Standard & Poor’s last week downgraded Linn-Mar Community School District’s rating two notches to A-plus from AA on its school infrastructure sales, service, and use tax revenue bonds as debt service coverage ratios will fall once the district carries out its plans to issue additional debt.
The district is issuing $15.5 million of school sales tax revenue bonds and has plans for an additional $10 million of debt this year and next. Proceeds of the new sale are to fund various projects in the district.
The credit’s strengths include its participation in the Cedar Rapids economic area, pledge of sales tax receipts, strong maximum annual debt service, and adequate legal provisions that include a 1.2 times additional bonds test and a fully funded debt service reserve.
Those strengths, however, are limited by the potential for enrollment and sales tax revenue fluctuations, both of which have a direct impact on revenue collections. “We expect that sales tax revenues will continue to provide at least adequate coverage of debt service through maturity,” wrote analyst Scott Garrigan.
