Moody's Investors Service said it has downgraded to A2 from A1 the underlying rating on Waverly City School District, Ohio's general obligation unlimited tax rating.

Moody's has assigned a negative outlook.

The downgrade affects approximately $5.5 million of debt secured by the district's general obligation unlimited tax pledge.

The downgrade to A2 reflects the district's weakened general fund reserve levels after four consecutive years of deficit operations.

The downgrade also incorporates the district's modestly-sized rural tax base that has experienced limited growth in recent years and is expecting a sizable decline in the fiscal 2013 assessed value due to the closure of a top taxpayer.

The A2 rating additionally reflects the district's socioeconomic indices that trend slightly below state and national medians and manageable debt burden.

The negative outlook reflects the district's narrowed financial reserve position that could weaken in the near future given budgetary uncertainties.

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