Moody's Investors Service said it has assigned an A3 underlying and A1 enhanced rating with a stable outlook to the Riverside School District, Pa.'s $16.2 million general obligation bonds, Series 2014, and downgraded to A3 from A2 the rating on $8.4 million in previously-issued GO debt and removed the negative outlook.
The current bonds are secured by the district's general obligation unlimited tax pledge, as debt service is exempt from Act 1 limitations.
Proceeds will currently refund the district's Series 2004 bonds for estimated net present value savings of $1.1 million, or 7% of refunded principal. The bulk of the savings may be taken in the early years to bolster the district's reserves.
The downgrade to A3 follows a precipitous drop in cash and general fund balance in fiscal 2013. While the rating agency expected a deficit for the year, the actual decline in reserves was greater than anticipated. The district's reduced financial flexibility will make it more difficult to cope with such challenges as rising pension funding costs and a heavy dependence on state aid.
The rating also incorporates the district's limited tax base, a weak socioeconomic profile, and a heavy debt burden that is expected to moderate over time. The district's reserves are expected to remain stable going forward. Any departure from this expectation would apply renewed downward pressure on the rating.
