obligation bonds to A1 from Aa2, and assigned a negative outlook.

Monday’s downgrade affects $30 million of outstanding debt, which is backed by the unlimited property tax pledge of the northern California district.

“The downgrade incorporates a trend of structurally imbalanced operations three of the last four fiscal years, limited liquidity, and history of accreditation sanctions,” Moody’s analysts said in a report. “The negative outlook is based on potential risks associated with the upcoming accrediting commission’s decision.”

Ongoing accreditation sanctions provide uncertainty, especially with the accrediting commission’s renewed emphasis on fiscal health, coupled with the district’s still weak financial condition, Moody’s said.

The A1 rating reflects the district’s sizable tax base with below average wealth levels, modest debt burden, and below average financial position.

Moody’s said it could remove the negative outlook if the district’s liquidity substantially improves, if its assess values and socioeconomic indices improve, or if the accreditation sanction is removed.

The rating could be downgraded further if the district’s sanction is elevated to “show cause” or if its accreditation is terminated.

The district includes the College of the Redwoods in Eureka, Calif.

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