Moody's Investors Service said it has completed its review and downgraded to Aa1 from Aaa the general obligation unlimited tax and general obligation limited debt of Sycamore Community School District, Ohio.
Concurrently Moody's downgraded to Aa2 from Aa1 the district's outstanding certificates of participation. The rating actions apply to $52.2 million and $10.2 million of general obligation and COP debt, respectively.
The district's rating was placed on review due to its large net pension liability relative to its rating category. The district was put under review as part of our new approach to analyzing government pensions.
The review was completed with the downgrade to Aa1 and Aa2 and the current ratings incorporate the district's sizeable adjusted net pension liability as well as the district's other long-term credit fundamentals. The district participates in two statewide multi-employer cost sharing pension plans, the State Teachers' Retirement System and the School Employees' Retirement System.
The district's general obligation unlimited tax debt is secured a general obligation unlimited tax pledge which benefits from a dedicated property tax levy unlimited as to rate or amount. The district's general obligation limited tax debt is secured by a general obligation limited tax pledge, subject to the district's 10-mill limitation.
The lack of distinction between the unlimited and limited tax rating is due to the state requirement that Ohio school districts use all available revenues, including available property tax millage currently assigned to operations for the district or overlapping entities under the 10-mill limitation statutory code, for the payment of debt service prior to any other uses.
The district's COPs rating is notched once of the district's GO rating to reflect the essential nature of the projects financed by the issuance of the COPs (a school facility), the inherently weaker security that does not benefit from a dedicated levy, and the risk of non-appropriation.
The downgrade of the district's GO and COPs ratings reflect the district's exposure to two statewide multi-employer cost-sharing pension plans, and also considers the district's healthy and stable financial position, supported by strong reserves and prudent fiscal practices; the district's affluent tax base located in suburban Cincinnati (GO rated Aa1/rating under review); and manageable debt profile with limited future borrowing plans.
