Debt Warning Issued

by Charlie Smith on April 15th, 2004 at 9:00 AM

A major bond-rating agency has warned that rapidly rising regional debt could lower the credit rating of the Municipal Finance Authority of B.C.

On April 8, Standard & Poor's Ratings Services announced in a news release that the MFABC outlook had been lowered from "stable" to "negative". In the same news release, Standard & Poor's affirmed its triple-A rating for the MFABC's long-term debt.

This came just 41 days after Greater Vancouver Regional District directors approved TransLink's 10-year, $4-billion capital spending plan. It includes $370 million for the new Richmond/Airport/ Vancouver Rapid Transit project.

Coalition of Progressive Electors Coun. Tim Louis, chair of Vancouver's finance committee, told the Straight that Standard & Poor's announcement "confirms" to him the folly of building megaprojects to address the region's transit problems.

"It's not sound from a transit perspective, nor is it sound from a fiscal perspective," Louis said. "Per dollar spent, you're much better off putting the money into buses that are labour-intensive as opposed to megaprojects, which are capital--read, debt--intensive." He added that "debt" doesn't move people.

MFABC's debt is expected to peak at about $2.9 billion around 2005, according to its Web site (www.mfa.bc.ca/). The agency borrows money on behalf of the GVRD, TransLink, E-Comm, and most B.C. municipalities except the City of Vancouver.

Standard & Poor's credit analyst Paul Calder pointed out in the April 8 news release that the MFABC has legal authority to replenish its debt reserve account immediately by levying and collecting taxes from its member municipalities and the City of Vancouver.

The Standard & Poor's news release suggested that the GVRD's capital program "could exert potential downward pressure on the MFABC ratings".

Victor Durman, chair of the GVRD finance committee, told the Straight that his committee does its "due diligence" on spending decisions prior to giving advice to the GVRD board.

TransLink officials were expected to appear before the GVRD finance committee on April 14.

In 1998, John Les, then--mayor of Chilliwack and a trustee of MFABC, told the Straight that he would not allow TransLink's borrowing to interfere with MFABC's triple-A credit rating.

Les, now the B.C. Liberal government's Minister of Small Business and Economic Development, also told the Straight in 1998 that he "watched with some concern...when [former NDP premier] Glen Clark seemed to be riding off on his own and making certain announcements with respect to major financial commitments on behalf of [TransLink] that certainly aren't going to sit very well with bond-rating agencies".

Last December, the Toronto-based Dominion Bond Rating Service downgraded the City of Vancouver's triple-A credit rating to double-A high, citing the growing level of taxpayer-supported debt at the regional level.