City's liquidity described as 'exceptional' by credit rating agency (updated)

5:30 p.m. update: In response to a question at tonight's City Council meeting from Ward 1 Councillor Paul Christian, Al Horsman, the city's chief administrative officer, said that S&P Global Ratings is well aware of the current situation at Essar Steel Algoma.

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Original story 4:20 p.m.: The City of Sault Ste. Marie has very strong capacity to meet its financial commitments and that's unlikely to change over the next two years, according to credit rating agency S&P Global.

An S&P Global Ratings report to be presented at tonight's meeting of City Council states that the local economy has been just average because of slow population growth, the Sault's "relative remoteness from major markets," and our gross domestic product per capita and household income both lagging behind the provincial average.

Nonetheless, S&P commends the city's "very low" debt burden, describing it as "lower than that of many similarly rated international and domestic peers."

The city's liquidity position is "exceptional," the credit rating agency states.

S&P's rating for the City of Sault Ste. Marie is AA-(stable), which City Treasurer and Chief Financial Officer Shelley Schell says will help in securing long-term debt at competitive rates.

S&P says the city's expected increase in capital expenditures over the next three years may exert pressure for deferring discretionary or noncritical projects.

"The projected increase in debt will not adversely affect this rating as long as the city maintains liquidity and budgetary performance," Schell says in a report to Mayor Provenzano and city councillors.

"The city's budgetary performance is strong, in our view, with operating surpluses averaging about nine percent of operating revenues and relatively balanced results after capital accounts since 2011," says S&P's rating report.

"We expect operating surpluses to average about seven percent in 2014-2018 as Sault Ste. Marie has faced some pressure stemming from expenditures in goods and services."

S&P raised its eyebrows, however, at the Sault's longstanding practice of using part of a previous year's surpluses to lower the current year's tax levy.

Schell has spoken against this practice and S&P says it has contributed to budgets not being passed before the start of the fiscal year.

The city's finances will be discussed at tonight's City Council meeting.

The meeting will be livestreamed on SooToday starting at 4:30 p.m.