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January 31, 2001
City of Toronto Responds to Credit Rating Downgrade by Standard and Poor's
Finance --- Standard & Poor's yesterday lowered their credit rating for the
City of Toronto to AA, with a stable outlook. The downgrade was part of the
harmonization of ratings resulting from the recent merger of the Canadian Bond
Rating Service and Standard and Poor's, that formerly had separate ratings for
the City. The rating places Toronto two levels below the top-rated AAA rating.

The Standard & Poor's release was contrary to traditional practice. The City
was not permitted to review the release before its was placed on the wire
service. Standard & Poor's indicates erroneously that the costs and service
demands "have prevented the city from making the significant operating
expenditure savings originally contemplated by the provincial service
realignment and amalgamation of 1998". In fact, the City has exceeded the
amalgamation savings projected by the Province and has permanently reduced its
annual expenditures by $136 million because of amalgamation. Further, the
release indicates that the value of Toronto Hydro is uncertain due to ongoing
uncertainty during electricity deregulation. Much of that uncertainty has been
removed with the withdrawal of Bill 100 and approval by the Ontario Energy
Board of a phased in rate increase for Toronto Hydro.

"While the City is currently in relatively good financial condition, we
certainly face challenges in maintaining the City's traditionally strong
footing" said City Chief Administrative Officer Mike Garrett, "and clearly any
credit rating downgrade is cause for concern. We are continuing to actively
seek efficiencies in all of our operations and have generated a very
progressive culture in the new City. As well, we are actively working with our
funding partners in senior levels of government to address our future financial

Wanda Liczyk, the City's Chief Financial Officer and Treasurer, added, "An AA
rating is still very strong and places us ahead of most provincial governments.
We do not anticipate a major increase in our borrowing cost as a result of this
rating change."

Credit ratings provide indications to investors about the City's longer-term
financial health. Long term debt ratings are also provided by Moody's
Investors' Services (Aa2) and the Dominion Bond Rating Service, which last week
re-confirmed the City's rating at AA (high) as the result of a recent review.

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