An independent credit analysis supports the District of Muskoka’s debt reduction initiative, including a proposed increase to local development charges.

Both initiatives are acknowledged and supported in a recent report from credit rating company Moody’s Investors Service, said Stephen Cairns, Muskoka’s commissioner of finance and corporate services.

Cairns said a representative from Moody’s called the municipality to see if the debt reduction initiative was approved by council. He expects a similar followup on the development charges proposal.

District councillors are currently considering a staff recommendation to almost double development charges for new residential development in Muskoka. Charges for non-residential development are proposed to increase by almost 10 times the current amount.

The district’s annual credit analysis is similar to the process an individual may go through when applying for a loan, said Cairns. The analysis produces a credit rating.

Muskoka, he indicated, strives to keep a good credit rating.

The debt reduction initiative and proposed development charges increase both play a role in Muskoka’s credit rating, according to Moody’s.

David Rubinoff, senior vice-president at Moody’s, said no one point in the report would immediately impact Muskoka’s credit rating. He said if the development charges or any other initiative was not approved by council, Moody’s would look at the effects and see if the district did something to compensate in the future.

Currently, the district’s credit rating is moderate to strong, according to the Moody’s report. According to the report, Muskoka’s credit rating has remained at “Aa2,” which reflects a low credit risk to potential investors, said Cairns.

Muskoka has completed a credit analysis annually since 2006 because investors started to demand an independent rating, Cairns said. Investors and large institutions, like banks and insurance companies, want to see Moody’s stamp of approval, he said.

Put simply, an investor purchases the district’s debentures and makes money when the district pays back the loan with interest, said Cairns.

Another reason the district obtains the annual Moody credit rating is to negotiate better interest rates.

“The benefits of a strong credit rating are that it reduces the interest rate costs on new debt issues, it allows for more flexibility in negotiating the length and terms on new debt and it generally increases the market for the district’s debentures,” said Cairns.

Moody’s report recognizes the district’s increase in debt burden in recent years due to “an aggressive capital program for water and sewer infrastructure,” but the report also acknowledges the recent debt reduction initiative.

Compared with other Moody’s-rated Ontario municipalities, Muskoka has a “slightly higher-than-average debt burden,” the report indicates.

The report shows that Moody’s will monitor the impact of the district’s debt reduction initiative.