The City financing program projects $53.3 billion of longterm borrowing for the period fiscal years 2019 through 2023 to support the current City capital program, excluding $737 million planned to be issued for education purposes through Building Aid Revenue Bonds (BARB). The portion of the capital program not financed by the New York City Municipal Water Finance Authority (NYW or the Authority) will be split between General Obligation (GO) bonds of the City and Future Tax Secured (FTS) bonds of the New York City Transitional Finance Authority (TFA). Given the TFA is near its statutory limit on BARB debt outstanding, the financing program reflects BARB issuance so as to remain under the limit.
The financing of the City capital program is split among GO, TFA FTS, NYW, and TFA BARB bond issuance. The City and TFA FTS expect to issue $20.7 billion and $23.9 billion, respectively, during the plan period. The City issuance supports 39 percent of the total, while TFA FTS issuance supports 45 percent of the total. NYW will issue approximately $8.7 billion.
2019–2023 Financing Program
($ in millions)
|City General Obligation Bonds||$1,200||$4,040||$4,650||$5,280||$5,500||$20,670|
|TFA Bonds (1)||4,475||4,040||4,650||5,280||5,500||23,945|
|Water Authority Bonds (2)||1,447||1,852||1,667||1,752||1,993||8,711|
(1) TFA Bonds do not include BARBs issued for education capital purposes. TFA expects to continue to issue BARBs under the current legislative authorization. For amounts, see the Transitional Finance Authority section below. (2) Includes commercial paper and revenue bonds issued for the water and sewer system’s capital program. Figures do not include bonds that defease commercial paper or refunding bonds. Does not include bonds to fund reserves or cost of issuance.
Overview of the Financing Program
The following three tables show statistical information on debt issued and expected to be issued by the financing entities described above, other than BARBs to be issued by the TFA.
2019–2023 Debt Outstanding
($ in millions at year end)
|City General Obligation Bonds||$$37,519||$39,341||$41,809||$44,750||$47,749|
|TFA Bonds (1)||38,513||41,158||44,264||47,900||51,659|
|Water Authority Bonds||$30,118||$31,580||$32,832||$34,137||$35,686|
(1) Figures above do not include state funded financing for education capital purposes through the TFA BARBs.
2019–2023 Annual Debt Service Costs
($ in millions, before prepayments)
|City General Obligation Bonds||$3,775||$4,082||$4,191||$4,524||$4,886|
|TFA Bonds (1)||2,733||3,031||3,308||3,666||4,038|
|Water Authority Bonds (2)||$1,651||$1,845||$1,956||$2,077||$2,184|
(1) Figures above do not include state funded financing for education capital purposes through the TFA BARBs. (2) Includes First Resolution debt service and Second Resolution debt service net of subsidy payments from the NYS Environmental Facilities Corporation
2019–2023 Debt Burden
|Total Debt Service(1) as % of: (a) Total Revenue||7.1%||7.8%||8.1%||8.6%||9.1%|
|Total Debt Service(1) as % of: (a) Total Taxes||10.9%||11.5%||11.7%||12.4%||13.1%|
|Total Debt Service(1) as % of: (a) Total NYC Personal Income||1.0%||1.1%||1.1%||1.2%||1.2%|
|Total Debt Outstanding1 as % of: (a) Total NYC Personal Income||11.9%||12.1%||12.5%||13.0%||13.5%|
(1) Total Debt Service and Debt Outstanding include GO, conduit debt and TFA bonds other than BARBs.
Currently the debt service for the City, TFA FTS, and City appropriation debt, or conduit debt, excluding the effect of prepayments, is 7.1 percent of the City’s total budgeted revenues in fiscal year 2019. That ratio is projected to rise to 9.1 percent in fiscal year 2023. As a percentage of tax revenues, the debt service ratio is 10.9 percent in fiscal year 2019 and is projected to increase to 13.1 percent in fiscal year 2023.
The City, TFA, and NYW have enjoyed continued strong investor demand which has allowed the City capital program to be financed at reasonable interest rates. On March 1, 2019, Moody’s upgraded the City’s credit rating from Aa2 to Aa1. All of the issuers financing the City capital program have maintained credit ratings in the AA category or better by Moody’s, Standard & Poor’s, and Fitch, as indicated in the table below
|Issuer||Moody's||Standards and Poor's||Fitch|
|NYC GO||Aa1 AA AA||AA||AA|
|NYW First Resolution||Aa1||AAA||AA+|
|NYW Second Resolution||Aa1||AA+||AA+|
|NEFC Senior SRF Bonds||Aaa||AAA||AAA|
|EFC Subordinated SRF Bonds||Aaa||AAA||AAA|
Federal Tax Legislation
The enactment of the Tax Cut and Jobs Act in December 2017 (2017 Tax Act) brought changes in the tax code that affect the City’s financing program. Most notably, issuers of tax-exempt debt are now prohibited from refinancing their debt on a taxexempt basis more than 90 days from the maturity or optional redemption date of such debt. However, it will continue to be possible to refinance debt more than 90 days from the maturity or optional redemption date on a taxable basis. Since the enactment of the 2017 Tax Act, the City, TFA, and NYW have undertaken a number of refunding transactions, which are discussed below.
While the limitation on refinancing mentioned above impacts the supply of tax-exempt debt, other elements of the 2017 Tax Act also impact the demand for tax-exempt debt. The small decreases in top marginal tax rates for individuals should negatively impact demand for tax-exempt debt. However, the new caps in deductions for state and local taxes should have the opposite effect, mitigating the negative impact of lower marginal tax rates. The impact of this legislation is still developing.