NEW YORK - Moody's Investors Service said it has assigned an A2 rating to Mason City Community School District, Iowa's $5.5 million school infrastructure sales, services and use tax revenue bonds, Series 2012. Concurrently, Moody's has affirmed the A2 rating on the district's outstanding sales tax revenue bonds. Post-sale, the district will have $39.2 million of bonds secured by sales tax revenues, of which $20.5 million is rated. Moody's has also upgraded to Aa3 from A1 the rating on the district's outstanding general obligation debt, affecting $800,000.
The bonds are secured by the district's allocation of receipts from a 1% local option sales and services tax collected by Cerro Gordo County (general obligation rated Aa2) through 2013. From 2014 to 2029, the bonds are secured by the district's allocation of receipts from a 1% sales, services and use tax collected by the State of Iowa (issuer rating Aaa/stable outlook) for school infrastructure purposes.
Proceeds of the bonds will be used to finance improvements and renovations at the district's high school, which will complete the final phase of the district's master capital plan, as well as to fund a debt service reserve fund. The A2 rating reflects relatively narrow debt service coverage by pledged revenues, satisfactory legal covenants with a debt service reserve requirement, and declining enrollment trend that directly impacts the amount of revenue collected.
The upgrade to the Aa3 rating on the district's outstanding general obligation debt reflects the district's moderately-sized tax base in north central Iowa, modestly declining enrollment, improved financial operations that have resulted in material growth in fund balance, and low debt burden.