City of Ottawa maintains Triple-A credit rating for second time in four months
Ottawa – The City of Ottawa has maintained its “Aaa Stable” credit rating after a recent review by Moody’s Investors Service. Moody’s had last affirmed the City’s Triple-A credit rating in April 2014, at which time it rated Ottawa’s financial outlook at the higher end of Canadian municipalities, with a lower-than-average debt burden.
“This is a reflection of sound financial stewardship by this Council and City staff, and the prudent and respectful use of public money,” said Mayor Jim Watson. “We have brought our financial house in order by striking the right balance: keeping taxes and user fees low while continuing to invest in programs and projects that enhance quality of life.”
In Moody’s April report on the City of Ottawa’s financial outlook, it recognized the City’s strong financial governance, such as “prudent and forward-looking policies and multi-year capital plans” and “conservative debt and investment policies, which limits the city’s exposure to market-related risks.”
Earlier this month, when Moody’s revised the Province of Ontario’s outlook from “Aa2 Stable” to “Aa2 Negative,” it announced that it would review the credit ratings for certain related organizations in Ontario, including the City of Ottawa.
Given the very close macroeconomic and financial linkages between the Province and lower-tier governments, Moody’s rating methodology combines an assessment of the credit strength of related organizations, such as cities and universities, with an assessment of the credit strength of the “sovereign” government, in this case Ontario. Moody’s also assesses the degree to which the local government is dependent on assistance from the senior government.
While Moody’s changed the rating outlooks from stable to negative for five related issuers, it affirmed the ratings and stable outlooks for 14 related issuers, including the City of Ottawa.
Moody’s says that the creditworthiness of these municipalities, including high dependence on self-generated revenue, strong reserve levels and a track record of managing operating pressures, provides these municipalities with the ability to withstand a potential downgrade of the Province.
The rating agency noted that several municipalities, including Ottawa, are rated at or above the rating for the Province and that the pressures currently facing the province, notably weak revenue growth and inability to achieve planned expenditure growth restraint, are not expected to negatively impact these municipalities.