Fitch Ratings last week downgraded its rating to A from AA-minus and revised its outlook to negative from stable on the Toledo City School District.
The move affects $30 million of unlimited-tax general obligation debt. The downgrade “reflects significant deterioration of financial flexibility driven by fiscal pressures which include sizeable cost pressures and a constrained and volatile revenue environment,” Fitch said.
The negative outlook is due to additional strains facing the district after it lost a bid for a 0.75% income-tax hike in the early May primary. Like other districts in Ohio, Toledo relies heavily on income taxes for funding.
The district faces dwindling state aid as $26 million of stimulus funding is set to run out next year. On the bright side, the school district has a light debt burden and minimal capital needs, Fitch said.
The district this year faces a $31 million unreserved cash fund deficit. The income tax increase, had it been approved, would have meant an additional $18 million in annual revenue for the district.