CHICAGO --Moody's Investors Service upgraded sales tax ratings on three Iowa school districts to reflect an extension of their sales tax base not previously factored into the ratings by Moody's.
Moody's upgraded the ratings Sept. 22 to A1 from A2 on the sales tax bonds of Linn-Mar Community School District, Norwalk Community School District, and Storm Lake Community School District.
Moody's affirmed the A2 sales tax revenue ratings of Fort Dodge Community School District, Mason City Community School District, and the Oskaloosa Community School District. The latter's sales tax pledge differs from the other school districts as it is a fixed allocation of sales tax receipts from the city and county.
The upgrades are primarily the result of updated inputs for the taxable base and pledge ratings factor under Moody's special tax methodology. The pledged revenues for five of the six school districts changed from a county-wide sales tax base to a statewide sales tax base. The legislative change occurred in 2008 but was phased in for each school district on different dates between ranging from 2008 to July 1, 2014.
Moody's said in prior rating assessments on the bonds, the inputs for the taxable base and pledge "mistakenly" reflected the local tax base. These inputs have been corrected to reflect the statewide base. The broader taxable base for the pledged revenues provides additional diversity and mitigates volatility in the revenue stream, Moody's said.
Fort Dodge and Mason City also benefit from the broader base but other rating factors such as debt service coverage levels led to the affirmation of the existing rating rather than an upgrade.
Oskaloosa was affirmed instead of upgraded as its taxable base and pledged revenues did not change. The school district is part of an intergovernmental agreement with the city of Oskaloosa and Mahaska County in which the district receives a fixed allocation of sales tax receipts.
