KBRA Affirms AAA Rating, Stable Outlook on the State of New York State Sales Tax Revenue Bonds
5 Dec 2025 | New York
KBRA affirms the long-term rating of AAA on the State of New York State Sales Tax Revenue Bonds. The rating reflects the legal framework of the New York State Sales Tax Revenue Bond Program, the essentiality of sales tax revenues to the State’s capital and operating budgets, and the State’s general creditworthiness. These factors effectively preclude appropriation risk, in our view.
Sales Tax Revenue Bonds, one of the state’s three primary capital financing vehicles, are secured by a pledge of monthly payments made by the State pursuant to financing agreements between one of three authorized issuers of Sales Tax Revenue Bonds, and the State Director of Budget. Authorized issuers include the Dormitory Authority of the State of New York, the New York State Thruway Authority, and the New York State Urban Development Corporation, doing business as Empire State Development. Payments under the financing agreements are supported by a dedicated statutory allocation of New York State sales tax receipts, equal to two cents of the State’s four-cent sales and use tax (“STRBTF Receipts”), which are deposited directly into the Sales Tax Revenue Bond Tax Fund.
Key Credit Considerations
The rating action reflects the following key credit considerations:
Credit Positives
- Provisions of the Enabling Act and the importance of sales tax revenues to state operations mitigate the risk of legislative non-appropriation of financing agreement payments or a failure to pay such payments when due after amounts have been appropriated and set aside in the STRBTF.
- STRBTF Receipts provide ample historical and projected MADS coverage.
- Overleveraging of the revenue stream is unlikely given the strong 2.0x additional bonds test, as well as the State’s reliance on excess sales tax revenues for operations.
- The potential for a diversion in the flow of STRBTF Receipts in the event of a budgetary delay or severe fiscal distress is extremely remote, in KBRA’s view.
Credit Challenges
- Financing agreement payments are subject to annual appropriation and are executory only to the extent of amounts available in the STRBTF.
- Sales tax receipts are inherently sensitive to cyclical economic conditions, demographics, inflation, financial market volatility, and exogenous events such as recessions and pandemics.
- The Sales Tax is subject to legislative amendment, modification or repeal.
Rating Sensitivities
For Upgrade
- N/A
For Downgrade
- A trend of declining debt service coverage that approaches the 2.0x ABT level.
- A failure by the State legislature to annually appropriate amounts required to make financing agreement payments.
- Action by the State to amend, repeal, or alter statutes relating to the sales Tax or the State Sales Tax Revenue Bond Financing Program that negatively impacts revenues available for financing agreement payments.
To access ratings and relevant documents, click here.