Moody’s Investor Services has once again given the Region of Waterloo a triple-A rating, its highest credit score.
That’s good news for Woolwich and Wellesley townships, which will pay lower interest rates on money borrowed from the region as a result.
In a report published Feb. 7, the financial institution noted, “the Region Municipality of Waterloo’s AAA rating reflects sound financial management, a low debt burden and a strong liquidity position.”
In terms of how the company looks at regional and local governments, Moody’s examines several factors to decide upon their ranking. They reviewed the operating environment of the region, financial performance in recent years, debt levels, government and fiscal management, and the economic fundamentals of the region as well, said Jennifer Wong, the lead analyst for Moody’s in the Regional Municipality of Waterloo.
“They’ve had robust growth in revenues, supported by a strong growing economy, and they have prudent fiscal policies and planning, which has helped the region generate operating surpluses, (and) they have a relatively low debt burden and high levels of cash investment.”
The prudent fiscal planning within the region was one of the biggest factors in the rating. In 2009, total revenues increased by 5.1 per cent in the region, and even though total expenses outstripped that revenue increase by rising 11.5 per cent, the region still managed to generate an overall surplus of $15 million.
The substantial level of asset liquidity was also highlighted in the report. By December 2009, cash and investments in the region amounted to $300 million, up from $244 million just five years prior. This accumulation of cash and investments reflect Waterloo’s “prudent and forward-thinking fiscal planning, building up cash reserves in anticipation of capital projects and future obligations,” the report said.
For Woolwich and Wellesley townships, the AAA rating is going to be a long-term benefit, mostly in relation to borrowing money from the region, referred to as debenturing.
“Woolwich, being a lower-tier municipality, cannot apply for long-term debenturing according to the municipal act, it has to be done through the region,” explained Richard Petherick, the township’s director of finance.
What that AAA credit rating ensures is lower interest rates for the township on any loans that they may apply for.
“We’re going to receive better interest rates because they are more secure – the worse your rating is the higher your interest will be.”
Most recently Woolwich applied for $3.7 million in debenture loans from the region to help with the financing and construction of the Woolwich Memorial Centre and the new community centre in Breslau, and Petherick also expects to identify some more modest debenturing needs to be included in the 2011 budget, to be presented to council on Mar. 3.
The lower interest rates also apply to Wellesley Township, which is also required to borrow money through the regional debenturing program.
“If you’re looking at our budget, you’ll see that we do have some projects that have been paid for through debentures, and quite often if we do any sort of local improvement projects we would allow the people to debenture those costs and that is all put through the region as well,” explained Susan Duke, Wellesley’s chief administrative officer.
In 2011, Wellesley expects to accrue $42,423.50 in interest on debenture loans from the region, which topped more than $118,000.