KBRA Assigns AA+ Rating to the City of New York’s General Obligation Bonds Fiscal 2022 Series 1 and Fiscal 2022 Series A; Outlook is Stable

Kroll Bond Rating Agency (KBRA) assigns the long-term rating of AA+ with a Stable Outlook to the City of New York’s General Obligation Bonds Fiscal 2022 Series 1 and Fiscal 2022 Series A.

The City of New York (“NYC” or the “City”) General Obligation Bonds are secured by the City’s faith and credit pledge. All taxable real property is subject to the levy of ad valorem taxes, without limitation as to rate or amount, for payment of debt service. Pursuant to the Financial Emergency Act, a general debt service fund (“the Fund”) is established for bonds and certain notes. Payments of the City real estate tax must be deposited upon receipt into the Fund and retained under a statutory formula. Since its inception in 1978, the Fund has been fully funded at the beginning of the payment period.

The rating recognizes the City’s preeminent role as a domestic and international center of business and culture, the broad and diverse economic base which has demonstrated historic resiliency, elevated, yet manageable debt obligations, and institutionalized procedures and plans for confronting near-term financial challenges, which have assisted in navigating through pandemic-driven challenges. These factors underpin KBRA’s belief in NYC’s eventual recovery. The combination of the City’s role on the world’s stage and the legal mechanics described above support the assigned rating.

A rating report will follow.

Key Credit Considerations

KBRA continues to monitor the direct and indirect impacts of the COVID-19 virus. Click here to access KBRA’s ongoing research on the topic.

The rating was assigned because of the following key credit considerations:

Credit Positives

• City’s role as international business and cultural center commensurate with its status as the nation’s largest city, and position as center of a large metropolitan economy.
• Institutionalized policies and procedures and tenor of actions enacted during the pandemic support financial stability.
• Long range financial and capital planning; pension funded ratios and unfunded liabilities have trended positively, while annual debt service requirements continued to be maintained at below 15% of City tax revenues.

Credit Challenges

• Economic base remains susceptible to financial services sector cycles, although reliance has moderated with increasing diversification.
• Financial Plan identifies out-year budget gaps, which must be closed.
• Coastline location and associated exposure to climate change related rising sea levels and intensifying storms.

Rating Sensitivities

For Upgrade

• Further increases in reserve levels.
• Reduction in out-year budget gaps.

For Downgrade

• Secular economic decline.
• Relaxation of, or less adherence to well-established policies and procedures.

To access ratings and relevant documents, click here.

Disclosures

A description of all substantially material sources that were used to prepare the credit rating and information on the methodology(ies) (inclusive of any material models and sensitivity analyses of the relevant key rating assumptions, as applicable) used in determining the credit rating is available in the Information Disclosure Form(s) located here.

Information on the meaning of each rating category can be located here.

Only those ratings on securities issued by this Issuer that also are denoted on the Security Ratings tab for this Issuer on KBRA.com as “endorsed” by Kroll Bond Rating Agency Europe Limited into the European Union and/or by Kroll Bond Rating Agency UK Limited into the UK are covered by the disclosures set forth in this press release and the corresponding Information Disclosure Form. No other ratings on issuances by this Issuer have been endorsed into the European Union or the UK, and the disclosures set forth herein and in the corresponding Information Disclosure Form are inapplicable to those ratings and may not be used for regulatory purposes by European Union or UK investors in these securities.

Further disclosures relating to this rating action are available in the Information Disclosure Form(s) referenced above. Additional information regarding KBRA policies, methodologies, rating scales and disclosures are available at www.kbra.com.

About KBRA

Kroll Bond Rating Agency, LLC (KBRA) is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. Kroll Bond Rating Agency Europe Limited is registered as a CRA with the European Securities and Markets Authority. Kroll Bond Rating Agency UK Limited is registered as a CRA with the UK Financial Conduct Authority pursuant to the Temporary Registration Regime. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider.

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