Ottawa, City of: Confirms at AA (high), Trend Still Negative

Paul Judson; Eric Beauchemin, CFA / 416-593-5577 ext.2261, ext. 2252 / pjudson@dbrs.com

 

DBRS is confirming the City of Ottawa’s (“City”) long-term debt ratings as indicated above.  However, the trend remains Negative, reflecting uncertainty over the ability to meet medium-term capital requirements without placing undue pressure on property taxes and debt.

 

While final 2002 results were not available at the time of this report, the City has indicated that fiscal results came in on target.  However, net tax-supported debt is expected to have increased modestly as a result of $60 million in new debt largely used to fund transportation infrastructure.

 

Sizeable capital spending requirements are expected to dampen fiscal results over the medium term and may lead to further weakening in the City’s financial profile, prompting the decision by DBRS to maintain the Negative trend.  Between 2003 and 2007, $2.2 billion in capital spending is planned, primarily to maintain and rehabilitate existing infrastructure.  Financing the majority of this spending internally, as projected by the City, will be challenging, given (1) the expected operating pressures looking forward, and (2) the relatively heavy property tax and user fee burden already faced by residents that limits the ability and public acceptance of future tax increases.

 

In addition to large capital requirements, the City is also faced with partial responsibility for funding social welfare and social housing programs, as well as a high reliance on the technology sector.

 

 

Dominion Bond Rating Service Limited (DBRS) has published a full report that provides additional analytical detail.  To see this report, please click on http://www.dbrs.com/web/sentry?COMP=2900&DocId=121420.  If you do not have access to this document, please contact us at info@dbrs.com.