"Municipalities will continue to offer very attractive relative value, relative to other layers of government - and part of that is a supply issue. We’ve had federal, provincial and regional governments across the world massively increase their borrowing in concert due to Covid. Whereas local governments have had to balance their budgets. Obviously, local governments can borrow for capital purposes and that component has grown, but the growth has been predictable, very stable and nothing close to the deficit-induced borrowing of the other layers of government. From a relative value, call it rarity value perspective, municipal debt and MFA debt present great value in my view."
- Peter Urbanc, CEO, MFA
“Provinces in Canada operate within a highly decentralized federal structure that accommodates regional and linguistic diversity across the country’s vast expanse.”
- Douglas Offerman, Senior Director, Fitch Ratings
"MFABC currently has no intention of issuing certified labeled bonds. Given their unique mandate of providing low-cost lending for local government capital projects, they believe their efforts should be focused on being a thought leader and promoter of the adoption of common and comparable ESG reporting data by their members. Thus, they have recently introduced an ESG reporting framework online. The foundation of that framework is an ESG mapping approach that endeavours to provide Environmental, Social, and Governance disclosure by which investors, bond market participants. and other interested stakeholders can better understand how proceeds from their funding program are used."
"As an infrastructure bank operating throughout BC, MFA has a bird’s eye view of local governments across the entire province and, as one would expect, we saw a variety of different contexts and approaches to dealing with the pressures of Covid-19 on budgets. Property taxes are the main source of revenue for local governments, but the make-up of other types of revenues can vary quite bit. In a medium-sized city like Victoria, for example, where MFA is headquartered, there are certain revenue sources such as parking, and tourism-related revenues, that have dried up and have an important budgetary impact."
"We see 30yr Muni-Provi spreads as fair at current levels; adding Municipal bonds looks like an attractive way to enhance returns for investors who are broadly constructive on spread product, subject to liquidity constraints."
"Across the municipal sector, liquidity ends up being quite a consistent and significant credit strength. Exceptional liquidity is equally a core underpinning for BCMFA, which is more akin to an infrastructure bank and shares many key similarities with top-rated SSAs in the Nordic region, Japan and elsewhere. In normal times, local governments don’t typically draw on their abundant stores of liquidity, but when push comes to shove (or rather, when a virus infects your local economy) they can and will use cash balances, short-term funds, other reserves, credit lines and short-term borrowing facilities to meet their obligations."
Special Report - May 2020 - CIBC
Canadian Municipalities during COVID-19
Maria Berlettano & Tom Bognar
"We highlight that on April 28, Fitch confirmed MFABC's AAA rating with ‘Stable’ outlook citing “the authority's independent and essentially unlimited taxing power, minimal operating risks, carefully matched assets and liabilities, and strong liquidity position.” Fitch also goes on to say that “MFABC retains abundant liquidity to address potential demands and to bridge timing 95.5% 96.0% 96.5% 97.0% 97.5% 98.0% $- $1,000,000,000 $2,000,000,000 $3,000,000,000 $4,000,000,000 $5,000,000,000 $6,000,000,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Total Own Purposes Taxation and Grants in Lieu (LHS) Taxes Collection Rate (RHS). Although Canadian municipalities are mostly funded in the domestic markets and in domestic currency, participation among international investors has been growing. gaps until revenues from the unlimited property tax can be collected.”