Moody's Downgrades East Ramapo's Financial Outlook To 'Negative'

RAMAPO, NY — Moody's Investors Service announced Tuesday that it has given the East Ramapo school district a Baa3 bond rating and revised its financial outlook to negative from stable.

The district, which Moody's now considers a moderate credit risk, has about $48 million in outstanding general obligation unlimited tax bonds, the financial services company said.

According to the statement from Moody's:

The rating reflects the district's very weak governance which has resulted in a narrow financial position severely limiting financial flexibility. ... Despite recent stability supported by an influx of federal money and large increase in state aid, the financial position is expected to deteriorate over the next three years absent additional increases in recurring revenue. The rating also incorporates below-average resident income, a positive enrollment trend despite enrolling less than 30 percent of school age district residents, above-average leverage driven by unfunded pension and OPEB liabilities and a large amount of deferred maintenance across the district which will require significant capital investment.

Environmental, social and governance risks are key drivers to the rating. District governance is considered weak because of the inability of the school board to provide adequate resources for students despite the state monitor's powers and efforts to adhere to a long-term strategic fiscal and academic plan. The weak governance also impacts the district's ability to effectively manage a challenging social and demographic profile. Social challenges include a low graduation rate, very high dropout rates, high percentage of English as a second language students, and a high poverty rate compared to the state average for school districts. The environment risk is material given the district's building condition survey results that rates all 13 schools as either failing or unsatisfactory including a growing health concern over the lack of water outlets. While the district's water supply is safe, the school buildings' poor water infrastructure does not allow students and staff access to the water supply.

East Ramapo schools superintendent Clarence Ellis wrote to district residents in June about the infrastructure problems highlighted in the building condition survey cited by Moody's.

"We acknowledge that questions have arisen regarding the district's sense of urgency in making critical repairs, and we want to assure our families that we share your determination to address these issues with utmost priority," he said. "Considering the magnitude of the required repairs highlighted in the BCS, a special committee will be appointed by the Board of Education."

By the fall, he said, the committee is expected to present a comprehensive scope of work developed by architects, including a plan of action and cost estimates, as a roadmap for implementing the necessary improvements and ensuring proper allocation of funds.

"Our primary goal is to ensure that our East Ramapo buildings provide a safe, conducive environment for learning, meeting the necessary standards for educational excellence," he said.

In July, the New York Civil Liberties Union called on the state to fix the "deplorable, dangerous conditions" — and take over the school district.

Moody's analyists said the downgrade to negative outlook reflects residents' historical lack of support for property tax increases and the likelihood of financial deterioration in the district — beginning in fiscal 2026 — if there isn't an increase in tax revenue or another recurring revenue source.

"The condition and safety concerns of the district infrastructure could further challenge the district's operations and academic programs," the analysts said, noting that the estimated cost to address the district's capital needs is $236 million.

Factors that could lead to an upgrade of the ratings

1. A trend of structurally balanced operations
2. Material increase in available reserves and liquidity
3. Further state oversight including increased powers of the state monitors, funding towards capital or operating costs

Factors that could lead to a further downgrade

1. Decline in available reserves and liquidity
2. Failure to address the long-term structural imbalance
3. Adoption of a contingency budget for fiscal 2025
4. Inability to maintain academic programs as a result of failing infrastructure

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