Despite an improving fiscal picture that includes higher bond ratings, New York City faces risks as it emerges from the darkest days of the pandemic, state and city fiscal watchdogs said.
Those risks include the emerging of the COVID-19 Delta variant, the need for unspecified labor savings and a five-year capital program that might not be sustainable, said Michelle McManus, deputy director of the
The board, established during the city’s financial crisis during the 1970s and which still signs off on the city’s budget, remained in sunset mode Tuesday as it rubber-stamped a $98.7 billion
According to McManus, the board’s risk analysis of projected labor savings and higher-than-expected spending for “uniformed services overtime” could push budget gaps up by a net $1.2 billion for each of fiscal 2023 through 2025, to about $5 billion.
Police overtime costs in fiscal 2021 alone reached $474 million, or 77% over budget, said Adrian Pietrzak, a research associate for the watchdog Citizens Budget Commission.
During the past year, Moody’s Investors Service and S&P Global Ratings revised their outlooks on the city’s general obligation bonds to stable from negative and Kroll Bond Ratings assigned its first-ever rating to city GOs, AA-plus, also with a stable outlook.
S&P and Moody’s rate the city AA and an equivalent Aa2, respectively. Fitch, which assigns an AA-minus rating, still has a negative outlook.
According to data on the Municipal Securities Rulemaking Board's
City officials had the benefit of $14.2 billion of federal rescue aid over several rounds in crafting its so-called recovery budget. Their June modification projects roughly $6.1 billion of surplus funds in fiscal 2021 that they used to prepay expenses in FY2022.
“We’re very happy about that, if you’re scoring at home,” Mayor Bill de Blasio said during Tuesday’s meeting at the state’s Manhattan office. “Definitely there’s more work to be done, but I expect a smooth handoff to the next administration.”
Term-limited de Blasio will leave office on Jan. 1. Brooklyn Borough President Eric Adams, who won the Democratic primary in June, is a heavy favorite to defeat Republican Curtis Sliwa in November.
Low interest rates have enabled the city to keep its projected debt service burden under the 15% affordability threshold despite expanding its capital plan to $83.1 billion.
Still, said McManus, projections are based on a tax revenue forecast subject to an uneven city and national economic recovery.
“Although the city’s fiscal situation is looking more positive, there are some concerns about the city’s revenue forecast regarding issues in the commercial real estate market, as well as the spread of the Delta variant particularly among the unvaccinated population, which may impact economic activity if government restrictions are reimposed.”
De Blasio on Tuesday announced a requirement for proof of vaccination for employees and customers of indoor eateries, gyms and entertainment centers. The order will take effect Aug. 16 with full enforcement beginning Sept. 13.
Budget gaps remain stubborn due to the uncertainty, according to state Comptroller
“The city must balance the expansion of services now with the ability to fund these services in the future,” he said.
City Comptroller Scott Stringer, who is also term limited, said the city faces too many unknowns.
“How will we pay for the billion dollars in new programs funded with the stimulus, when the stimulus funds are gone? How will we pay for the next round of labor contracts with our city workers? How will we pay for the biggest capital program ever?” he asked.
On a brighter note, Stringer, whose office oversees the city’s five pension funds, said the funds over the past year earned 25.8% on assets under management. In the last eight years, the city earned on average 9.1%, Stringer said, above target returns of 7%.
