Moody’s downgrades East Ramapo CSD, NY’s GO to Baa2; outlook remains negative

$14.6M in outstanding debt affected

PRESS RELEASE FROM MOODY’S

Moody’s Investors Service has downgraded to Baa2 from Baa1 the underlying rating on East Ramapo Central School District, NY’s $14.6 million in outstanding general obligation debt; the outlook remains negative. The district’s debt is secured by an unlimited tax pledge.

RATINGS RATIONALE

The downgrade to Baa2 reflects deterioration in the district’s financial position resulting in a negative General Fund balance in fiscal 2013 and 2014. Given its limited liquidity, the district is a regular issuer of cash flow notes to fund ongoing operations. The rating also incorporates the district’s substantial tax base, average wealth levels, and minimal debt burden with rapid amortization of principal.

The negative outlook incorporates the expectation the district will continue to face financial strain from rising special education and transportation costs given limits on revenue growth. Without additional revenues or expense reductions, the accumulated fund balance deficit will increase over time. The state is currently contemplating putting the district under increased oversight, and the outlook incorporates the uncertainty regarding the state’s involvement in the district’s operations going forward.

Moody’s notes that the school district has overlapping boundaries with the Town of Ramapo (GO rated A1/negative), which is currently under federal investigation for reasons that have not been publicly disclosed. The school district is an autonomous governmental entity from the town and there has been no indication that the federal investigation extends to the school district or any of its management or officials.