Corporation’s financial position stable, says rating agency

The civic body was rated under ‘issuer rating’, which indicates an issuer’s general capacity to fulfil its financial obligations. The highest rating is AAA. The Brickwork Ratings assigned a BWR A to the Corporation. BWR relied on audited financials up to financial year 2015, SLIP data provided by the civic body, SAAP of 2015-16 and 2016-17 and other details. 

While rating municipal and urban local bodies, BWR looks at various criteria, including municipal area’s economy and demography, intergovernmental fiscal transfers, operational efficiency, management quality and municipal finances. 

“The rating derives strength from city’s overall infrastructure and ongoing projects for improvement of storm water drains in the aftermath of 2015 floods,” said a release by the ratings agency. 

“However, the rating is constrained by Corporation’s inability to increase property tax rates as that can be done only by the Government and moderate levels of tax collection efficiency, absence of GIS for property identification; low cost recovery for its various service lines and increased dependence on grants and interest-free loans from the Government,” the release added. D Karthikeyan, Corporation Commissioner, said that they were happy with the ratings. 

“Most cities have a rating of BBB. We got a rating of ‘A’, which means that financial health is not bad,” he said. S Nandakumar, an independent consultant, said the basic function of such ratings are to help the entity gain an access to the bond market. 

“If the body is looking to raise additional capital to fund a project, they can approach the bond market or tap into a new class of income investors such as the Provident Fund or certain insurance companies or mutual funds. If the interest rates are low, as they are now, this is a good alternative source of funding. 

The rating is mandatory before the investors can decide on funding,” explained the consultant. Is the Corporation planning on issuing municipal bonds? “We have not considered it yet. If required, we may undertake,” said Karthikeyan.