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 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 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 debentures 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


“The credit profile of the City of Toronto (Aa1 stable) reflects a highly important economy as Canada’s largest city, attracting significant immigration which supports a diversification of sectors and a broad tax base. Debt affordability remains very strong despite high interest rates, along with an excellent liquidity profile with significant holdings of reserves and sinking funds. The city’s unique taxation powers, including the municipal land transfer tax, allow it to access additional revenue sources besides property taxes and user charges. Key pressures arise from significant operating shortfalls which will require continued expense mitigation efforts, use of reserves and finding additional revenue sources including from the provincial government. A large capital spending program and a significant backlog of deferred capital maintenance puts pressure on future capital spending.”
– Moody’s Investor Services, October 23, 2023

“Slower projected economic growth on the back of elevated inflation and high interest rates will put pressure on the city’s 2024 budget. We expect operating results to weaken but remain healthy through 2025, while increasing capital spending will lead to higher after-capital deficits. Although we expect a rise in the debt burden to be modest, the draw on reserves will increase. The city of Toronto intends to use internal resources to close the estimated budget shortfall in 2023, and we believe management will put forth additional revenue and cost measures in 2024 to address budget gaps. In addition, we believe discussions with the Province of Ontario could result in an updated framework to support the city’s fiscal sustainability, though we are not factoring this into our base-case projections. There is also room for additional funding from the federal government. Toronto’s deep and diversified economy, prudent financial management and supportive government framework, and historically strong liquidity remain the foundation of the city’s credit strength.”
– Standard & Poor’s, October 17, 2023

DBRS Morningstar considers Toronto’s large and diversified economic structure, relatively low property tax, and robust liquidity as the city’s credit strengths while the significant capital investment needs, ongoing considerable fiscal pressures, increasing service pressures fiscal performance, and revenue volatility from the City’s Municipal Land Transfer Tax as the city’s credit challenges.”
– DBRS Morningstar, November 3, 2023