New York, November 13, 2012 -- Moody's Investors Service has affirmed the A1 rating on Louisville City School District's (OH) general obligation debt. Concurrently, Moody's has assigned a negative outlook. The A1 rating and negative outlook apply to $30.3 million in outstanding general obligation debt.
SUMMARY RATINGS RATIONALE
The outstanding rated bonds are secured by the district's general obligation unlimited tax pledge. Affirmation of the A1 rating reflects the district's moderately-sized, residential tax base located east of Canton (GO rated A1/negative outlook), average socioeconomic characteristics, challenged voter history and elevated debt levels with below average principal amortization. The assignment of the negative outlook reflects the district's narrowing General Fund cash reserves which are not expected to improve absent new voter approved operating revenues.
o Favorable union contracts valid through fiscal 2013
o Moderately-sized, residential tax base with average socioeconomic indicators
o Narrow General Fund cash reserves unlikely to improve absent new revenues
o Challenged election history
o Depreciating tax base trends
The negative outlook reflects the district's narrowed General Fund financial position, projected operating deficit for fiscal 2013 as well as the districts challenged history of achieving new voter approved revenues. We expect these factors to continue to challenge the district in the near term, potentially contributing to a decline in the credit profile.
What Could Make The Rating Go Up (or Remove The Negative Outlook):
o Successful passage of a new money operating levy that results in sustained operational improvement
o Sustained increases in General Fund reserves to levels more consistent with higher rated entities
o Substantial growth in taxable valuation and/or increasing socioeconomic indicators
What Could Make The Rating Go Down:
o Sustained narrow General Fund reserves
o Continued deterioration in the district's tax base and/or falling socioeconomic indicators
PRINCIPAL METHODOLOGY USED
The principal methodology used in this rating was General Obligation Bonds Issued by U.S. Local Governments published in October 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
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Andrew Thomas Van Dyck Dobos Associate Analyst Public Finance GroupMark G. Lazarus Analyst Public Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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