Fitch Affirms Municipal Finance Authority of British Columbia, Canada at 'AAA'; Outlook Stable

(The following statement was released by the rating agency)

NEW YORK, May 10 (Fitch) Fitch Ratings affirms the Municipal Finance Authority
of British Columbia, Canada's (MFABC) 'AAA' Issuer Default Rating (IDR),
including approximately C$7 billion in outstanding senior unsecured debentures.

The Rating Outlook is Stable.

SECURITY

The debentures are direct and unconditional unsecured obligations. MFABC has a
debt reserve fund (DRF) pledged to debenture holders and is required to impose
ad valorem taxes without limitation on all taxable property in the province to
maintain the DRF.

KEY RATING DRIVERS

ROBUST INSTITUTIONAL FRAMEWORK AND AUTHORITY: The 'AAA' rating rests on the
strong institutional framework MFABC operates within in Canada (IDR
'AAA'/Outlook Stable). MFABC retains independent fiscal authority including its
ability to collect on loans owed to it by municipal borrowers and its statutory
requirement to levy an unlimited province-wide property tax to maintain the DRF.
Within the broad constitutional and statutory limits of the province and the
federal government, the authority functions fairly autonomously.

SOLID LIQUIDITY AND MARKET ACCESS: MFABC benefits from excellent access to
capital as demonstrated through credit facilities and frequent long and
short-term borrowings to finance client loans. MFABC also retains modest
operating and debt reserves (via its Debt Reserve Fund) as well as C$3.1 billion
in sinking fund set-asides. In Fitch's view, the authority would have adequate
time to implement the required property tax levy to replenish the DRF in the
event of a payment delay by a municipal borrower.

GEOGRAPHIC CONCENTRATION, STRONG BORROWER HISTORY: No municipal borrower has
ever failed to make its debt service payments, and the authority's DRF has never
been drawn upon. The greater Vancouver area comprises the majority of the
outstanding loan balances. The provincial government of British Columbia (IDR
'AAA'/Outlook Stable) exercises significant oversight of its local governments,
including explicit control over borrowing through MFABC.

CONSERVATIVE MANAGEMENT: The authority's legal structure, careful oversight,
stringent monitoring of municipal credit conditions and regimented credit
approval process all support well-organized debt financing.

BROAD, SLOWLY GROWING ECONOMY: British Columbia's diverse economy continues its
pace of steady economic growth, ahead of the Canadian average. Employment growth
picked up modestly in 2015, and the provincial government is forecasting modest
GDP growth, albeit below pre-recession growth rates.

RATING SENSITIVITIES

FUNDAMENTAL CREDIT CHARACTERISTICS: The rating is sensitive to a change in
MFABC's prudent approach to borrowing, access to sufficient liquidity, or
changes in the robust institutional framework provided by Canada.

CREDIT PROFILE

Created in 1970, MFABC is the borrowing vehicle for all municipalities and
regional districts in the Province of British Columbia, Canada and provides
financing for general municipal projects, water and sewer infrastructure and
transportation. The joint and several pledge supporting MFABC's debt issuance
requires all member governments within a regional district to satisfy the
obligations of a deficient borrower within the district and ultimately requires
the borrower to repay the authority for any deficiency.

MFABC's available liquidity to respond to temporary payment interruptions
includes a modest DRF of C$108 million, C$3.1 billion from sinking fund
set-asides and C$47 million of unrestricted retained earnings (as of fiscal
year-end 2015 [Dec. 31]). In the event a municipality could not meet its
payments, MFABC would draw first on the DRF. The authority also maintains a
C$200 million line of credit available for any short-term disruption (with
Canadian Imperial Bank of Commerce CIBC , IDR 'AA-'/Outlook Stable) and
ultimately benefits from its ability to levy ad valorem taxes province-wide.

MFABC's board and regional administrative districts consist of municipal
representatives who carefully manage capital project planning and debt issuance
to achieve low borrowing costs for local governments. Additionally, MFABC
returns all excess earnings on sinking fund investments to its borrowers, once
sinking funds have earned enough to satisfy associated debt service
requirements. This sinking fund methodology effectively reduces borrowing costs,
as investment earnings on the sinking funds typically are large enough to cover
one-quarter to one-third of principal.

TAXING AUTHORITY PROVIDES KEY BACKSTOP

The authority maintains the power to levy ad valorem taxes, without external
approval, if a borrower fails to meet its debt service payments and other
sources such as the DRF are used to pay debt service. Further, MFABC must levy a
province-wide tax should the DRF fall below 50% of its required level. The size
of the levy is limited to restoring the DRF to its required level. The authority
has never had a payment default from one of its borrowers, nor has it needed to
levy property taxes or draw fiscal reserves to cure a debt service deficiency.
The authority does levy a nominal annual property tax (totaling approximately
C$250,000 annually) primarily to maintain the property tax mechanism.

The process for accessing MFABC financing is stringent, generally requiring
provincial government, local voter and regional administrative district
approvals prior to review by MFABC. Municipalities' use of debt is restricted to
capital purposes, and payments for debt cannot exceed 25% of a municipality's
recurring revenues.

PRUDENT DEBT MANAGEMENT

Management of authority debt is conservative and sophisticated. Outstanding
MFABC debt consists of approximately C$7 billion in debentures and approximately
C$575 million (rising to $700 million by the end of the year) in commercial
paper (CP) generally used for interim financing. In addition to substantial
internal liquidity support, the CP program also benefits from dedicated lines of
credit provided by CIBC and National Bank of Canada (IDR 'A'/Outlook Stable).

Given timing differences between maturities on loans to municipalities and final
maturity of debentures, consistent market access to refinance maturing issues is
an important credit consideration. The authority has increased its CP program
authorization to C$700 million to support several major capital projects. MFABC
will implement the additional issuance in phases to ensure market acceptance.
The authority increased the dedicated lines of credit to maintain 50% coverage
of the full CP program. Fitch views these measures as prudent and characteristic
of the authority's approach to debt management.

In the event of a default by a borrower, immediately available resources would
provide adequate flexibility to bridge cash needs pending the imposition and
collection of a tax levy. The authority has access to multiple sources of
liquidity, including the DRF (C$108 million as of Dec. 31, 2015), a bank credit
facility (C$200 million with C$100 million available within one day), surplus
earnings of the sinking fund (C$67 million), as well as the total sinking fund
itself (C$3.1 billion total). In 2011, MFABC established the strategic retention
fund (SRF), an additional internally designated operating reserve to augment
liquidity. The fund's value is reported in MFABC's retained earnings and totaled
C$47 million at Dec. 31, 2015. The authority expects the fund will grow over
time via net operating receipts and interest on certain invested short-term
borrowing proceeds.

AGGREGATE CLIENT DATA INDICATE OVERALL STRENGTH

As of Dec. 31, 2015, MFABC had C$4.3 billion in outstanding principal on loans
to clients (net of sinking funds). New loans declined slightly to C$313 million
in 2015 from C$351 million in 2014. Approximately 50% of the loan balances
outstanding are to Greater Vancouver municipal entities, including TransLink,
the regional transportation authority. TransLink now issues its own debt, having
last borrowed through MFABC in 2009, and its balance (currently approximately
20% of the MFABC's loans outstanding) should continue to decline as a share of
the authority's portfolio. MFABC's borrowers in aggregate saw revenue growth in
2015, with revenues up a robust 12.4 over the prior year to C$12.1 billion.
Borrowers' reserves totaled C$7.2 billion in fiscal 2015, equal to a strong 59%
of revenues.

BROAD ECONOMIC BASE GROWING SLOWLY

British Columbia's overall economic profile continues to provide a solid and
diverse revenue base, but growth remains slow and below the pre-recession pace.
The province is a key component of Canada's overall economic profile with
provincial real GDP in 2014 comprising 12.8% of national GDP. Distribution
across sectors is similar to the national distribution, indicating a
well-diversified economic base. While natural resources are critical for
portions of the province's vast interior, other sectors including financial
activities and education and health services, which are based mainly in
Vancouver and other urban areas, are significantly larger components of GDP.

Leading up to the recession, British Columbia's growth rate outpaced national
trends and the downturn was somewhat less severe in the province than for the
nation as a whole. While the province's recessionary recovery was somewhat less
robust than the nation, recent performance has been stronger. In 2014, 3.2% real
GDP growth exceeded the national gain of 2.5% and trailed only Alberta amongst
the provinces. The Finance Ministry's forecast for 2016 of 2.4% growth in
British Columbia is ahead of the ministry's national forecast of 1.4%. Fitch's
March 2016 Global Economic Outlook also projects 1.4% national growth in 2016.
BC's employment growth (measured by the Labour Force Survey) remains modest but
the pace improved in 2015, increasing 1.2% versus 0.8% national growth.

British Columbia's outlook going forward is somewhat brighter than the rest of
the nation given the province's lesser reliance on natural resources as an
economic driver. Natural resources accounted for 8% of the province's 2014 real
GDP versus 10% nationally.

Fitch views the economic risk associated with a potentially overvalued housing
market as manageable for the province. In 2015, the province reports housing
starts increased a robust 10.9% (per Canada Mortgage and Housing Corporation).
According to the Canadian Real Estate Association (CREA) average home prices in
the province rose more than 20% year over year as of March 2016. Excluding sales
in British Columbia and Ontario (home to the Greater Toronto Area region),
average national home prices were actually down 1% in the same period.

Based on CREA's MLS Housing Price Index (HPI), home prices in the Greater
Vancouver area were up 23% yoy as of March 2016 versus a 9.1% growth in the
Aggregate Composite covering all 11 Canadian markets for which CREA reports the
HPI. Vancouver has historically benefitted from a restricted land supply and
high desirability given its favorable climate and coastal border, supporting
robust housing prices. More recently, prices appear to have been boosted by an
influx of foreign buyers, particularly from Asia, who have viewed the Canadian
housing market as a safe haven for investment, increasing the speculative value
of these properties without altering the traditional market dynamics. The
province will begin collecting additional data on residential purchases this
year, which could provide more insight into trends underlying growth in housing
prices. The province projects some moderation in the local housing market with
declines in housing starts in 2016 and 2017.

Fitch views slowdowns in the national economy as British Columbia's most
significant economic risk. The province appears well-positioned to withstand
natural resource driven challenges at the national level given its economic
diversity and close linkage with the neighboring U.S. economy. However, more
severe Canadian weakness could slow British Columbia's economy beyond
expectations.

Contact:

Primary Analyst

Eric Kim

Director

+1-212-908-0241

Fitch Ratings, Inc.

33 Whitehall St.

New York, NY 10004

Secondary Analyst

Douglas Offerman

Senior Director

+1-212-908-0889

Committee Chairperson

Marcy Block

Senior Director

+1-212-908-0239

Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email:
elizabeth.fogerty@fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

In addition to the sources of information identified in Fitch's International
Local and Regional Governments Rating Criteria, this action was additionally
informed by information from Statistics Canada and the Canada Department of
Finance.

Applicable Criteria

International Local and Regional Governments Rating Criteria - Outside the
United States (pub. 18 Apr 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878660

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