‘Robust’ economy helps city retain AAA rating

Despite debt expected to top $400 million for the first time, the City of Saskatoon has retained its coveted AAA credit rating.

S&P Global, which was formerly known as Standard & Poor’s, reaffirmed the city’s credit rating in a report released Wednesday. The AAA status is the highest assessment handed out by S&P Global.

“It’s a pretty good report card and we’re quite pleased and quite proud of that,” the city’s chief financial officer, Kerry Tarasoff, said in an interview. Only a handful of Canadian cities have a AAA credit rating, Tarasoff said.

The S&P Global report praises the city’s economy as “very strong ” and city hall’s debt burden as “very low.” The City of Saskatoon’s liquidity is lauded as “exceptional.”

Tarasoff explained the city boasts advantages over other cities in that it owns an electrical utility and operates a land development branch, which produce cash flows or liquidity that can be “significant.”

Despite rising debt due to several high-priced infrastructure projects, Tarasoff explained a debt repayment plan has been established for all of them.

Over the next three years, debt repayment is expected to exceed borrowing, which means the taxsupported debt burden should decline, the report says.

That tax-supported debt is estimated at $361.4 million at the end of 2017 and is expected to rise to $420.8 million by the end of the year. Debt is then expected to decline to $398.2 million in 2019 and $376.7 million in 2020. Debt in 2014 was $238.1 million.

Tarasoff said most of the debt is related to the city’s two P3 projects: The civic operations centre that opened late in 2016 and the project to build two new bridges, including a replacement for the downtown Traffic Bridge.

The operations centre, where Saskatoon Transit is based, cost $190 million, which includes construction and maintenance for 25 years. Similarly, the two new bridges will cost $497.7 million, including the maintenance cost for 33 years. The two new bridges are slated to open in October.

“We continue to view Saskatoon’s economy as robust,” the report says.

Although the report rates the city’s future liabilities as “minimal,” it mentions staff pensions and the cost of closing its landfill.

Overall, stability is forecast for city hall for the next two years, barring a large and unexpected increase in capital spending, the report says.