City’s strong financial management earns top- notch credit rating

Report lauds Calgary’s economy, debt level in face of energy crisis

A U. S.- based financial firm awarded Calgary a AA+ credit rating for the second year in a row based, in part, on a strong economy, fiscal management and moderate debt level compared to other municipalities.

The Standard & Poor’s report notes Calgary’s economy hasn’t experienced “much variability” despite being “susceptible to volatility within the energy sector.”

“In our opinion, Calgary’s financial management is very strong,” according to the report that praised the city’s management team as sufficiently experienced and qualified to enact fiscal policies and effectively respond to external risks.

“The city demonstrates what we view as good political and managerial strength,” it said.

Mayor Naheed Nenshi said the credit rating acts as a good independent external financial indicator of how well the city is managed.

“This very nicely highlights the prudence of the financial decisions that we’re making, that we take a long- term view of what is right for the city on the level of debt that is appropriate for us,” said Mayor Naheed Nenshi.

The S& P report noted the decline in oil prices and subsequent drop in investment in the sector could cause Calgary’s GDP to shrink one to 1.5 per cent in the next year.

Additionally, the city maintains an “exceptional liquidity position” with free cash and liquid assets to average about $ 2.4 billion, which could cover more than four times the city’s projected debt service in 2016.

Calgary’s debt is projected to increase to $ 4.3 billion next year, in part to pay for infrastructure projects like new recreation centres and suburban water lines, before it starts to drop.

“We believe that the city’s access to external liquidity is strong, in part because of its access to $ 200 million through bank lines, its commercial paper program, and the Alberta Capital Financing Authority for term- debt financing,” said the report.

Eric Sawyer, the city’s chief financial officer, said the S& P report acts as an independent performance measure using “pretty sound methodology.”

Sawyer said he was pleased with the AA+ rating, which “reflects strong financial management, it reflects really good liquidity that the city has.”

But he noted the report also raised some concerns around capital funding and are closely watching the city’s debt level.

“Overall, ( it’s) a very strong rating, it would be among the best in Canadian municipalities,” Sawyer said.