The City uses debt to help finance large capital projects. This provides the City with more affordable financing by matching the repayment term to the economic useful life of the project, instead of funding the entire cost from current revenues.

The City’s capital projects are funded by a variety of sources including the issuance of debt.

Debt provides the City with affordable financing and matches the repayment term to the economic useful life of the project. Without debt financing, the City may be hindered from taking on large capital projects. Also, present taxpayers would be funding projects that provide long-term benefit to future residents.

An Ontario municipality may issue long-term debt only for capital purposes and cannot borrow for operations. The only exception is issuing promissory notes that must be repaid with the current year’s tax levy. Repayment of municipal debt is amortized over the term of the debenture with regular contributions being made to the sinking fund. The city auditor certifies the sinking fund balance annually. If the balance certified is less than the amount required in the year for the repayment of the sinking fund, the City will pay an amount sufficient to make up the deficiency into the sinking fund.

The City of Toronto is a respected participant in the global capital markets. Adherence to the Financing of Capital Works Policy and Goals maintains the City’s reputation and affords continued efficient and cost-effective access to capital markets.

The City’s debt issuance guidelines and policies are outlined in the following documents:

The City issues debt to support funding for capital projects with a priority on state-of-good-repair of key infrastructure.

The debt requirement for the next three years is approximately $2.5 billion. In 2020, the City plans to borrow up to $1 billion to fund capital expenditures.

Forecasted Debt Issuance

The City typically issues sinking fund debentures with bullet maturity in terms of 10, 20 & 30 years.

Annual contributions to the sinking funds are held in an investment fund for repayment of the original amount of the debt at maturity.

The City often re-opens deals to build benchmark-sized offerings and enhance liquidity.

Long-Term Short-Term Outlook
Moody’s Investor Service Aa1 P-1 Stable
Standard & Poor’s AA A-1+ Positive
Dominion Bond Rating Service AA Stable


“We consider that the city has capacity to implement appropriate fiscal responses to ensure its finances remain sustainable over the medium term, even when we are projecting continued budgetary pressures for fiscal 2022-2023.  Toronto, as do all other Canadian cities, benefits from an extremely predictable and supportive institutional framework, a strong economy, ample liquidity position as well as debt levels that compare favorably with those of international peers. The positive outlook reflects our expectation that the city will implement the necessary measures to ensure manageable planned deficits and successfully control budgetary pressures stemming from strengthening economic headwinds and the diminished-but-continuing impacts of the pandemic.”

– Standard & Poor’s, October 20, 2022

“The Aa1 stable rating reflects the city’s status as Canada’s largest and most important municipal economy, attracting significant immigration which supports diversified sectors and a broad tax base. The rating also reflects strong debt affordability and an excellent liquidity profile with significant holdings of reserves and sinking funds. The credit profile benefits from the city’s unique taxation powers, including the municipal land transfer tax, which allow Toronto to access additional revenue sources besides property taxes and user charges. These positives are balanced by a large capital spending program and a significant backlog of deferred capital maintenance puts pressure on future capital spending. At the same time, the city is faced with continued pressures related to the coronavirus pandemic, including lower transit revenues due to reduced commuter travel, although to date shortfalls have been successfully addressed through a combination of own sources (expense savings and reserves) and provincial and federal funding support.”

– Moody’s Investor Services, October 5, 2022

“DBRS Morningstar notes that the City’s fiscal performance has been largely insulated throughout the Coronavirus Disease (COVID-19) pandemic because of extraordinary senior government supports, and post-capital-expenditure (capex) results are expected to remain manageable…. Toronto has ample liquidity with consolidated cash and investments ….The increase in overall debt is driven in part by the City’s borrowing related to transit and community housing initiatives, which it plans to service through the time-limited and dedicated City Building tax levy.”

– DBRS Morningstar, November 23, 2022