City credit rating upgraded

The City of Peterborough has upgraded its AA- credit rating to AA from the Standard and Poor’s bond rating agency in an annual rating issued Thursday.

AA is the third highest rating on the agency’s municipal bond rating scale of ability to meet financial responsibilities. AA means a city has a strong capacity to meet its financial commitments.

The AA rating differs from the highest rating, AAA, only to a small degree.

“This is absolutely wonderful news,” stated Coun. Henry Clarke, the city’s budget chairman, in a press release Thursday.

“The upgrade reflects our assessment that sustained policies to promote financial sustainability and policymakers’ commitments toward reforms have delivered sound results over the last few years,” the S&P report states.

The report also states that S&P believes Peterborough’s political and managerial strength have improved over the past year, and that council and city financial staff have agreed in areas such as property tax change and the need to increase fees to finance specific infrastructure projects.

“In addition, the city has shown commitment to its internal debt limit and made progress on longterm economic constraints, such as shortage of industrial land, by advancing on a proposal to annex lands,” the report states.

Not that the city has managed to secure those industrial lands – not yet, anyway.

In March, city and Cavan Monaghan Township officials arrived at a deal that would have allowed 4,140 acres of land from the township to be absorbed by the city.

Under the deal, the city would have had to pay the township $2.5 million annually, for the next 25 years, to annex the lands (which are southwest of current city limits).

But when city council wanted to be able to pay less upfront while gradually increasing payments, township council said it didn’t want to renegotiate.

Both the city and the township councils have asked the province to step in and sort it out, but that hasn’t happened yet; in the meantime, the stalemate holds.

Even if a resolution comes soon, the S&P report questions the city ’s long-term growth potential.

“We believe the city’s relative remoteness and aging population lend some uncertainty to the availability of labour and investment prospects, and constrain the growth outlook,” the report states.

“Furthermore, we view Peterborough’s economic outlook as weaker with that of peers because of the ongoing shortage of industrial land, which puts the local economy at a disadvantage in its ability to support economic growth.”

The report also notes the city has limited wiggle room to raise taxes or curb spending, and may soon need to delay capital project spending until its existing debt is repaid.

“Although debt remains one of the main funding sources for Peterborough’s capital plan, the city will reach its internal debt capacity in the medium term, which we expect will result in delays in some of the capital projects until debt repayment creates more room.”

The report also points out that Peterborough’s personnel costs are expensive.

“Furthermore, and in line with other Canadian municipalities, the province mandates the provision of many services and much of the personnel costs are subject to collective agreements, which limits the city’s leeway to cut operating spending. The rising cost of discretionary benefits remains a pressure on operations as well.”

The city’s budget documents for 2018 state that personnel costs will amount to $101.7 million for next year, for 1,081 employees (full-time equivalents).

That represents 37.5 per cent of the total $270.9 million in gross expenditures for the city in 2018.

Meanwhile the province put a cap on discretionary benefits for social assistance recipients in 2012: You get $10 a month, from the Ontario government.

Councillors responded by creating a fund to top that up: They put aside $80,000 a year, which means people get $15 a month in discretionary benefits (not $10).

NOTE: View the full credit rating report online at www.thepeterboroughexaminer.com.