New ratings criteria ended the triple-A status of two New York State bond credits.
S&P Global Ratings downgraded New York’s long-term personal income tax and sales tax bonds one notch to AA-plus Wednesday citing its new priority-lien
"When we believe revenues might not receive priority in a distress scenario we cap the rating at the obligor's creditworthiness," according to S&P. That caps the PIT and sales tax credits at New York's general obligation rating, which is AA-plus.
"The downgrade reflects our view of the state's general creditworthiness that, under the new criteria, limits the final rating on the priority-lien tax revenue bond debt," S&P Global Ratings credit analyst Eden Perry said in a statement.
S&P’s new mark for the Empire State’s PIT and sales tax bonds is in line with Moody’s Investors Service and Fitch Ratings, which rates the debt Aa1 and AA-plus, respectively. New York State has general obligation bond ratings of Aa1 by Moody's and AA-plus by S&P, Fitch and Kroll Bond Rating Agency.
Perry noted that the new S&P priority-lien criteria factors in both the strength and stability of the pledged revenues as well as the general credit quality of the issuer where taxes are distributed and collected. She said the PIT and sales tax ratings reflect that while New York State has solid credit strengths, they face the "remote" risk of GO bondholders being able to access their funds in a financial crisis.
“Their rationale has to do with an extremely remote event,” said New York State Budget Director Robert Mujica. “It has no relation to the state’s fiscal condition or fiscal health.”
Other states have also seen downgrades to their priority lien tax revenue credits since S&P enacted the criteria change including
"The rating changes reflect revisions to Standard and Poor's rating criteria, not any developments in the State's economic or financial outlook,” Mark Johnson, a spokesman for State Comptroller Thomas DiNapoli, said in a statement.
