City of Ottawa - City of Ottawa Financial Profile

City of Ottawa Financial Profile

The City has a very good credit rating

Cities typically fund some of their capital costs by issuing debt - in the form of bonds - in the debt markets. Investors interested in purchasing this debt want to compare the bond's return to its risk. As a result, international rating agencies rate municipalities issuing debt to help investors determine the level of risk they would take if they purchased the bond. A high credit rating not only lowers the price of the bond, it makes the debt available to a wide range of Canadian and international investors. On the other hand, if a municipality's credit rating falls, it can increase the City's cost of borrowing and limit investors.

At this time, the City of Ottawa is rated by two international rating agencies: Moody's Canada Inc. and Standard & Poor's. Moody's recently confirmed an Aaa rating for the City - the highest possible ranking and one the City has maintained since 1975. In making its most recent assessment, Moody's notes that the City has performed well financially over the past several years, showing strict fiscal discipline and a commitment to long-range financial planning. Moody's also notes in this year's reporting, that the

"…current plan (LRFP II) aims to phase out new debt issuance for lifecycle projects and restrict debt financing to expansion related projects or projects funded by development charges, third party funding or rate changes…. The City's adherence to a long-term capital plan, which ensures that debt levels and debt servicing costs remain modest, constitute a credit positive."

Standard & Poor's (S&P) has assigned an AA+ Stable rating to the City, taking into account the City's exceptionally stable economy, its current low debt level and continued high liquidity. Just one level below its highest, S&P defines this rating as:

"An obligation rated "AA" differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong."

S&P expects that Ottawa's economy will retain its exceptional long-term stability and that increases in debt will be more or less contained to current forecast levels. In its analysis, the rating agency compares Ottawa to a peer group that includes Madrid, Oslo, Paris and Stockholm, and notes that Ottawa's debt level is very similar to that of Oslo and Stockholm, while its liquidity is the highest of this peer group.¹³

The City of Ottawa is an economic generator of significant importance locally and for Eastern Ontario and Western Quebec. Estimates show that City operations injected a little less than $1 billion directly into the Ottawa economy in 2004.

The City is an important economic generator

With approximately 17,000 employees on its annual payroll and a significant procurement and purchasing portfolio, the City of Ottawa makes a major economic impact. For example, City purchasing supports more than 7,000 vendors across the region, including approximately 1,000 rural suppliers. Purchased goods and services include: professional services, construction and technical services, general goods, and products and companies related to the maintenance of the City's fleet of equipment and assets.

This economic activity also supports employment, creates personal household income and generates revenue for the provincial and federal governments. Estimates of City-related local business volumes from secondary spending exceed $1.5 billion.

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¹³Standard & Poor's rating report published June 30, 2005.

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