Moody's Investors Service said it has downgraded to A1 from Aa2 the general obligation bond rating for San Francisco Community College District.

Concurrently, Moody's has assigned the rating a negative outlook.

The rating action reflects both the possible loss of the district's accreditation by the Accrediting Commission for Community and Junior Colleges (ACCJC) and the significant weakness of the district's fiscal position.

The district's fiscal position is particularly vulnerable to additional state funding cuts and payment deferrals. The district's finances have deteriorated as management has failed to bring structural balance to the budget, a fiscal weakness at the core of a possible loss of accreditation.

The negative outlook underscores the downward pressures that would be attendant to a loss of accreditation and any further material weakening of the balance sheet. The rating also incorporates the district's dynamic economy, exceptionally large tax base and favorable debt profile.

The district's credit quality also benefits from the structural features of California local government General Obligation bonds. The bonds are secured by a pledge of ad valorem property taxes levied by the county treasurer in an amount sufficient to pay debt service when due.

Proceeds from the levy are retained at the county treasury before being transferred by the county to the paying agent. At no point does the district have access to, or gain operational benefit from, the proceeds pledged to bond repayment.

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