Supplement to Base Prospectus dated 11 June 2009
CITY OF PARIS
2,000,000,000 Euro Medium Term Note Programme
The present supplement (the "Supplement") complements , and must be read jointly with, the Base Prospectus dated 24 July 2008 (the "Base Prospectus"), approved by the Financial Markets authority (the "AMF") under No. 08-157 dated 24 July 2008, and the Supplement to the Base Prospectus dated 6 February 2009, approved by the Financial Markets Authority (the "AMF") under No. 09-032 dated 6 February 2009, prepared by the City of Paris ("City of Paris" or the "Issuer") and relative to its programme for the issue of 2,000,000,000 euros
in notes (Euro Medium Term Note Programme) (the "Programme"). The terms defined in
the Base Prospectus have the same meaning in the present Supplement.
The present Supplement has been registered with the AMF, in its capacity as the competent authority in accordance with article 212-2 of its General Regulations, which transpose Directive 2003/71/CE dated 4 November 2003 concerning the prospectus to be published when securities are offered to the public or in view of admitting securities for trading (the "Prospectus Directive").
The present Supplement has been prepared in accordance with article 16.1 of the Prospectus Directive following the publication of the Issuer's administrative account for 2008.
Copies of this Supplement will be available without payment (i) at the office of the Fiscal Agent, the Principal Paying Agent and Calculating Agent, (ii) on the AMF's Internet site (www.amf-france.org) and (iii) on the Issuer's Internet site (www.paris.fr).
With the exception of what is shown in the present Supplement, no new fact, error or inaccuracy likely to have a significant influence on the evaluation of the Notes has occurred or been observed since the publication of the Base Prospectus.
The purpose of the present supplement is to provide information to investors on changes to the financial situation of the City and Département of Paris since the publication of the administrative account voted by the Council of Paris on 8 and 9 June 2009.
The present supplement has been prepared from the 2008 administrative account and the budgetary report and other documents that are attached to it. The present supplement is not intended to substitute for all of the budgetary documents approved by the Council of Paris on 8 and 9 June 2009. These official documents are available on request from the Issuer or from its Internet site.
1) In 2008, €1.587 billion of payment credits were allocated to the completion of the investment programme for the term of office
Actual capital expenditures remained high in 2008, with €1.587 billion of payment credits for the City and the Département.
To compare with the previous financial year, it was necessary to offset two exceptional operations in 2007, for a total of €266 million (the €122 million facilities grant to OPAC and the €144 million Condorcet/Avenue de France property swap transaction). Under these conditions, 2008 expenditures were down 3% compared to 2007 expenditures (€1.636 billion).
Out of this total of €1.587 billion of capital expenditures:
- For the first time, acquisition expenditures represent the leading item at €596 million in 2008. Among these expenditures, on a constant scope basis, property acquisitions reached €443 million, remaining stable compared to 2007. The major portion of these acquisitions was allocated to implementing the term of office’s local authority housing programme, for a total of €242 million in 2008.
- Public works expenditures constitute the second leading item, for a total of €577 million. The main expenditure items are:
The educational area, with expenditures of €136 million. They were allocated in
particular to new buildings, restructurings and expansions of establishments (€81 million, including €57 million for primary schools and €24 million for secondary schools), maintenance work (€57 million), art schools (€9.4 million) and higher education (€4.7 million).
Regarding the development of public land, €116 million of public works was
completed in 2008. This mainly includes €20 million was allocated to develop and extend the Tramway, nearly €18 million to operate and finish the ring road roofs, €14 million for urban development and security and €14 million to maintain the roadway infrastructure. In addition, €9 million was spent on canals, €7 million on public lighting, nearly €4 million on the Mobilien programme, €2.7 million on development works for people with disabilities and €2.5 million on cycle paths.
In the cultural area, expenditures reached €80 million, including €36 million of
public works allocated to the Gaîté Lyrique, €8 million to libraries and €7.3 million to the Trois Baudets, a centre to promote and present French songs. In the childhood area, the effort was once again sustained in 2008, with €49
million spent on work to renovate or construct day nursery centres. As a result, 792 places were opened in day-care centres and nurseries in 2008.
€43 million was spent on capital expenditures for sports and youth facilities, including €9.4 million for the Alfred Nakache swimming pool in Belleville (20th arrondissement) and nearly €8 million to build three gyms and two youth centres as part of the major urban renewal projects (GPRU). In addition, €8.5 million was devoted to the Jean Bouin stadium, the Roller Fillettes (18th arrondissement), the Traeger sports centre (18th) and the Carreau du Temple (3rd).
Finally, €44 million was spent on public works to renovate Paris heritage sites.
- The amount of facilities grants paid reached €322 million in 2008, of which €241 million was in the housing sector (including €130 million for local authority housing), €20 million for roads and transportation and €15 million for economic development. On a constant scope basis (excluding the non-recurring grant of €122 million to OPAC in 2007), facilities grants increased 7% in 2008.
- Study expenditures amounted to €28 million in 2008, a relatively stable level compared to the average over the past five years (€33 million).
2) Actual investment income reached €955 million
Actual investment income amounted to €955 million vs. €916 million in 2007. As in 2007, this amount included the collection of exceptional income, related to the early reimbursement of €470 million of advances to the RIVP. Thus, on a constant scope basis (i.e.; excluding the non-recurring operations of 2007; namely the early reimbursement of advances to OPAC and the Condorcet/Avenue de France property swap, for a total of €398 million), investment income decreased 6% in 2008.
This decrease is due in particular to the drop in investment grants received (-€16 million to €134 million) and the drop in police fine revenues (-€6 million to €24 million). Loan reimbursements were also down, going from €52 million on the 2007 administrative account to €25 million in 2008, excluding the RIVP’s early reimbursement (€470 million). A direct consequence of the sustained capital expenditures, the funds collected by the VAT Compensation Fund for FY 2006 capital expenditures increased €7 million, reaching €117 million in 2008.
The proceeds from sales of capital assets amounted to €132 million in 2008. They amounted to €257 million in 2007, under the effect of exceptional revenues (the Condorcet/Avenue de France property swap of €138 million). Excluding the exceptional operation, they increased nearly 11% over FY 2007.
3) Operating expenditure increased by 3.3%
Current operating expenditures reached €5.365 billion in 2008 vs. €5.193 billion in 2007, a 3.3% increase compared to 4% in 2007 and in 2006.
General expenditures increased 4.9% in 2008 compared to 2.6% in 2007. In a context of renewed inflation, one third of this increase was caused by the increase in energy costs (fluids and fuels).
The contributions paid by Paris remain one of the main expenditure items. Confirming its desire to strengthen the public transportation service, the City of Paris maintained a high level of contribution paid to the Ile-de-France Transport Authority, with €326 million paid in 2008. Its contribution to the Inter-municipality authority for processing household waste (SYCTOM) increased 6%, reaching €120 million. The grants paid increased 3% to €214 million, including +17% for private day nurseries and the contribution to the Police Headquarters increased 2.5%, reaching €268 million. The contribution to the Ile-de-France Social Solidarity Fund, whose funds are redistributed to the most disadvantaged towns, stabilized at €100 million in 2008.
Social aid expenditures increased 1.2% to €1.280 billion. Minimum welfare payment expenditures amounted to €271 million, down €15 million from the previous year under the effect of the decreased number of recipients. €140 million was expended on social aid for disabled persons, a decrease of 2% from 2007. This development was related to an increase in the personalised autonomy allowance, whose expenditure reached €119 million in 2008, an increase of 11.6% over 2007. The contribution paid by the City of Paris to the Social Action Centre amounted to €295 million in 2008, up 3.6% compared to the 2007 administrative account (€285 million).
Salaries and related expenditures increased 3.6% to €1.930 billion in 2008. This increase was the result of factors outside Paris’ control plus the municipality’s own policy decisions. Consequently, the payroll increase was partially related to the application of salary increases decided by the government, which automatically apply to Paris’ agents: increase in the civil service wage index (+0.5% in March and +0.3% in October, for a weighted increase of 0.56% for FY 2008) and a +3.18% revaluation of the guaranteed minimum wage in 2008 (+2.25% in May and +0.93% in July). Moreover, after 400 transfers in 2007, 241 technicians, workers and support staff (TOS) at schools left the national government’s civil
service to join the Paris Département’s workforce.Independently of these outside variation factors, the Paris executive council continued its policy of gradually reducing casual jobs (190 positions were created in 2008 after 994 in 2007) and in January 2008 paid an €11 million allocation for healthcare benefits. In addition, the opening of several new facilities in 2008 required the creation of 272 positions, including 185 for the new day nurseries. In addition to this, there is the automatic effect of increasing seniority and qualifications ("glissement vieillesse technicité" - GVT), the continued reform of the C category and the organisation of national elections (3 rounds in 2008: municipal elections and industrial tribunal elections).
Other current operating expenditures increased 13.3% to €145 million in 2008. This increase resulted from a €6 million increase in expenditures decided during the
arrondissements’ special convention in light of the opening of new neighbourhood facilities, reaching €106 million in 2008, and the increase in facilities grants to the Paris Fire Brigade (+€4.7 million) and the housing policy (+€2 million).
4) In the context of a turnaround in the property market, current operating income remained stable in 2008
Current operating income decreased 0.6 % to €5.850 billion vs. €5.883 billion in the 2007 administrative account.
The drop in current operating income is explained primarily by the decrease in property taxation, which, on a consolidated basis, amounted to €856 million in 2008 vs. €940 million
in the 2007 administrative account. Transfer taxes payable to the Département were €616
million vs. €688 million in 2007 and the additional tax on registration fees in the City was €240 million vs. €251 million in the 2007 administrative account.
For the eighth consecutive year, the rate of local direct taxation was maintained in 2008 at
the rate established in 2001 (8.8% for the City council tax and 2.19% for the Département
council tax, 7.11% for the tax on developed land, 13.5% for the tax on undeveloped land and 12.35% for the business tax). In spite of this rate stability, total direct tax income rose 2.3% (€1.720 billion in 2008 vs. €1.682 billion in the 2007 administrative account) under the effect of the increase in the tax bases reassessed by the State (+2.53% for the property tax on developed land, +2.23% for the council tax and +1.26% for the business tax). These changes were primarily due to the nominal revaluation coefficient for rental properties voted by Parliament for 2008, namely 1.6%.
State allocations were down (-0.2% to €1.338 billion), especially due to a 16% drop in compensation allocations in 2008 (compensation allocation for the business tax, compensation allocation for council tax and compensation allocation for property tax). The TIPP (domestic tax on petroleum products) allocation, designed to compensate for the Minimum Welfare Payment expenditures transferred by the State, amounted to €234 million in 2008, €37 million less than the expenditures actually paid by Paris. The
exceptional allocation to the Département’s mobilisation fund for social integration, paid
for expenditures from 2005 to 2007, was also down to €24 million in 2008 vs. €26 million in 2007 and €29 million in 2006. The TSCA (Special Tax on Insurance Policies) allocation, paid as compensation for various responsibilities transferred since 2005 (technicians, workers and support staff transferred, compensation for the Ile-de-France Transport Authority and for the elimination of the automobile tax disc, transfer of the Youth Aid Fund, etc.) amounted to €59 million in 2008.
Fees and services provided decreased 1% in 2008 to €387 million due in particular to the transfer of EDF fees on rental income, which increased 4.7%. In addition, proceeds from services provided continued to increase, growing nearly 11% due in particular to the opening of new facilities in the infancy and youth sector and the Vélib bike rental service revenues.
Grants and contributions received were down 6% from 2007, with a total of €192 million vs. €204 million in the 2007 administrative account. This decrease is directly related to the drop in services paid for by the Family Allowance Office, down €19 million in 2008 compared to 2007.
5) Financial and non-recurring operations
In 2008, non-recurring income was down 79.5% to €21 million vs. €102 million in 2007 due to €90 million of revenues generated in 2007 on the occasion of the early reimbursement of advances to OPAC (Public Development and Construction Office). Non-recurring expenditures were stable compared to 2007 at €64 million. They include €19.5 million due to ZAC (Mixed Development Zone) deficits and €15 million of expenditures on tickets cancelled from prior years.
In a context of the liquidity crisis and rising rates, even though the outstanding debt increased €193 million to €2.326 billion, the interest charges on debt (long-term and short-term) was held to €74.3 million. Moreover, since the hedging operations on the interest rate risk generated €6.2 million for the City, the net interest charge was €68.1 million. In its active debt and cash management, the City has set as the annual standard to reach a weighted average interest rate level for the debt that is significantly lower than the average 10-year French Government Bond rate over the year, where the weighted average interest rate is calculated as follows: (interest charges [long-term debt and short-term “lines of credit”] + flows paid on swaps – flows received on swaps) / (outstanding capital due on the debt x 100).
Since 2003, the weighted average interest rate on the City’s debt has always been less than the average French Government Bond rate (in brackets): 3.72 % in 2003 (4.13 %), 2.95 % in 2004 (4.10 %), 3.01 % in 2005 (3.41 %), 2.49 % in 2006 (3.79 %), 2.82 % in 2007 (4.31 %), and 3.19 % in 2008 (4.23 %).
Taking into account financial and non-recurring operations, total actual operating expenditures increased 3.5% and total income decreased 1.8% in 2008.
6) Borrowing remained limited and the capacity to finance capital expenditures continued at a high level
Borrowing allows the cost of creating facilities that will benefit several generations of Parisians to be spread over time. The City of Paris takes constant care to obtain the best financial conditions possible for its loans, in particular by taking advantage of its AAA rating, the highest rating given by the three independent rating agencies (Standard and Poor’s, Moody’s and FitchRatings).
The EMTN programme resulted in 2 new issues during the last quarter of 2008; 1 loan was also contracted outside the EMTN programme.
The capacity to finance capital expenditures decreased 21% from the 2007 administrative account, settling at €1.209 billion. This is sufficient to finance nearly 76% of the actual capital expenditures vs. 81% in 2007.
In addition, €331 million of loans were raised, including €251 million in the form of bond issues and €80 million of bank loans.
At the end of FY 2008, €378 million of financing was required to balance the administrative accounts for the municipality. Consequently, in view of the loan taken out, only €47 million of the Municipality’s working capital was used, amounting to €318 million at 31 December 2008.
Outstanding debt stood at €2.326 billion at the end of FY 2008. This represents a €193 million increase in net debt in view of the €138 million loan repayment. In spite of the deterioration in the economic situation, the growth in debt was limited to 9% at 31 December 2008 compared to 31 December 2007.
Consequently, Paris managed to set up a capital expenditure programme of nearly 1.6 billion in 2008 while only marginally increasing its indebtedness. Paris remained one of the least indebted municipalities in France, with a ratio of outstanding debt/actual operating income of 39% in 2008 compared to 169% in Marseille, 72% in Lyon and 57% in Bordeaux, while the national average for municipalities of more than 100,000 inhabitants was 79% in 2007.
7) Changes to the budgets for the City and Département of Paris from 2007 to 2008:
City and Département of Paris from 2004 to 2008, in € millions Administrativ e account Administrativ e account Administrativ e account Administrativ e account Administrativ e account variation 2004 2005 2006 2007 2008 2008/2007
Current operating income 5,264 5,520 5,718 5,883 5,850 -0.6%
Current operating expenditures 4,643 4,794 4,978 5,193 5,365 3.3%
Operating surplus 621 725 740 690 485 -29.8%
Financial balance -13 -13 -27 -40 -51 25.4%
Non-recurring balance -18 -46 -25 40 -43 -206.7%
Total of real operating income 5,331 5,576 5,804 6,004 5,894 -1.8%
Total actual operating expenditures 4,740 4,909 5,117 5,315 5,502 3.5%
Gross surplus 590 667 687 689 391 -43.2%
Loan repayments (with revolving credits) 150 168 153 72 138 92.3%
Net surplus 441 499 534 618 254 -58.9%
Actual investment income 279 300 874 916 955 4.3%
Capacity to finance capital expenditures A 720 798 1,408 1,534 1,209 -21.2%
Actual capital expenditures B 1,135 1,274 1,718 1,901 1,587 -16.5%
Financing requirement C = B - A 414 475 310 367 378 2.9%
New loans D 150 607 450 359 331 -7.7%
Working capital at 31 December 362 100 232 372 364
Variation in working capital = D - C -264 132 140 -8 -47
Working capital at 31 December 98 232 372 364 318
Outstanding debt at 1 January 1,109 1,109 1,548 1,845 2,132
Outstanding debt at 31 December 1,109 1,548 1,845 2,132 2,326
Variation in outstanding debt 0 439 297 287 193
Capital expenditures financing:
Financing capacity 63.5% 62.7% 82.0% 80.7% 76.2%
Loans 13.2% 47.7% 26.2% 18.9% 20.9%
Responsibility for the supplement to the base prospectus Person who accepts responsibility for the present Supplement
In the name of the Issuer
After having taken all reasonable measures in this regard, I declare that the information contained in the present Supplement to the Base Prospectus is, to the best of my knowledge, true and accurate. It includes all information required by investors to form an opinion on the assets, activities, financial position, revenues and outlook for the Issuer, as well as on the rights attaching to the financial instruments and does not omit any information that might alter its significance.
CITY OF PARIS
17, boulevard Morland, 75004 Paris.
Telephone numbers +33 (0)1 42 76 34 55 or +33 (0)1 42 76 34 57
Represented by: Alain BAYET Finance Director
In application of articles L.412-1 and L.621-8 of the "Code monétaire et financier" and its general regulations, particularly articles 212-31 to 212-33, the "Autorité des marchés financiers" ("AMF") approved this Supplement to the Base Prospectus on the 11 June 2009 under number No. 09-185. This document may not be used to support any financial operation unless it is supplemented by the definitive terms. It has been prepared by the Issuer and its signatories may be held liable for it. In accordance with the provisions of Article L.621-8-1-I of the "Code monétaire et financier", approval was granted after the AMF confirmed "that the document is complete and understandable and that the information it contains is consistent." It does not imply authentication by the AMF of the accounting and financial data presented herein. This approval is granted under the condition precedent of publication of the definitive terms set forth, in accordance with article 212-32 of the AMF general regulations, specifying the features of the notes issued.
