How the City makes the grade – and our budget
The City of Kingston has once again received a stellar AA+ credit rating with a stable outlook from Standard & Poor's (S&P) Global Ratings. We sat down for a quick conversation with Desiree Kennedy, Chief Financial Officer, to better understand what this means for the City’s budget, spending and debt.
City Matters: Hi, Desiree! Can you start by explaining what a credit rating means?
DK: Of course. A credit rating is an indication of how well we can meet our financial obligations. We are assessed annually by an outside agency – in this case, S&P Global Ratings – that looks at our local economy, as well as the fiscal policies the City has in place to manage our spending on services, programs and capital projects.
CM: What kinds of policies or practices does the agency look at when making an assessment?
DK: S&P Global Ratings looks at a broad range of our financial management practices, including our approach to budgeting, capital planning and debt. Municipalities are required to balance their budget each year, so the agency looks at how our revenue compares to what is being spent, our strategies for funding capital and utilizing debt, and how we are planning for the future.
CM: Why is a credit rating necessary?
DK: A stable credit rating provides us with more favourable interest rates and flexible terms. The rating also provides assurance to the community that we are managing our finances well and that we are able to meet our financial obligations. Earlier this year our rating was upgraded from AA to AA+, which is the second-highest rating given by the agency. This rating reflects our efforts to reduce our reliance on debt while planning effectively for future spending.
CM: What are the City’s operating and capital budgets? How are they funded?
The operating budget reflects the range of day-to-day services that the City provides, including fire and emergency services, road maintenance, sidewalks, pathways and trails, transit, parks and recreation, arts and culture, libraries, social services, and planning and development. Property taxes and other revenue sources – such as user fees for City facilities and transfers from other levels of government – fund the City’s operating budget.
Capital spending is a bit different. These are significant investments in “capital” assets that support the programs and services that I mentioned previously, like parks, buses, and buildings like community centres. This budget allows us to replace aging infrastructure and build or buy new assets as needed. A portion of the operating budget is transferred to the capital reserve funds each year to be used for capital spending.
*Looking for bonus marks? Learn more about the 2022 budgets by consulting the City’s budget overviews or by exploring past budgets and financial statements. Follow along on Get Involved Kingston for updates on the 2023 budget engagements. *