Moody's Investors Service said it has downgraded to Aa2 from Aa1 the Washington and Multnomah Counties School District No. 48J (Beaverton), Oregon's general obligation bond rating in conjunction with the anticipated sale of its general obligation refunding bonds, Series 2012A (federally taxable) and general obligation refunding bonds, Series 2012B (tax-exempt) in the aggregate amount of $161.3 million.

At this time, Moody's also has downgraded to Aa2 the district's outstanding parity general obligation debt totaling an additional $179.1 million, as well as downgraded to Aa3 from Aa2 the rating on the district's $21.0 million of full faith and credit (limited tax GO) bonds.

A negative outlook has been assigned to the district's ratings. The current offerings are secured by the district's full faith, credit and unlimited property tax pledge. The current offerings are expected, at the district's discretion, to receive the Aa1 enhancement rating with stable outlook of the state of Oregon School Bond Guarantee Program.

Series 2012A bonds proceeds will refund some outstanding maturities of the district's outstanding series 2004A bonds. Series 2012B bonds proceeds will refund some outstanding maturities of the district's outstanding series 2007 bonds.

The downgrade to a Aa2 underlying rating reflects the district's weakened and volatile financial position resulting from intentional draw downs below the board's 5% reserves target. The rating also reflects the district's large tax base with recent valuation declines, above-average socioeconomic indicators, and manageable debt profile.

The negative outlook incorporates Moody's expectation that despite a credible plan to rebuild general fund reserves to the district's 5% target, its strained financial position leaves district liquidity susceptible to unexpected shocks. Additionally, 5% reserves are thin for a Aa2-rated entity, and future credit reviews will monitor the district's progress toward rebuilding reserves to levels that approximate similarly rated peers nationally.

The Aa1 enhanced rating assigned to all bonds issued under the program reflects the state's (GO rated Aa1 Stable) full faith, credit and unlimited taxing power which is pledged to guarantee qualified school districts' bond debt service when due. Key aspects of the program include third party notification of any unpaid debt service and favorable state oversight.

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