DBRS Confirms City of Calgary at R-1 (high) and AA (high)

DBRS has today confirmed the Commercial Paper and Long-Term Debt ratings of the City of Calgary (the City or Calgary) at R-1 (high) and AA (high), respectively. Both trends remain Stable as Calgary maintains a sound credit profile buttressed by its healthy liquidity position and the prudent fiscal management that has resulted in over a decade of post-capex surpluses. However, the strength of the City’s credit profile is tempered by the sizeable infrastructure needs and costs associated with providing services to its rapidly expanding population

In 2007 the City continued its trend of delivering solid results with a post-capex surplus amounting to $130 million. The City produced a balanced operating budget totalling $1,789 million for 2008. As of Q3 2008, Calgary had exhibited sound year-to-date fiscal results with a $7.9 million favourable variance from the budget which is largely based on sound cost-containment and higher tax revenues from the 4.5% increase in the property tax rate. The City recently approved its balanced 2009-2011 operating budget containing $2.4 billion in operating expenses planned for 2009. The 2009 budget addresses the increased costs associated with expanding services to provide for the growing population, although DBRS notes some spending uncertainty for 2009 as virtually all labour agreements are slated for renegotiation. The spending pressures are expected to persist over the medium term as Calgary is still experiencing strong net migration. However, the City will continue to benefit from its sound financial profile and the ability to levy taxes in a relatively low-tax region.

Calgary continues to face considerable infrastructure needs and the new 2009-2013 Capital Plan calls for total investment of $7.6 billion. The spending needs as outlined in the five-year plan have been substantially addressed by sizable funding from the Province of Alberta (rated AAA) and the federal government, as the City will receive grants under the Municipal Sustainability Initiative and the Provincial fuel tax revenue sharing and Federal gas tax revenue sharing programs, totalling over $2.75 billion from 2009-2013. Capital spending is expected to push net tax-supported debt to $875 million by the end of 2010 but is forecast to decline to around $713 million by the end of 2013.

While DBRS expects notable spending pressures to persist in the medium term, the support of the financially robust Alberta government, the City’s record of prudent fiscal management and its strong revenue growth should contribute to the achievement of sound performance in coming years.

Note:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Canadian Municipal Governments, which can be found on our website under Methodologies.

This is a Corporate (Public Finance) rating.