Current capital plan expected to fall within debt and debt service limitations, but absent careful monitoring and management limit could be breached
New York City Comptroller Brad Lander released the Annual Report on Capital Debt and Obligations for Fiscal Year (FY) 2024, an assessment of the City of New York’s long-term debt obligation. The report provides a comprehensive overview of the City’s debt, debt-incurring power (the difference between indebtedness and the debt limit), and debt affordability indicators over time and when compared with a peer group of U.S. cities.
The City funds the lion’s share of its infrastructure projects through a robust municipal bond program, primarily through City’s General Obligation (GO) bonds and NYC Transitional Finance Authority Future Tax Secured bonds (TFA FTS). Remaining needs are funded through a combination of State and Federal financing. From Fiscal Year 2010 through 2024, the City’s outstanding debt, excluding the New York City Municipal Water Finance Authority (NYW), has increased from $69.5 billion to $104.1 billion (49.7%). Over the same time period, New York City personal income grew by 78.2%, local tax revenues increased by 99.4%, and total revenues, including state and federal, grew by 58.9%.
“Ensuring New York City can meet its obligations to fund the construction and maintenance of the city’s roads, bridges, school buildings, affordable housing, and many more critical infrastructure projects requires a strong ability to borrow and service capital debt,” said Comptroller Lander. “In light of the risks posed to the City by the incoming federal administration, this year’s capital debt and obligations report highlights that failing to implement a system to assess and, as needed, rein in our debt service could jeopardize our ability to maintain the City’s good credit rating and fiscal health.”
At the start of Fiscal Year 2025, the City’s outstanding debt counted against the Constitutional limit provided $41.0 billion of available borrowing capacity. The Comptroller’s Office projects remaining debt-incurring power to decline from $41.0 billion as of the beginning of FY 2025 to $33.2 billion as of the beginning of FY 2028.
The passage of the New York State executive budget for FY 2025 included an amendment to the Transitional Finance Authority (TFA) Act, increasing the City’s borrowing capacity by a total of $14 billion by July 1, 2025. Ahead of the amendment’s passage, the Comptroller’s Office published a report and a debt affordability study evaluating the need for the increase. The report also identified a mechanism that would ensure that the City’s 15% debt service threshold is operational and identify any potential breaches of it. Despite concerns about a growing capital plan with future capital commitments that may be unaccounted and unbudgeted for, the City has failed to implement this change into its debt management policy.
As the City enters future capital commitments, it will begin to approach its statutory debt limit. Factors outside of the City’s control, such as tax revenues and property tax valuations, have the potential to erase any cushion the City has, especially in later fiscal years where we project less room. By the end of FY 2025, indebtedness counted against the debt limit is projected to be $109.3 billion, leaving only $27.5 billion of remaining debt-incurring power assuming the level of capital commitments in the September Plan. New commitments and subsequent borrowing shows debt incurring power gradually dropping to $11.1 billion in FY 2034. And while there is some cushion to absorb additional commitments, if actual commitments outperform projections by 10% on average, the City could breach the debt limit in fiscal year 2031.
Despite the City’s large amount of debt, the City’s credit ratings remain strong, an encouraging sign, and the four major credit rating agencies have a stable outlook. Each agency cited the City’s large and diversified economy and sound fiscal management as positive factors and reasons for the City’s strong ratings. At present, the City’s GO bonds are rated Aa2 by Moody’s Investors Service; AA by Standard and Poor’s Global Ratings and Fitch Ratings; and AA+ by Kroll Bond Rating Agency.
View the full Annual Report on Capital Debt and Obligations including more takeaways of the City’s capital debt here.
