Date of Release: 2008-05-08

Peel, Regional Municipality of

Confirms at AAA

DBRS has today confirmed the Long-Term Debt rating of the Regional Municipality of Peel (the Region) at AAA with a Stable trend. The credit profile remains strong, supported by a record of prudent fiscal management which has capitalized on the Region’s solid economy in recent years by creating a significant liquidity position ($1.3 billion at year-end 2006) and a very low debt burden. However, rewards of growth have been matched by large capital needs which, although increasing, are still expected to be funded internally. The fairly diversified economy continues to support modest growth despite the impact on the manufacturing and distribution industries of weakened exports due to the strength of the Canadian dollar and softer U.S. demand, as well as elevated energy prices.

Consolidated results for 2007 are not yet available, but early indications point to a sound position, likely with a DBRS-adjusted surplus after incorporating lower-than-expected capex. The budget remains balanced for 2008, supported by a sound though more moderate taxable assessment growth of 1.6% and the incorporation of 4.3% and 9% increases in tax and utility rates, respectively. If, however, capex comes in at budgeted levels, the Region will likely finish the year in a net deficit position on a DBRS-adjusted basis. Additionally, labour negotiations with ten of the 13 bargaining units continue, adding an element of uncertainty in expenditure projections.

Over the long term, needs arising from population growth and infrastructure renewal, as well as considerable construction cost inflation, are expected to continue to pressure capital spending requirements for the Region and other municipalities across Canada. The Region’s ten-year rolling capital plan has been increasing each year for the past several years and now totals $4.7 billion from 2008 to 2017, up a further 6% over the prior ten-year plan. Nonetheless, the Region still plans to fund all capital projects internally and has begun addressing a projected funding deficit by introducing a Capital Investment Plan to increase reserve contributions through 1% annual tax increases over the next ten years. This plan reduces the likelihood for debt financing in the foreseeable future, and highlights the prudence and forward-looking management approach which supports the strong credit quality of the Region.


Note:
All figures are in Canadian dollars unless otherwise noted.

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