Toledo Public Schools’ credit rating took a hit in recent days, as one rating agency downgraded the school district while another put the district on notice.

Standard and Poor’s downgraded the district’s credit rating from AA- to A+, while Moody’s maintained its A1 rating, but added a negative outlook, which means it may face a future downgrade. Interim-treasurer Matt Cleland told Toledo Board of Education members Tuesday night that the agencies focused on the continued depressed economy and the district’s lack of a reserve fund.

The moves by both agencies won’t likely cause borrowing costs for the district to rise, Mr. Cleland said, because of a state credit enhancement program. Mr. Cleland said action by the agencies was relatively positive news for the district.

“It seems counter intuitive to say this is a very good outcome,” he said, “but in this economy, and when you consider that entire counties’ ratings are being downgraded, I think we’ve been fortunate to maintain our Moody’s rating, and are not at all surprised with the Standard & Poor’s.”

The credit ratings were prompted by the district’s refunding of $58 million in construction bonds; refunding the bonds should save taxpayers at least $3 million.

Despite acknowledging district leaders made large expense cuts to balance the school system’s budget, the agencies noted continued declining revenue for the district because of enrollment losses, and narrow cash reserves. The district has depleted its reserve fund in recent years to help offset budget deficits.

“The reason we used the rainy day fund is because we were being hit by a tsunami in regards to our budget,” board vice president Lisa Sobecki said.

Board president Bob Vasquez said the rating agencies spoke considerably during the district’s presentation about the possibility of new local revenue; failure to win a new levy could cause Moody’s to downgrade the district’s debt. They also focused on the possible growth, or deterioration, of the district’s local tax base.

“The district operates within the community,” Mr. Vasquez said, “and the bad economy has a contributing effect (on the ratings).”

Board member Larry Sykes criticized the district’s credit rating presentation, calling the most recent effort weaker than in previous years. Several major local projects, such as the impending opening of a casino, were not included, and the district’s strong minority leadership was also omitted, he noted.

A third credit rating agency, Fitch, downgraded district bonds this summer, and included a negative outlook.

Also, the Tuesday meeting was the last for board member Jack Ford, who did not run for re-election and is stepping down from the board. Mr. Ford spent a quarter century in elected office, as mayor, state representative, city councilman, and school board member, and decades more as a public servant.

“It’s been a nice ride,” Mr. Ford said.

Mr. Ford’s seat will be filled in January by Cecelia Adams, a former TPS administrator.

Contact Nolan Rosenkrans at: nrosenkrans@theblade.com or 419-724-6086.

First Published December 21, 2011, 3:23 a.m.