Main factors affecting the rating

The rating reflects the operating results of the Capital City of Warsaw, its high ability to finance investments from its own resources, an exemplary 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 publication of new macroeconomic data had a positive impact on the entity’s assessment, but it was not strong enough to justify raising the rating. The possible change will depend on annual results, which will be published by the entity in the first half of 2019.

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 11.1 billion in 2013 to PLN 15.4 billion in 2018, which implies a cumulative annual growth rate (CAGR) of 6.76%. Part of this increase, however, is associated with grants related to the government program to support families bringing up children (the „Family 500+” program). The city’s tax revenue ranged from 49.11% to 51.54% of current revenue. On average, 24.36% of tax revenues were local taxes.

The average cost of the city’s debt is 4.54%, while the average debt repayment period – that is, the time period in which the city would repay its liabilities assuming that it would devote its entire operating surplus according to the plan for 2018 to 8 years. However, if we expand the analysis and take the average surplus from 2013-2018, then the value of this indicator will decrease to less than 4 years.


The main factors of the rating change

The city has a stable budget base. The level of operating surplus grew in the years 2013-2017. A relatively low surplus in 2018 may be related to prudent forecasting of income and expenses. An important factor that may lead to a change in the rating will, therefore, be an analysis of the actual execution of the planned revenue and budget expenditure plan. An analysis of the city’s budgets in the last 11 years suggests that approximately 20% of the revenue item generates approximately 85% of the budget (similarly in the expenditure of 20% of the largest positions, it generates 83% of all expenditure). Despite the narrowing down of the source of these revenues, they are based on a significant extent (on average 76% in 2013-2018) on the city’s own revenues. According to the consolidated balance sheet, as at December 31, 2017, the city had cash in the amount of PLN 6.1 billion (134% of the value of direct debt planned at the end of 2018).

Despite the completion of investment projects in the last 5 years exceeding PLN 8 billion, the level of debt is lower than at the beginning of this period by PLN 799.1 million. The debt planned by the entity in subsequent periods should not significantly affect its ability to settle long-term liabilities.

Factors determining the raise of the rating: stabilization of the operating surplus at the level exceeding 12% of current income and maintaining a decreasing share of expenditure on remuneration in current expenditure.

Factors determining the rating downgrade: an over-plan increase in the level of debt, with a permanent reduction in the operating margin below 10% and an upward trend in the relation of operating income and expenses, caused by an increase in expenditure on remuneration.



Jacek Krawiec
Lead Analyst
+48 61/851 38 83

Long-term credit rating Warszawa, Region of