Moody's Investors Service said it has downgraded to A1 from Aa3 the rating on Newburgh City School District, N.Y.'s $14.9 million in rated debt outstanding.
The bonds are secured by the district's unlimited tax pledge.
The downgrade to A1 incorporates the district's sizeable tax base with declining property valuations, average resident wealth levels, narrowing reserves due to three consecutive years of large operating deficits, and elevated debt and pension burdens.
Strengths include a sizeable tax base with relatively diverse local economy and willingness to make large expenditure cuts to eliminate budget gap.
Challenges include declining property valuations, large reserve draw-downs as a result of state aid cuts and increase in tax claims and employee benefit costs, and elevated debt and pension burdens.
The rating could go up if the trend of positive operating results lead to a sustained increase in reserve levels or if there is significant property valuation growth and improvement in socioeconomic indicators.
The rating could go down if the district is unable to balance operations resulting in further deterioration of financial position, or in case of a material decline in tax base and local economy.
