A major Canadian credit-rating agency has downgraded the City of Vancouver's long-term debt rating to AA from AA (high).

DBRS announced the change today, citing a recent announcement by the city to draw on a credit facility to complete the Olympic Village.

"The Village is an 1,100-unit residential complex in the Southeast False Creed area being developed to provide temporary housing to the athletes of the 2010 Winter Olympics before being converted into 250 units of social housing and 850 market units," DBRS reported in a statement accompanying the downgrade. "Its budget was originally set at $750 million (excluding land costs), but it is now estimated to have jumped by approximately $125 million, based on the figures available publicly."

City manager Penny Ballem told the Straight that DBRS's move will have no impact on the operating budget.

"It's really a credit watch," she said. "DBRS is not our formal credit-rating agency. Moody's just came out yesterday maintaining our triple-A rating. They said they would be watching us around the [Olympic] village, but no impact on our ratings. So things are looking good."

DBRS's statement  did not mention the rising cost of social housing on the site. On February 17, a staff report to council reported that the 252 units of affordable housing would cost approximately $110 million, up from an original estimate of $65 million.

That works out to about $440,000 per unit of affordable housing, according to Coun. Raymond Louie, who chairs the city services and budgets committee.

DBRS pointed out that Vancouver announced on February 18 that it had secured a $400-million revolving line of credit, of which $90 million had been used to buy out the original lender (Fortress Investment Group).

In addition, the city has advanced $134 million to the developer since September. Another $240 million in reserves has been set aside.

"This brings Vancouver's total investment in the project to $464 million, leaving more than $400 million in additional funding required to complete the project by the November 2009 deadline," DBRS stated. "As a result, tax-supported debt is expected to grow well beyond $2,000 per capita by the end of 2009, including Vancouver's pro rata share of net debt held by the regional transit authority, a level not consistent with a AA (high) rating."