DBRS Confirms the City of Vancouver at AA (high)

DBRS has today confirmed the long-term debt rating of the City of Vancouver (the City) at AA (high) with a Stable trend. The City continues to exhibit sound credit fundamentals, underpinned by a large and highly valued property tax base, an established record of exemplary financial results and a sizable liquidity position. Furthermore, Vancouver’s economy is poised for strong growth over the medium term, given the large number of infrastructure projects occurring in the region leading up to the City’s staging of the 2010 Winter Olympics. However, growing regional government debt, for which area municipalities are indirectly responsible, is expected to continue exerting downward pressure on the City’s credit profile.

The City has recorded annual surpluses (post-capex) dating back to F2000, including a $4.8 million surplus achieved last year. This performance reflects the City’s strict cost containment habits, which have been made more effective by its limited number of financially onerous capital-intensive responsibilities compared with other large Canadian municipalities. The City also has a moderate DBRS-adjusted net tax-supported debt burden, which stood at $479 million or $815 per capita last year. This includes a portion of the outstanding debt issued by regional governments, (mostly that of the Greater Vancouver Transportation Authority (the GVTA, rated AA)), as regional debt is partly funded by property taxes, is used to finance services traditionally considered municipal in nature (e.g., transit), and is a joint and several liability of area municipalities, including the City.

The City is expected to continue posting sound results, although it faces the task of resolving the current strike of approximately 5,000 workers without unduly eroding budget flexibility. The City’s DBRS-adjusted debt burden appears likely to rise sharply over the next several years, however, due to significant capital needs at the regional government level. Nonetheless, the exact size and timing of future regional government borrowing -- and how this might affect tax and fee levels in Vancouver -- is somewhat tentative, as the GVTA is currently undergoing changes to its operating structure. DBRS expects the GVTA to adopt a new operating structure and update its ten-year capital plan next year, at which point there will be greater clarity on the evolution of regional debt and how this could affect the City’s credit profile.

Notes:
All figures are in Canadian dollars unless otherwise noted.
This rating is based on public information.

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.

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