WATERLOO REGION — The Region of Waterloo has maintained its triple-A credit rating for the 16th year despite increasing debt and average reserves.

Moody's Investors Service said in a report that the region has prudent fiscal management and long-term planning practices but said its reserves need to be closely watched.

Politicians say they're pleased with the designation and recognize reserves need some attention.

"Our reserves are probably on the low side but that's a reflection of council wanting to be fairly conservative … they probably could stand to be higher but we've managed it well," Regional Chair Ken Seiling said.

A municipality's credit rating can affect the interest rate it pays for debt. A good credit rating helps a government secure lower interest rates on debt, and the rating also affects local municipalities and school boards, which the region secures loans for.

When setting the rating Moody's looks at several factors, including a municipality's reserve funds.

The region has about $475 in reserves per capita, the lowest level among comparable municipalities, including York Region, which has $1,596 per capita, and Halton Region, which has $1,511 for capita.

Coun. Sean Strickland, who chairs the region's budget and finance committees, said staff are reviewing the region's reserve funds and investigating ways to minimize the use of debt for capital projects.

"Staff has been quite diligently trying to match capital expenditures in any given year with the amount of debt that's being issued and so we need to continue to do that work," he said.

On the debt side, the region's per capita debt of $1,086 was second highest after York Region among comparable municipalities, according to a staff report in November. Debt per capita here increased from $376 in 2010.

Seiling said the region is still well-within debt limits set by the province.

"We're not approaching anywhere near the debt levels that we could," he said.

In 2015, the region could have taken on about $1.3 billion in new debt, while staying within its limit.

Net direct and indirect debt totalled about $761 million at the end of 2014, according to the Moody's report, and debt as a percentage of operating revenue was about 87 per cent in 2014, more than double the ratio in 2010.

Of concern for Strickland has been the cost to service debt which is paid by property taxes, development charges, user rates and reserves, sometimes in combination, depending on the project.

But a lower credit rating and higher interest rates would cost the region more, he said.

"We need to work hard at the region to ensure to the best of our ability we can maintain that triple-A rating into the future," he said.

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Some headway was made on the reserve issue in the 2016 budget. Politicians approved $650,000 to the capital levy reserve to pay for projects that don't qualify for debt financing within the region's policies.

A review of the region's reserve and reserve fund policy is expected to be completed this year. It will consider rules for how each reserve should be used and target balances.