DBRS Confirms the City of Edmonton at R-1 (high) and AA (high)

DBRS has today confirmed the Commercial Paper and Long-Term Debt ratings of the City of Edmonton (the City or Edmonton) at R-1 (high) and AA (high), respectively. Both trends on the ratings remain Stable, although concerns have emerged as a result of the sizable capital initiatives endorsed by Edmonton City Council (the Council) for which financing has yet to be finalized and which have the potential to push tax-supported debt to a level no longer consistent with the current rating.

The City is projecting that total tax-supported debt will double in 2008 and grow by 55% the following year, bringing the debt burden to $1 billion or $1,300 per capita by year end 2009. While manageable for the City, the outlook currently excludes funding for about $1.2 billion in other high-priority tax-supported initiatives endorsed by the Council, including the North Light Rail Transit. The unfunded projects have been identified as candidates for tax-supported debt for which management will be seeking borrowing authority from the Council by the end of 2008.

DBRS notes that the City benefits from one of the strongest economic growth outlooks in the country, a very substantial liquidity position totalling $1.6 billion at year-end 2007 and the strong financial position of the Alberta government (the Province, rated AAA). Furthermore, fiscal results remain sound, as highlighted in the surplus of $16 million (net of capex) posted in 2007 and balanced budgets expected for the foreseeable future, although capital spending pressures are likely to somewhat tighten the budgeting environment and reduce financial flexibility in the years ahead.

DBRS intends to review the credit once financing sources have been finalized, and may revise its views on the rating if borrowing authority increases substantially without adequate new support from senior governments.

Note:
All figures are in Canadian dollars unless otherwise noted.