UPDATE: Interested in Standard and Poor’s credit report on Barrie? Click here to have a read.
City’s overall debt load stands at a total $361 million committed – $186 million current, with another $175 million on the way
Despite being part of the national job-loss story, in which the country shed 54,000 jobs in October, 39,000 throughout Ontario in communities like Barrie, Standard and Poor’s still likes the city’s economic essentials, affirming its double A-Stable credit rating.
The rating was part of the financial company’s annual report, which includes information such as credit ratings, data analysis, and research for public and private consumption. Ratings carry a lot of weight, with poorer ratings resulting in higher borrowing costs.
The double A rating reflects Barrie’s stable financial situation, says Mayor Jeff Lehman, and the current council’s “strong commitment” to balancing service demands with budgetary realities.
“This rating tells us that we are continuing in the right direction.”
The city’s “diverse” economy and steps to manage the municipal budget earned Barrie the double A rating. However, the report identified some concerns, including funds needed to service the City’s growing debt load. Growth potential and consequential increase in taxation revenue” will stabilize the debt situation, says the report.
Concern was also raised about Barrie’s liquidity position, but that worry was moderated by recognition of the City’s long-term financial plan and its impact on medium-term liquidity.
The rating is good news because of its impact on borrowing costs, and the fact Barrie relies of debt financing for infrastructure projects, says Ed Archer, general manager of corporate affairs.
“It’s important that we minimize debt charges so we can direct our limited funds toward delivering programs and services for residents.”
The rating comes with a couple of expectations: that the City will continue to stick to its capital plan to manage potential debt increases, and that Barrie’s economy will “maintain its stable course.”
In late summer (an Aug. 29 report), a staff report was issued to general committee, an update to the City’s long-range financial plan and financial policy framework. It included a number of recommendations to “strengthen the City’s financial condition. Measures included:
• Increasing annual contributions to the tax capital reserve so that within 12 years the yearly contribution equals the amount “supported by property taxes.”
• Limiting debt payments to 20 percent of the City’s source revenues.
• That future dividends from PowerStream be applied to debt relief before being placed in the tax capital reserve.
The province limits municipalities to debt levels of 25 percent of source revenues. Barrie is at 15.5 percent, or 62 percent of its debt capacity. Total current debt is $186 million, with another $175 million on the way, for a total commitment of $361 million.