Standard and Poor’s Global Rating Services’ Research Update: City of Hamilton credit rating raised to 'AA+' From 'AA' on strong budgetary performance and stable outlook

HAMILTON, ON -  August 18, 2017 -  Hamilton City Council ratified a series of committee reports on August 18, 2017 including a report presented to General Issues Committee last week outlining the details of Standard and Poor’s (S&P) Global Rating Services’ research update and its positive assessment of the City’s credit rating and economic outlook. The update, released in June, raised the City’s long-term credit and debt ratings to ‘AA+’ from ‘AA’.

The ‘AA+’ credit rating and stable outlook reflect the City’s high rankings in almost all categories, including:

• Institutional framework – very predictable and well balanced
• Economy – very strong
• Financial management – strong
• Budgetary flexibility – average
• Budgetary performance – strong
• Liquidity – exceptional
• Debt burden – very low
• Contingent liabilities – very low

The City’s budgetary flexibility was rated average due to the impacts of provincially mandated service levels, labour contracts, inflation, challenges deferring capital spending due to aging infrastructure and infrastructure deficit.

Other highlights include:

• The City operates in a predictable, well-balanced local and regional structure which lends to its stability
• Financial management is considered strong due to fiscal prudence, e.g. cost-cutting where possible, including $12M from the City’s 2017 budget
• Strong budgetary performance; the city has mild, yet steady, assessment growth
• Exceptionally high internal liquidity levels complemented by healthy internal cash flow generation reflected in high operating surpluses and satisfactory access to external liquidity for refinancing needs
• Very low debt burden and interest costs are expected to remain very modest
• Contingent liabilities such as ownership of businesses, standard employee benefits and landfill post-closure liabilities are modest and do not present significant risks to the City’s debt burden or liquidity
• Among the credit ratings of 12 Ontario municipalities rated from AA to AAA by S&P, Hamilton ranked fourth (behind Durham, Halton and Peel, and ahead of Guelph, York, Barrie, Kingston, Niagara, Ottawa, Toronto and Windsor)

The research update findings are consistent with the City’s continued focus on greater financial acumen through multi-year business planning, business cases with identified good value for money, risks and outcomes, vendor management and standardized project management processes.

“This is a welcome vote of confidence in the City of Hamilton. This report underlines that the City of Hamilton benefits from strong financial management allowing us to keep tax increases low while properly funding the city’s infrastructure needs to ensure that our diversified economy continues to steadily grow. The people of Hamilton can be assured that their city is in good financial hands.” - Mayor Fred Eisenberger

“Standard & Poor’s assessment of the City’s strong budgetary performance and stable outlook is extremely encouraging. The increase in our rating from ‘AA’ to ‘AA+’ is proof that we’re on the right track and that Hamilton as a community is thriving and well-positioned to experience continued growth and prosperity.” - Councillor Jason Farr, City of Hamilton 

Additional resources

• GIC – August 14, 2017 - 2016 S&P Global Ratings Credit Review (FCS17069) (City Wide)
• Standard & Poor’s Global Ratings Research Update – RatingsDirect – City of Hamilton – June 16, 2017