LOS ANGELES — Fitch Ratings on Nov. 18 lowered the ratings to junk on slightly more than $100 million of San Ysidro, Calif., school district debt, deeming it likely that the state could take over the school district.
School officials said in a release that without further salary reductions from school employees the school district will be insolvent before the school year ends in June.
If the school district can't reach an agreement with employees on salary reductions it would have to apply to the State Superintendent of Public Instruction for an emergency loan, which would result in a state takeover of the school district. The state would then appoint a trustee, whose power would supersede any decisions by the school board.
Fitch lowered the ratings on the San Diego area district's general obligation bonds and certificates of participation impacting more than $100 million in debt and placed the bonds and COPs on negative watch.
The ratings on $82 million of general obligation bonds were downgraded to BB-plus from BBB-plus, according to a Fitch report. Analysts also lowered the ratings on $29.1 million in COPs to BB-minus from BBB-plus.
The GO bonds are general obligations of the district, payable solely from the proceeds of ad valorem taxes, without limitation as to rate or amount. The COPs are limited obligations secured by the district's covenant to budget and appropriate lease rental payments for the use of certain district properties, subject to abatement.