Aug 31 - Standard & Poor's Rating Services lowered its school issuer credit
rating (ICR) on Saginaw City School District, Mich.'s general obligation (GO)
debt one notch to 'BBB' from 'BBB+' based on larger than expected general fund
drawdowns in fiscal 2011 (audited) and 2012 (unaudited), which has resulted in a
negative fund balance. At the same time, Standard & Poor's affirmed its 'AA-'
program rating on the district's GO bonds based on the district's qualification
for, and participation in, the Michigan School Bond Qualification and Loan
"The stable outlook on the SPUR reflects our rating outlook on the state of
Michigan," said Standard & Poor's credit analyst Errol Arne. "The stable outlook
on the school ICR reflects Standard & Poor's expectation that the district's new
administration will continue to make significant expenditure adjustments to
counter reduced revenues and move toward balanced operations," said Mr. Arne.
The school ICR reflects Standard & Poor's assessment of the district's:
* Negative fund balance resulting from continuing deficits;
* Local economy beleaguered by high unemployment;
* Economic indicators, which range from low to adequate; and
* Drop in enrollment, which ties directly to state aid funding.
Somewhat tempering the negative credit factors listed above are the district's
access to the nearby employment centers of Midland and Bay City and
low-to-moderate debt burden.
Standard & Poor's does not expect to revise the rating within the two-year
parameter because of management's efforts to reduce enrollment losses, as well
as its willingness to reduce expenditures. If the district's financial position
continues to weaken, Standard & Poor's could lower the rating.
The district's unlimited-tax full faith and credit pledge secures the
outstanding GO debt. Saginaw City School District serves an estimated population
of 59,675 across the cities of Saginaw and Zilwaukee as well as a portion of