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+ | Stable |
| Dominion Bond Rating Service | AA | -- | Stable |
“The credit profile of the City of Toronto (Aa1 stable) reflects its economic importance as Canada’s largest city and financial and administrative hub. The city benefits from a broad and resilient tax base, strong liquidity and investment levels, and prudent financial management. The city’s capital plan, totaling nearly CAD60 billion over 10 years, targets projects in transit, housing, and infrastructure. Despite a growing deferred capital maintenance backlog, Toronto’s governance framework, conservative debt policies, and multi-year financial planning continue to support its strong credit profile.”
– Moody’s, August 13, 2025
“The city’s strong and diversified economy and proactive management action, combined with support from senior levels of government, will support stable operating performance. The stable outlook reflects our expectation that projected weaker after-capital performance will not persist and the city’s commitment to balancing budget pressures will not waver, as demonstrated through strong and stable operating performance and a moderate debt burden.”
– Standard & Poor’s, October 20, 2025
“We note that persistent financial headwinds, significant debt funded capital needs, and a soft economic outlook could present challenges; however, we believe that the City’s balanced budget requirement, combined with financial sustainability initiatives under its long-term financial plan, and timely and meaningful support from other levels of government, may ensure the financial metrics remain within the acceptable range for this credit rating.”
– DBRS Morningstar, November 7, 2025