A prime indicator for the financial health of the Corporation of the City of Guelph, Standards & Poors has affirmed its AA+ credit rating for the City for a seventh straight year while adding that the outlook is still stable.
“Guelph continues to benefit from an economy that is wealthy and stable, underpinned by sizable manufacturing and public sectors, although it is somewhat less diverse than that of higher-rated peers,” the report reads. “We believe that the city will continue to generate robust operating surpluses in the next several years, with no additional debt issuance, but that elevated capital spending will pressure after-capital balances.”
That’s good news to the City’s managers.
“This AA+ credit rating reaffirms that the City of Guelph is built on a strong financial foundation,” said Mayor Cam Guthrie in a City of Guelph press release. “Excellent municipal finances and practices will benefit the people who live and work in this beautiful city for years to come.”
“This strong rating reflects Council and staff’s ongoing hard work and diligence in meeting our financial obligations,” added Chief Administrative Officer Scott Stewart. “An AA+ rating will allow us to act strategically in investing in the required infrastructure to meet our community’s needs.”
According to S&P, Guelph is ideally situated for growth with our stable population increase, and our closeness to the Greater Toronto area. They also say that our large public sector employment helps stabilise the local job market, and that there’s a high level of institutional stability at the municipal level that provides a “very predictable and well-balanced institutional framework.”
The S&P report added that they might increase the credit rating for the City if it adapts best practices of other high-rated cities like multi-year budgeting; the City of Guelph will begin that process starting in 2021.
On the flip side, S&P warns that they might downgrade the rating if “the city were to pursue an aggressive capital plan absent operating revenue growth sufficient to prevent a material erosion of operating balances, large after-capital deficits, and a tax-supported debt burden greater than 30 per cent of operating revenues.”
That means there’s a danger to the City if it takes on too much debt to meet the demands of capital. On the bright side, S&P notes Guelph’s “exceptional liquidity, and “modest debt burden,” which means that the City would have to go on a pretty big spending spree to get close to the debt warning level S&P is concerned about.
S&P also praised the acquisition of Guelph Hydro by Alectra Inc, which now sees Guelph own 4.6 per cent of the combined utility, while having no exposure to Alectra’s debt.
Since 2013, Guelph has enjoyed a AA+ credit rating, but the S&P report does not mention any concern about Provincial funding cuts or downloading, and how that might affect the City’s financial outlook.
In June, Moody’s released a warning that some municipalities were going to have difficulty compensating for Provincial changes, and that was a month after the Provincial government announced that they were putting select cuts on hold until the 2020-2021 fiscal year.