S&P predicted that the Niagara Region will face adversity in preserving its AA+ credit rating. Photo Credit: The Niagara Independent.
Niagara Region has received another AA+ credit rating from S&P Global Ratings: 2024 marks the third straight year in which the Niagara Region has received this status.
Credit ratings are based on how well an organization manages its financial affairs, taking into account both the governmental framework and the health of the local economic context.
In their 2024 report, S&P Global Ratings lauded the Niagara Region for sound and transparent financial management protocols. It also deemed strengths of the regional economy to include sectors such as manufacturing and trade, healthcare, and the innovative Port Colborne electric vehicle battery separator facility currently under construction.
Still, S&P predicted that the Niagara Region will face adversity in preserving its AA+ credit rating as it adds debt to upgrade essential infrastructure needs, especially in the realms of transportation and water/wastewater.
The Niagara Region issues debt for local municipalities, as well as itself, through the utilization of debentures, which are a long-term debt tool that serves as loans. Bundling the debt allows for the achievement of optimum rates in the capital market.
The Region currently sells debentures on the capital market by rotating annually between three fiscal agents, which include RBC Capital Markets, National Bank Financial and CIBC World Markets.
It was stated in a report to the Niagara Region’s corporate services committee that the municipality’s 2024 debt plan would include $35.3 million in debentures, in the one-to-ten-year term on behalf of the municipalities of St. Catharines, Niagara Falls, Welland, Fort Erie and Lincoln. Ten-to-thirty-year debentures consist of $42.7 million for St. Catharines, Niagara Falls, Niagara-on-the-Lake, Grimsby, Lincoln and West Lincoln, as well as $141.3 million for the Region’s wastewater initiatives and long-term-care home restorations.
The corporate service committee report confirmed that the debenture would result in an increase to the Region’s outstanding debt from $366.5 million to a whopping $472.9 million, approaching the sector limit. The province currently limits debt servicing to 25 per cent of the municipality’s operating revenues.
The report also suggested that the Region might be compelled to contemplate alternative options for servicing its long-term debt in the future. One possible solution would be to issue this debt in the capital markets with a “bullet bond,” which necessitates a sinking fund.
An existing sinking fund can be found on the Niagara Region’s books, which was issued in 2010 for both the Region, as well as the City of St. Catharines.
The latest AA+ rating from S&P is unlikely to temper the criticism of residents towards the Niagara Region. The higher-tier council has come under intense scrutiny in recent years for repeatedly raising taxes and increasing spending by large margins.
The Niagara Region is currently in the final stages of constructing Budget 2025. The Regional Council will meet to finalize the General Tax Levy, Capital, and User Fee By-Laws on Dec. 12, 2024.
Nick Redekop completed his Honours Bachelor of Arts Degree in Labour Studies at Brock University. He has previously served in municipal and federal politics. In his free time, Nick enjoys following sports, taking part in outdoor activities, and reading biographies. Nick resides in Niagara Falls
