Writeoff wonÂ’t impact customers, Hydro says
TORONTO, ONTARIO - Good news and bad news for Toronto finances.
The good: A pat on the back for the city's financial performance from Standard & Poor's Rating Services.
The bad: City-owned Toronto Hydro has taken a $13 million writedown on asset-backed commercial paper, the notes that have rocked financial markets in the U.S.
Even so, Toronto Hydro paid city hall a dividend equal to the previous year, to the tune of $46.2 million.
And the writedown won't affect customer rates.
Standard & Poor's gave Toronto a modest nudge upward.
Its rating stays at AA, but with a "positive" outlook rather than "stable."
While a notch below AAA, the rating is very solid. It means Toronto's bonds are suitable for conservative portfolios and the city can borrow at relatively low interest rates.
The solid rating "reflects the city's robust economic performance, improved financial flexibility and modest debt burden," the credit agency said in a release.
Standard & Poor's welcomed two new municipal taxes – on land transfers and vehicle registrations – that provoked a political firestorm when Mayor David Miller introduced them last year.
Councillors stalled the taxes last spring, but Miller managed to push them through later.
The new taxes, "coupled with increasing grants from senior governments," will shore up the city's finances, the agency says.
It also predicts "the local economy will continue to produce solid results."
Toronto Hydro reported its net profit dropped to $82.8 million in 2007, from $92.4 million the year before, which it attributed in part to a milder summer and the impact of energy conservation programs.
Even so, the company paid out $46.2 million to the city.
One cloud is a revelation that the utility holds $88 million in asset-backed commercial paper, an exotic type of financial note underpinned in part by shaky U.S. mortgages.
Toronto's Hydro's financial statements say the notes matured in the third quarter of 2007 but weren't repaid "due to liquidity issues" and there's no market for them now.
It says a group of banks, investors and financial experts has been working on a solution that would repay note holders eventually.
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