Rating Action: Moody's affirms Carson City-Crystal Area Schools, MI's issuer and GOULT ratings at Baa2, revises outlook to positiveGlobal Credit Research - 08 Feb 2022New York, February 08, 2022 -- Moody's Investors Service has affirmed Carson City-Crystal Area Schools, MI's issuer and general obligation unlimited tax (GOULT) ratings at Baa2 and revised the outlook to positive from negative. The issuer rating reflects the district's ability to repay debt and debt-like obligations without consideration of any pledge, security, or structural features. The district closed fiscal 2021 with $13.8 million in GOULT debt outstanding.RATINGS RATIONALEThe Baa2 issuer rating reflects the district's healthy but historically narrow reserve position that was recently bolstered by coronavirus aid and expenditure cuts but will continue to be pressured by declining enrollment. Further incorporated in the rating is the district's concentrated tax base located in central Michigan (Aa1 stable), below-average resident income levels and elevated leverage, primarily because of the district's participation in a statewide, cost-sharing pension plan. Also considered in the rating is the district's ability to access short term borrowing for operations, if needed, from the state.The Baa2 GOULT rating is the same as the issuer rating based on the district's authority to levy an ad valorem property tax, unlimited in both rate and amount, to pay debt service on the bonds.RATING OUTLOOKThe positive outlook reflects budgeted projections for another addition to reserves in fiscal 2022 and stability in fiscal 2023, driven by expenditure cuts that already yielded a structural operating surplus in fiscal 2021. The outlook also considers the district's plan to reduce cash flow borrowing to in fiscal 2022 and eliminate it in fiscal 2023.FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS- Continued growth in fund balance and liquidity- Strengthening of property wealth and resident incomes- Material reduction of leverageFACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS- Deterioration of fund balance or liquidity- Continued enrollment declines that pressure operations- Increases to leverageLEGAL SECURITYThe district's outstanding GOULT bonds are payable from an ad valorem property tax levy that is unlimited in both rate and amount.PROFILECarson City-Crystal Area Schools, MI serves Carson City and ten townships across Montcalm, Gratiot, Ionia, and Clinton (Aa1) Counties with two buildings, one for prekindergarten through third grade and another for fourth through twelfth grades. Enrollment was about 800 for the 2020-21 school year.METHODOLOGYThe principal methodology used in these ratings was US K-12 Public School Districts Methodology published in January 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBM_1202421. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. 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