Overview -- We are revising our outlook on the City of Laval to stable from positive. -- At the same time, we are affirming our 'AA-' long-term issuer credit and senior unsecured debt ratings on Laval. -- The outlook revision reflects our view regarding the uncertain leadership that could delay some of council's priorities, especially regarding the 2013 budget. -- The ratings on Laval reflect what we view as the city's superior budgetary performance, above-average economic growth prospects, and robust liquidity. Rating Action On Nov. 15, 2012, Standard & Poor's Ratings Services revised its outlook on the City of Laval, in the Province of Quebec (A+/Stable/A-1+), to stable from positive. At the same time, Standard & Poor's affirmed its 'AA-' long-term issuer credit and senior unsecured debt ratings on the city. The outlook revision reflects our view regarding the uncertain leadership that could delay some of council's priorities, especially regarding the 2013 budget. Rationale On Nov. 9, 2012, Laval's mayor of 23 years resigned. Council was expected to appoint an interim mayor until the next municipal elections in November 2013. On Nov. 13, the province appointed an auditor to review the city's administrative operations, principally related to the granting of municipal contracts, real estate transactions, and city planning. Laval has subsequently announced that it is delaying the appointment of an interim mayor. Although we acknowledge the administration's ability to implement council's decisions, we believe that these events have altered the city's historically stable political climate and could delay some of council's priorities. The ratings on Laval reflect what Standard & Poor's views as the city's superior budgetary performance, above-average economic growth prospects, and robust liquidity. We believe that high debt burden and leadership uncertainty are factors that constrain the ratings. Laval's budgetary performance remains superior, in our opinion. In 2011, the city posted an operating surplus of 22% of adjusted operating revenues, in line with the five-year average. Lower capital spending, due to deferred projects, more than offset lower provincial and federal stimulus funds in 2011. As a result, Laval recorded an after-capital surplus that doubled in 2011, to 14% of total adjusted revenues. We expect the city will continue to generate solid operating and after-capital surpluses during our two-year outlook horizon. In our opinion, Laval is sufficiently large and well-diversified to sustain economic shocks that are reasonably foreseeable in the near term. The city continues to see significant investments in construction, science, technology (principally biotechnology), and commercial services. In 2011, Laval's GDP per capita was close to C$32,400, up by more than 3% from the previous year. This increase was superior to that of most of its peers and to that of greater Montreal area. We expect that the city's economy will likely deliver above-average growth compared with those of peers, with estimated real GDP growth of greater than or equal to 3% per year. Laval benefits from what we view as a robust liquidity position and we expect it to remain strong in the next two years, despite a significant capital program. At year-end 2011, the city's free-cash and liquid assets (Standard & Poor's-calculated) were about 200% of the city's debt service. Laval also has access to an undrawn line of credit of C$140 million. At year-end 2011, the city's tax-supported debt burden remained stable, at 91% of consolidated operating revenues. Interest represented 7.2% of adjusted operating revenues, in line with the five-year average. While we believe the city's debt burden is somewhat higher than that of other similarly rated peers, we do not expect its tax-supported debt to exceed 120% of consolidated operating revenues in the next two years. Outlook The stable outlook reflects Standard & Poor's view that the leadership uncertainty will ultimately be resolved after the appointment of an interim mayor. At the same time, we expect that, in the next two years, Laval's budgetary performance and liquidity will remain strong, and that the city's economy will continue to deliver above-average growth. We could revise the outlook to negative or lower the ratings if leadership uncertainty adversely affects council's decision making or tax-supported debt increases beyond 120% of projected operating revenues. Conversely, we could revise the outlook to positive or raise the ratings in the next year if the city's operating and budgetary surpluses continue to be solid, its liquidity remains strong, tax-supported debt remains below 120% of projected operating revenues, and current leadership uncertainty recedes. Related Criteria And Research Methodology For Rating International Local And Regional Governments, Sept. 20, 2010 Ratings List Laval (City of) Outlook Revised To Stable To From Issuer credit rating AA-/Stable/-- AA-/Positive/-- Rating Affirmed Senior unsecured debt AA- Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.