Main factors affecting the rating

The rating reflects the improving operating results of the city of Kraków, its high ability to finance investments from its own resources, a very good liquidity position of the budget and a low level of debt service in relation to operational funds. The rating also takes into account the level of indebtedness of municipal companies.

The debt policy is implemented in a safe manner and guarantees its timely repayment in subsequent periods. The debt planned by the entity should not significantly affect its ability to settle long-term liabilities.

The current income of the unit in 2013-2018 increased from PLN 3,478.81 million in 2013 to PLN 5 100.96 million in 2018, which implies a cumulative annual growth rate (CAGR) at 7.96%. Part of this increase, however, is related to grants related to the government program to support families bringing up children (the „Family 500+” program). The city’s tax revenue ranged from 44.43% to 47.90% of current revenue. On average, 31.54% of tax revenues were local taxes.

The average cost of city debt is 2.75%, while the average debt repayment period – the time interval in which the city would repay its liabilities assuming that it would allocate its entire operating surplus for 2018 equals 7.93 years. In the entire period 2013-2018, the value of this indicator remained below the level of 8 years.


The main factors of the rating change

The city has a stable budget base. The level of the surplus remained high throughout the analyzed period. The relatively low surplus planned in the third quarter of 2018 was related to cautious forecasting of income and expenses. An important factor leading to the change in the rating is the positive implementation of the planned revenue and budget expenditure plan. An analysis of the city’s budgets in the last 11 years suggests that approx. 20% of the revenue item generates approx. 85% of the budget (similarly in the expenditure of 20% of the largest items, it generates 70% of all expenditure). Despite the narrowing down of the source of these revenues, they are based on a significant extent (on average 75% in 2013-2018) on the city’s own revenues.

Despite the completion of investment projects in the last 5 years exceeding PLN 3 billion, the level of debt is higher than at the beginning of this period by only PLN 332.7 million. Debts planned by the entity in subsequent periods should not significantly affect its ability to settle long-term liabilities.

Factors determining the upgrade of the rating: according to the methodology adopted by INC Rating, Polish local government units cannot receive a rating higher than the rating of Poland, assigned as the country’s average rating issued by the rating agencies Moody’s, S&P and Fitch.

Factors determining the lowering of the rating: an over-plan increase in the level of debt, with the operating margin below 6%, and the trend in the ratio of income and operating expenses, caused by an increase in expenditure on wages.



Krzysztof Waśko
Lead Analyst
+48 61/851 38 83

Long-term international credit rating Kraków, City of