CHICAGO — Moody's Investors Service warned this week that last week's flooding across central Iowa could have negative credit implications for the hardest-hit towns.

The triple-A rated city of Ames, its school district, and nearby colleges and universities bear the biggest brunt, Moody's said.

The rating agency has not taken any rating actions on the six affected credits.

Analysts noted that in a similar case, Grand Forks, N.D., ultimately saw its fiscal profile strengthened as it underwent a period of growth from rebuilding efforts after a devastating 1997 flood.

In addition, federal aid to local Iowa towns could offset the most immediate fiscal stress.

"Immediate credit pressure is caused by overtime payment for relief workers, repairs, and clean-up at a time of drastically reduced sales tax revenues and fees," analyst Edward Damutz wrote in the comment, which was part of Moody's weekly credit outlook.

"Potential credit stresses are reduced sales taxes and issuer inability to provide services and generate revenue from a damaged tax base. Favorably, there are no looming debt service payment dates for several months."

Ames and other parts of the state suffered severe flooding last week after three days and nights of heavy rain caused creeks and rivers to overflow. The city was forced to shut down its water system after the main water main broke, leaving residents without drinking water for several days, according to reports.

In addition to Ames, the other credits rated by Moody's that could be affected are Story County, the Ames Community School District, Iowa State University, Des Moines Area Community College, and Boone County.

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.