KBRA Assigns AA+ Rating to the City of New York, NY General Obligation Bonds, Fiscal 2025 Series E&F and Fiscal 2006 Series I, Subseries I-6; Affirms Rating for Outstanding General Obligation Bonds
27 Feb 2025 | New York
KBRA assigns a long-term rating of AA+ to the City of New York, NY (the "City") General Obligation Bonds Fiscal 2025 Series E, Fiscal 2025 Series F, and Fiscal 2006 Series I, Subseries I-6. Concurrently, KBRA affirms the long-term rating of AA+ rating the City's outstanding General Obligation Bonds. The rating Outlook is Stable.
The rating assignments and affirmation recognize the City's preeminent role as a domestic and international center of business, culture and tourism, the historic resiliency of its broad and diverse economic base, its elevated, yet manageable debt profile, management’s track record of fiscal discipline, and the efficacy of institutionalized procedures in confronting near-term financial challenges. Counterbalancing factors include federal funding uncertainty, ongoing spending pressures that contribute to outyear budgetary imbalances, and a geographic footprint that is increasingly vulnerable to extreme weather events.
Key Credit Considerations
The rating was assigned because of the following key credit considerations:
Credit Positives
- New York City’s role as an international business and cultural center, and its position as the hub of the country’s largest metropolitan economy highlight the diversity and resilience of the resource base supporting the Bonds.
- Institutionalized, long-range financial management and capital planning practices support financial stability.
- Total reserves, pension funded ratios, and unfunded liabilities have trended positively in recent years, while annual debt service requirements continue to be maintained at below 15 percent of City tax revenues.
Credit Challenges
- The City’s currently strong fiscal position and ongoing ability to achieve budgetary balance while maintaining essential quality of life programs and services would be compromised in the event of significant federal funding reductions or changes in federal policy. The Financial Plan does not address the potential for adverse federal action relating to funding declines.
- Federal immigration reforms have the potential to shrink the City’s population and labor market with negative implications for the larger economic outlook despite a potential salutary effect on expenditures.
- The City’s location and topography create exposure to rising sea levels, coastal and inland flooding and extreme heat, the mitigation of which is expected to entail substantial long-term city, state, and federal investment.
Rating Sensitivities
For Upgrade
- Maintenance of sound fiscal posture, budgetary flexibility, employment growth and revenue resiliency in the face of prevailing economic, policy, and social headwinds.
- Adoption of a formalized reserve policy targeting the size of reserves and conditions for deposits and withdrawals
- Formalization, through incorporation to the City Charter, of the City’s policy of limiting debt service to 15% of tax revenues in each year of the financial plan.
- Trend of reduced or eliminated projected out-year budget gaps.
For Downgrade
- Secular economic decline and/or deterioration in a key economic segment, of sufficient magnitude to challenge budgetary balance.
- Relaxation of, or less adherence to, well-established policies and procedures.
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