OREANDA-NEWS. A recent portfolio review of 12 Fitch-rated Ohio school districts resulted in rating actions for the ratings of five districts, four downgrades, and one upgrade. Seven ratings were affirmed. The rating actions reflect the implementation of Fitch's revised criteria for U. S. states and local governments. A complete list of ratings affected by this review follows at the end of this press release.

Fitch's revised criteria includes a more focused consideration of an entity's revenue framework, including growth prospects and independent legal ability of a government to raise revenues, and the introduction of scenario analysis to support consideration of the sufficiency of an entity's reserve levels.

Fitch believes the funding method for school districts in Ohio present challenges to district financial operations. Strict legal restrictions on revenue-raising and an inability of property tax revenues to capture economic growth to keep pace with rising expenditures contribute to the weak assessment of revenue framework for most Ohio school districts. Operating performance is heavily influenced by the tendency of Ohio school districts to budget cyclically--building up reserves and then drawing them down over time to support operations before requesting additional funds from voters. Fitch's scenario analysis provides insight into the relative risks of this practice, given each district's expected reserve cycle and revenue stream volatility, throughout economic cycles. This analysis, along with the weak revenue framework, drove the majority of the rating changes.

For further details about the trends underlying today's rating actions, please see a new special report titled "Weak Revenue Framework and Cyclical Budgeting Affect Ohio School District Credit Quality" (August 2016).

The portfolio review resulted in rating actions for the following Ohio School District Issuer Default Ratings (IDRs):

AFFIRMATIONS

--Allen East Local School District at 'AA-';

--Mechanicsburg Exempted Village School District at 'AA-';

--Claymont City School District at 'A+';

--Cleveland Municipal School District at 'A-';

--South Point Local School District at 'AA-';

--Fairfield City School District at 'AA';

--Toledo City School District at 'A-'.

DOWNGRADES

--Berea City School District to 'A-' from 'A+';

--Columbus City School District to 'AA' from 'AA+';

--New Albany-Plain Local School District to 'AA' from 'AA+';

--Solon City School District to 'AA+' from 'AAA';

UPGRADES

--Hamilton City School District to 'AA' from 'AA-'.