2008 Credi Rating-Standard & Poors Analysis

Home Browse Search

Essex (County of) Essex's debt burden remains low, as the county has defrayed the issuance of debt through pay -as- you-go financing to fund capital expenditures. Direct debt amounted to 34% of operating revenue at the end of fiscal 2007, or C$37.2 million, compared to 35.6% the previous year. The county does not rely on debt issuance to fund its capital plan: rather, it funds a large portion of capital expenditures through a 1.5 % annual increase in the county levy. As a result, we don't expect Essex's debt level, on a stand -alone basis, to increase greatly as a result of the capital expenditure plan; direct debt, on a stand- alone basis, should remain below 30% of operating revenue in the next few years. While the county's stand -alone debt level is low and likely to remain low by peer comparison, debt issuance from its seven lower -tier municipal members indirectly affects its financial profile. Lower -tier- member debt (issued in their own names) necessarily influences the county's own debt - carrying capacity, as the lower -tier members provide for their debt service from the same taxes paid by the same ratepayers. In 2007, the county's combined debt burden (including both the county's own debt and that of its lower -tier members) was noticeably higher than its own debt burden, at about 47.1 % of combined operating revenue, although this was still low by peer comparison. Because the lower -tier municipalities are responsible for water and sewer infrastructure, a major expenditure among Ontario municipalities in recent years, there is potential for this to create indirect financial pressure on the county. Capital expenditure programs at the lower -tier level will necessitate debt issuance. As a result, we expect the combined burden to rise to slightly more than 65% of combined operating revenue in the next four years. Outlook The stable outlook reflects the expectation that there will be no material increase in the county's debt and that cash and investment balances will remain strong. Standard & Poor's also expects that Essex will continue to produce stable operating results. A dramatic increase in debt at the lower -tier level or a major economic deterioration could lead to a negative ratings action. Table 1 P opu l at i o n su mm a ry* T ota l p opu l at i o n % aged 14 y ea r s o y % aged 65 yea o o M ed i a n age 176,642 19.1 13.3 37.5 Economic statistics (% change) 2007 2006 2005 2004 2003 Population¶ 1.3 1.3 1.3 1.3 1.3 Unemployment rate ( %) 9.3 9.0 7.9 9.2 7.2 Assessment base§ 0.2 7.8 2.8 13.2 9.6 *Median age is for Essex County; other data is for the county less the separated city of Windsor, ¶Annualized census results for Essex less the City of Windsor. §Includes both unit growth and market value changes. www.standardandpoors.com 3