LOS ANGELES — Moody's Investors Service downgraded the issuer bond rating of a Santa Clarita, Calif. school district one notch to A2 from A1 and maintained a negative outlook reflecting the district's weakened financial position.
Moody's also downgraded Sulphur Springs Union School District Calif.'s Series 2010 certificates of participation to Baa1 from A3. The downgrades affected $24.3 million in COPs.
"The downgrade incorporates the district's persistent challenges to control expenditures and the trend of modestly declining enrollment," Moody's analyst said. "The modest debt burden is offset by scheduled increases in debt service requirements that would significantly challenge its already narrow financial position."
The finances of the district, which comprises nine elementary schools, continued to deteriorate in fiscal 2014 and 2015, Moody's said.
The deterioration is "indicative of the district's perennial financial underperformance relative to its budget expectations" and occurred despite improved state and local funding, Moody's analysts said.
The district's challenges are somewhat counteracted by what Moody's said is a growing tax base with above average wealth indicators, and a modest pension burden.
For the negative outlook, Moody's cited the execution risk in implementing the district's near-term debt restructuring plan to reduce future debt service payments. It also takes into account the recent history of sizeable negative budget operating variances and the challenge this represents in meeting future financial projections.
