-- We are revising our outlook on the City of Laval to stable from
-- At the same time, we are affirming our 'AA-' long-term issuer credit
and senior unsecured debt ratings on Laval.
-- The outlook revision reflects our view regarding the uncertain
leadership that could delay some of council's priorities, especially regarding
the 2013 budget.
-- The ratings on Laval reflect what we view as the city's superior
budgetary performance, above-average economic growth prospects, and robust
On Nov. 15, 2012, Standard & Poor's Ratings Services revised its outlook on
the City of Laval, in the Province of Quebec (A+/Stable/A-1+), to stable from
positive. At the same time, Standard & Poor's affirmed its 'AA-' long-term
issuer credit and senior unsecured debt ratings on the city.
The outlook revision reflects our view regarding the uncertain leadership that
could delay some of council's priorities, especially regarding the 2013
On Nov. 9, 2012, Laval's mayor of 23 years resigned. Council was expected to
appoint an interim mayor until the next municipal elections in November 2013.
On Nov. 13, the province appointed an auditor to review the city's
administrative operations, principally related to the granting of municipal
contracts, real estate transactions, and city planning. Laval has subsequently
announced that it is delaying the appointment of an interim mayor. Although we
acknowledge the administration's ability to implement council's decisions, we
believe that these events have altered the city's historically stable
political climate and could delay some of council's priorities.
The ratings on Laval reflect what Standard & Poor's views as the city's
superior budgetary performance, above-average economic growth prospects, and
robust liquidity. We believe that high debt burden and leadership uncertainty
are factors that constrain the ratings.
Laval's budgetary performance remains superior, in our opinion. In 2011, the
city posted an operating surplus of 22% of adjusted operating revenues, in
line with the five-year average. Lower capital spending, due to deferred
projects, more than offset lower provincial and federal stimulus funds in
2011. As a result, Laval recorded an after-capital surplus that doubled in
2011, to 14% of total adjusted revenues. We expect the city will continue to
generate solid operating and after-capital surpluses during our two-year
In our opinion, Laval is sufficiently large and well-diversified to sustain
economic shocks that are reasonably foreseeable in the near term. The city
continues to see significant investments in construction, science, technology
(principally biotechnology), and commercial services. In 2011, Laval's GDP per
capita was close to C$32,400, up by more than 3% from the previous year. This
increase was superior to that of most of its peers and to that of greater
Montreal area. We expect that the city's economy will likely deliver
above-average growth compared with those of peers, with estimated real GDP
growth of greater than or equal to 3% per year.
Laval benefits from what we view as a robust liquidity position and we expect
it to remain strong in the next two years, despite a significant capital
program. At year-end 2011, the city's free-cash and liquid assets (Standard &
Poor's-calculated) were about 200% of the city's debt service. Laval also has
access to an undrawn line of credit of C$140 million.
At year-end 2011, the city's tax-supported debt burden remained stable, at 91%
of consolidated operating revenues. Interest represented 7.2% of adjusted
operating revenues, in line with the five-year average. While we believe the
city's debt burden is somewhat higher than that of other similarly rated
peers, we do not expect its tax-supported debt to exceed 120% of consolidated
operating revenues in the next two years.
The stable outlook reflects Standard & Poor's view that the leadership
uncertainty will ultimately be resolved after the appointment of an interim
mayor. At the same time, we expect that, in the next two years, Laval's
budgetary performance and liquidity will remain strong, and that the city's
economy will continue to deliver above-average growth. We could revise the
outlook to negative or lower the ratings if leadership uncertainty adversely
affects council's decision making or tax-supported debt increases beyond 120%
of projected operating revenues. Conversely, we could revise the outlook to
positive or raise the ratings in the next year if the city's operating and
budgetary surpluses continue to be solid, its liquidity remains strong,
tax-supported debt remains below 120% of projected operating revenues, and
current leadership uncertainty recedes.
Related Criteria And Research
Methodology For Rating International Local And Regional Governments, Sept. 20,
Laval (City of)
Outlook Revised To Stable
Issuer credit rating AA-/Stable/-- AA-/Positive/--
Senior unsecured debt AA-
Complete ratings information is available to subscribers of RatingsDirect on
the Global Credit Portal at www.globalcreditportal.com. All ratings affected
by this rating action can be found on Standard & Poor's public Web site at
www.standardandpoors.com. Use the Ratings search box located in the left