Moody's cuts Pittsburgh School District's GO, issuer rating to A1

Moody’s Investors Service downgraded the Pittsburgh, Pennsylvania, School District’s issuer and general obligation limited tax bond ratings to A1 from Aa3. The outlook has been revised to stable from negative.

At the same time, Moody’s assigned an A1 rating to the school district’s proposed sale of $35.5 million of Series 2023 GOs. Proceeds from the sale will be used to finance some of the district’s multiyear capital plan.

The district is located in Allegheny County in southwest Pennsylvania and is the second largest school district in the state.

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After the sale, the district will have around $345.4 million of debt outstanding.

“The downgrade of the district’s issuer rating to A1 reflects its weakened financial position,” Moody’s said. “While the district’s operating deficits have moderated significantly, they will persist over the next fiscal year.”

Still, Moody’s said reserves remain satisfactory.

“The district’s substantial and growing property tax base is coterminous with the regional economic center of the city of Pittsburgh (A1/stable),” Moody’s said.

“The rating also reflects the district’s declining enrollment, driven by a declining population and significant competition from cyber and charter schools, along with manageable leverage that will grow as the district moves forward with its multiyear capital plan,” Moody’s said.

Moody’s noted the lack of distinction between the district’s issuer and GOLT ratings was based on the district’s general obligation full faith and credit pledge.

“The stable outlook reflects our expectation that reserves will remain satisfactory in the near term due to the moderation of the district’s operating deficits,” Moody’s said.

Moody’s said factors that could lead to an upgrade would be material expenditure reductions by the district, structurally balanced operations and substantial growth in reserves.

Factors that could lead to a downgrade included further material declines in reserves and liquidity, rising fixed costs leading to inability to control expenditures and continued acceleration of the declining enrollment trend, Moody’s said.

The school district is located in Allegheny County (Aa3/stable) in southwestern Pennsylvania (Aa3/positive). It has about 20,000 students in its pre-K through 12 classes and operates 57 facilities. It is the second largest school district in the state.