ICCSD — Hypothetical 2028 Moody's GO Bond Rating Assessment

⚠ Read this first. This is an independent, hypothetical estimate produced by an unofficial analysis project — not a Moody's rating, not a Moody's opinion, and not investment advice. Moody's has withdrawn ICCSD's rating and would assign any future rating through its own process. This project is not affiliated with ICCSD, Moody's, or PFM. All figures are drawn from public records (district ACFRs, Iowa DOM filings, and PFM board presentations) and our forecast, which carries material uncertainty.

The specific question. We are estimating the General Obligation (GO) / issuer rating — the rating tied to the District's taxing power and proposed 2028 PPEL GO Capital Loan Notes. This is not the SAVE revenue-bond rating (a separate credit). And it is a 2028 hypothetical: today there is effectively no rating — Moody's withdrew it for lack of timely audited financials and "will not conduct a rating review until the District's audits are released within 12 months of the most recent fiscal year."

How a GO rating is built

A municipal GO rating is assembled in two layers: a weighted scorecard, then qualitative notching.

Layer 1 — Weighted scorecard (Moody's US K-12 methodology)

Pillar	Weight	What it measures
Economy / tax base	~30%	Full valuation, wealth & income — can the community pay?
Financial performance	~30%	Fund balance & cash as % of revenue; operating results
Institutional framework	~10%	State rules — revenue predictability, ability to cut/raise
Leverage	~30%	Debt + pension (IPERS) + OPEB, and fixed costs, vs. revenue

Layer 2 — Qualitative notching

Governance & management quality, reporting reliability, liquidity practices, and the specific security pledge (a GO's dedicated, effectively unlimited debt-service levy is a structural plus) move the scorecard up or down several notches.

The scale

AaaAaA Baa BaBCaa–C

Aaa–Baa = investment grade · Ba and below = speculative ("junk"). Each grade has sub-notches (Aa1 > Aa2 > Aa3 > A1 …).

ICCSD scored on what we know

Pillar	ICCSD reality	Indicative
Economy	$8.4B tax base, growing +2.5–4%/yr; University of Iowa anchor; stable employment	Aa · strong
Financial performance	Unassigned fund balance ≈ $1M (~0.5% of revenue); ~16 days cash (and it is borrowed); structural deficit; solvency below the 5% floor through FY2029; UAB ≈ 0/negative	Ba or below · weak
Institutional framework	Iowa formula fairly predictable, but UAB caps flexibility; budget guarantee; SF2472 disruption	A · moderate
Leverage	≈ $157M GO + $165M SAVE + $60M IPERS + $13M OPEB ≈ $395M vs. ~$219M GF revenue	A/Baa · moderate

A low-Aa economy carrying a Ba financial profile blends to roughly A/Baa on the scorecard — then the notching is decisive:

Governance / reporting — large downward notch. FY2023 audit filed 26 months late; FY2024–26 still unfiled; material weakness; CFO with incompatible duties; ~$1M+ unreconciled bank accounts; repeat findings.
Liquidity practice — downward. A standing warrant treadmill ($25M FY2026, $10M FY2027) plus interfund loans to stay solvent.
GO security pledge — small upward. Iowa's dedicated, effectively unlimited debt-service levy protects bondholders even amid operating stress.

The estimate: probability of each 2028 outcome

Conditional on ICCSD re-seeking a Moody's GO rating in 2028, our estimated distribution:

Aa3 or higherPFM's stated target

A category (A1–A3)solid investment grade

25%

Baa (Baa1–Baa3)low investment grade · most likely

42%

Ba or belowspeculative grade, if rated

No Moody's ratingaudits not current → insurance route

20%

Central estimate

Baa1 / Baa2

Most likely a low-investment-grade GO rating — held up by the tax base and GO security, held down by negative reserves, structural deficits, and a fresh-out-of-withdrawal track record. ~72% chance investment grade (Baa or better); ~28% chance no usable rating or speculative; only ~5% chance of the Aa PFM hopes for.

Why the spread looks like this

Pulls the rating up ↑

Large, growing $8.4B tax base (University of Iowa anchor)
GO bonds secured by a dedicated, unlimited debt-service levy
Iowa's reasonably predictable funding framework
If executed: clean FY2027 audit + restored liquidity

Pulls the rating down ↓

Negative / ~zero fund balance; solvency below the 5% floor through FY2029
~16 days cash, sustained only by short-term warrants
Late & unfiled audits, material weakness, control failures
Rating withdrawn — must rebuild a track record from scratch
Sector headwinds: SF2472 (SAVE), declining enrollment

Bottom line

ICCSD is a strong-tax-base, weak-finances, broken-reporting credit. The most likely 2028 outcome is a low-investment-grade GO rating (Baa1/Baa2) — if the District executes its turnaround and files clean audits on time. The path to the Aa PFM wants runs through years of clean audits, positive operating margins, and rebuilt reserves that the current forecast does not yet produce.

The most important tail risk is not a low rating — it is no rating at all (~20%): if the FY2024–2026 audits are not caught up and a clean FY2027 audit issued within 12 months, Moody's will not even conduct a review. In that case the 2028 PPEL GO borrowing would likely proceed only with municipal bond insurance (issued at the insurer's AA), which PFM's own term sheet already lists as a possible use of funds.

Appendix — Benchmarking ICCSD against the Aa peer median

Added 2026-06-11, using S&P Global Ratings, "U.S. Local Governments Credit Brief: Iowa School Districts Means And Medians," April 23, 2026. That brief reports median credit metrics for every S&P-rated Iowa district, grouped by rating. We use it to answer a sharper question than the scorecard above: on the specific financial KPIs that define an Aa credit, how far is ICCSD from the median Aa district today — and what would it take to close that distance by 2028?

Translating S&P → Moody's. ICCSD's GO rating is (was) a Moody's rating, but the only fresh Iowa peer data is on the S&P scale. The two map one-to-one: S&P AA+ ≈ Moody's Aa1, AA ≈ Aa2, AA− ≈ Aa3. Throughout this appendix the "Aa median" = S&P's AA column = the Aa2-equivalent district. ICCSD itself is not in S&P's list (it is Moody's-rated and currently withdrawn), so its figures below are our estimates from ICCSD ACFRs, Iowa DOM filings and the PFM model — read them as indicative, not audited.

Where the gaps actually are

Mapped onto S&P's ten median metrics, ICCSD's gap to Aa is not broad-based. The district is at or above the Aa median on the economy, and roughly in line on debt and pension. Almost the entire gap sits in two financial-performance metrics — reserves and operating results — plus one off-scorecard factor: governance & reporting.

Area (S&P metric)	Aa median (S&P AA / Aa2)	ICCSD (est.)	Standing
Economy — county product, wealth & income GCP 84%, PCPI 88%, HHEBI 101%, PCEBI 94% of U.S.	≈ U.S. avg	At/above	At or above Aa
Operating performance — 3-yr avg result (% of revenue)	−0.59%	≈ −2% to −3%	Below — A+ range
Available reserves — % of operating revenue	17.3%	~0.5% (FY26)	Severe gap · ~17 pts
Debt service — % of revenue	8.8%	≈ 7–9%	≈ In line
Net direct debt per capita	$2,396	≈ $1,600GO only; SAVE excl.	Better than Aa
Pension contribution — % of revenue	4.5%	≈ 4–5%	≈ In line
Net pension liability per capita	$551	≈ $600	≈ In line
Governance & reporting (notching, not on the median table)	Clean, timely audits	26-mo-late / unfiled; material weakness	Severe gap

ICCSD economy/debt/pension figures are indicative estimates (Johnson County + University of Iowa tax base; $157M GO net direct debt over ~100k residents; statutory IPERS contributions). The two red rows and the orange row are where the rating is actually lost.

The reserve gap, visualized

Available reserves carry the most weight and show the widest gap. The District's own plan targets 15–17% by FY2028 — but that sits at or above PFM's optimistic case; on PFM's base case reserves never reach the median inside the forecast horizon, and even the optimistic case does not get there until FY2029. (Axis: 0–20% of operating revenue.)

Aa2 medianS&P AA cohort · the target

17.3%

ICCSD FY2026PFM base · near zero

0.5%

ICCSD FY2028PFM base case

2.4%

ICCSD FY2028PFM optimistic case

13.0%

ICCSD FY2028District plan target

15–17%

Board policy 701.5R1 sets a 10–15% solvency target with a 5% floor; ICCSD has been below the floor since FY2022 and stays there through FY2029 on PFM's base case (3.5%). The District plan closes the rest of the gap with one-time proceeds and the FY27 levy — see below.

The gap, in dollars

≈ $37M → $17M

The Aa2 reserve median is a GF balance near 17.3% × ~$219M ≈ $37.8M, versus ~$1.1M on PFM's FY2026 base — a ~$37M gap from a near-zero base. But the District's plan does not close it with recurring cuts alone: one-time property sales (Hills, ESC, Scanlon) and the $8M FY27 levy do much of the lifting. If those land and carry FY2026 reserves toward ~9–10%, the remaining climb to the median is closer to ~$17M — and the recurring operating job shrinks to erasing the ~$6M deficit plus modest surpluses.

Action plan to close the gap by 2028

The gap analysis points the plan: don't chase the economy or debt metrics (already Aa-like) — attack audits, operating margin, reserves, governance and liquidity. The five workstreams below run partly in parallel, but Workstream 1 is a gate: until audited financials are current, none of the financial metrics even get a rating.

Workstream 1 — Audit catch-up (the binding prerequisite)

Until audited financials are current, none of the metrics below get a rating at all — this is the gate. A realistic catch-up cadence:

Window	Milestone
Q2 2026	FY24 audit draft (in flight, ~May 15 target)
Q3 2026	FY24 audit complete, presented to board (July)
Q4 2026	FY25 audit complete, presented to board (Nov. target)
Q1 2027	FY26 audit complete by the March 31, 2027 statutory deadline
Q2 2027 →	FY27 audit on a normal 4–6-month post-close cadence

Alongside the calendar, remediate the material weakness: reconcile the ~$1M+ unreconciled bank accounts, separate the CFO's incompatible duties, clear repeat findings.

KPI · months between fiscal-year-end and audit acceptance — target a steady state of 6 months by the FY27 close.

Workstream 2 — Stop the structural deficit (operating performance)

Close the ~$6M General Fund operating gap with levers already moving: the $8M additional property tax in the FY27 certified budget; the $7.5M of approved budget cuts annualized; and the proposed $7.8M FY28 salary-and-benefit reduction (organizational right-sizing, via the org-chart review now underway, per the April 1 cash-flow memo).
The state-aid quarterly-payment timing change improves the cash-flow profile through FY27–FY28.
Path: FY26 likely −2% to −3%; FY27 ≈ balanced (~0%); FY28 slightly positive (+1% to +2%) — bringing the rolling three-year average to the Aa2 −0.59% (or better).

KPI · rolling three-year operating margin, published quarterly by the FOC — target −0.5% or better by FY28 close.

Workstream 3 — Rebuild reserves to the 15–17% range

Fund the climb from committed/available sources: FY26 property sales (Hills, ESC, Scanlon — confirm close prices and how much routes to the General Fund vs. Debt Service); the $8M FY27 levy; the annualized $7.5M cuts plus the $7.8M FY28 reduction; and the state-aid timing change. Iowa's cash-reserve property-tax levy is the structural backstop (legally available because reserves sat below 20% — the lever S&P's brief flags).
If those land, the District can accrete ~$5–8M/yr into the GF reserve, reaching the 14–17% range by FY28 close — tight but plausible.

KPI · unassigned + assigned GF balance as a trailing-twelve-month % of operating revenue — target glide path FY26 ≈ 9–10% · FY27 ≈ 12–13% · FY28 ≈ 15–17%.

Reconcile this against the forecast. That glide path sits at or above PFM's optimistic case (FY28 13%, FY29 17.5%) and well above its base case (FY26 0.5%, FY28 2.4%). The difference is almost entirely the one-time property proceeds and the $8M levy: from a near-zero base the climb is ~$37M, but if those one-time sources lift FY26 reserves toward ~9–10% first, the remaining climb to 17% is closer to ~$17M. Which is real depends on how much of the property proceeds land in the General Fund, and when.

Workstream 4 — Disclosure & governance posture

The withdrawal was about disclosure and management posture as much as the numbers, and the rating agencies weight institutional framework & management qualitatively. To position for a 2028 engagement:

Continuing Disclosure Annual Reports filed on time (EMMA).
The FOC publishing a written quarterly financial report on a fixed cadence.
An internal-controls work plan with quarterly milestones, signed off by the FOC.
A board-adopted reserves policy — explicit floor (e.g., ≥15% of operating revenue) and a multi-year glide path.
A board-adopted debt-management policy.
Pre-engagement with the rating agency (Moody's and/or S&P) in late 2027 / early 2028 to walk through the audit catch-up and trajectory before a formal rating application.

KPI · count of formal policies adopted, plus on-time disclosure-compliance %.

Workstream 5 — Exit the liquidity treadmill

Retire the standing warrants ($25M FY2026, $10M FY2027) and interfund loans; build to > 60 days cash so the GO levy backstops bondholders, not day-to-day payroll.

Risk register for the 2028 plan

Risk	Mitigation
Property-sale proceeds short of estimate. A softer market or longer marketing could push Scanlon/Hills proceeds into FY28 or shrink them.	Model a conservative case at 50% of expected proceeds.
Enrollment decline accelerates. The model assumes ~0.3%/yr through FY31; faster decline cuts state aid and pressures the margin.	Run a scenario at 1–2% annual decline.
One-time costs from the audit catch-up. Restatements often surface previously unrecognized liabilities.	Hold a $3–5M contingency in the FY27 and FY28 plans.
Bond-market access before catch-up. The District may need bridge financing in FY27 before the rating is restored.	Maintain MidwestOne warrant (RAW) capacity; plan for taxable private-placement pricing if needed.
Pension / OPEB liability surprises. IPERS allocations move with state actuarial assumptions.	Model a 25 bps shock to the funded ratio.

What it will take — and how much it will hurt

The plan is plausible but unforgiving: it only works if the one-time proceeds, the levy, and the cuts all land roughly on schedule, with little margin for the risks above.

Where it hurts

Recurring cuts. Even with one-time help, the operating side must absorb the ~$7.5M of approved cuts plus the proposed $7.8M FY28 salary-and-benefit reduction — on the order of ~150 positions of organizational right-sizing, in a district already shrinking with enrollment.
A visible tax increase. The $8M FY27 levy (and any cash-reserve levy on top) is a real property-tax bump — into state property-tax-reform headwinds and a two-year levy lag.
One-time fuel, spent once. Property sales (Hills, ESC, Scanlon) lift the balance but don't recur; if they slip to FY28 or come in light, the glide path stalls.

Why it is genuinely reachable

The hard parts of an Aa — a $8.4B tax base and a dedicated, unlimited GO debt-service levy — ICCSD already has; the gap is execution, not capacity.
The big levers are already authorized or in motion: the $8M levy is in the FY27 budget, the $7.5M cuts are approved, the org-chart review is underway, and the property sales are listed.
Because one-time proceeds do much of the reserve lifting, the recurring operating job is closer to erasing the ~$6M deficit than to a $24M swing — which is what makes the District's 15–17% by FY28 target tight-but-credible rather than fantasy.

Bottom line on the gap

Audits first, then a tight 2-year climb

ICCSD's distance from Aa is narrow but deep: economy and leverage are already there, so the whole climb is reserves, operating margin and clean audits. The District's 15–17%-by-FY2028 target is plausible if everything lands — one-time property sales, the $8M levy, ~$15M of cuts, and the audit catch-up all on schedule. A more conservative read (PFM base) clears only the 5% floor by FY2028 and reaches the median around FY2029–2030. Either way the non-negotiable first step is the same: current, clean audits — without them there is no rating to improve.