New York City reported a $5 million surplus in its general fund for the 31st straight year, but warning signs hover, Comptroller John Liu said in his annual analysis of the city’s finances.
“The outlook for the national and local economies has worsened considerably since a year ago. Given the numerous drags on growth and the lack of economic policy consensus at the federal level, a continued slow and fragile recovery has been the best-case scenario,” Liu said in his outlook, released Wednesday night.
According to the report, the city’s economy grew 4% in fiscal 2011, which ended June 30, after contracting by 1.7% in fiscal 2009 and 1.9% in fiscal 2010.
“The city’s downturn lasted somewhat longer than the nation’s, but it was not as severe, primarily because many credit-sensitive industries do not have a large presence in New York,” Liu added.
The report said $65.32 billion was in the general fund. Standard & Poor’s, Fitch Ratings and Moody’s Investors Service affirmed their double-A ratings on the city’s general obligation bonds in the last fiscal year. Moody’s, in a credit outlook it issued three weeks ago, said the move by the city’s Office of Management and Budget for 2% reductions in current-year budgets and 6% cuts to fiscal 2013, totaling $2 billion, offset the credit-negative effects of further finance industry downsizing.
Earlier in October, New York State Comptroller Thomas DiNapoli forecast 10,000 additional Wall Street job cuts through 2012.
“Downsizing in the financial services industry poses particular challenges for the city’s economy,” Moody’s wrote. “Lower Wall Street employment and related compensation will diminish the city’s bottom line, especially personal income taxes, which account for 20% of total tax collections.”
Liu and Mayor Michael Bloomberg last week proposed an overhaul of pension-fund management in an attempt to curb escalating costs. They said the changes, if the state Legislature approves them, could save New York about $1 billion a year. Their plan would merge the pension plans’ five boards and 58 directors into a smaller board and a full-time professional investment staff to manage pension plans. The plans — which cover 237,000 retirees and 300,000 current city and city-affiliated employees — cover police, fire, teachers, education and other city workers.
Moody’s, in an emailed response Wednesday, called the proposed overhaul “broadly a credit positive,” but savings from changes that affect new hires are long term. In the near term, Moody’s said, the city’s fixed costs are still significant.
As of June 30, the city’s outstanding GOs totaled $41.78 billion: $34.82 billion of fixed rate and $6.96 billion of variable rate. Of the $4.18 billion of GOs the city issued in fiscal 2011, $2.18 billion was for new-money capital purposes and $2 billion was for refunding.
Also in the fiscal year, New York issued $1.68 of taxable Build America Bonds and $668.4 billion of transitional taxable fixed-rate bonds. In addition, the city converted $412.79 million of bonds between different interest rate modes.
On Wednesday, the New York City Transitional Finance Authority will sell $900 million of fixed-rate future tax-secured subordinate new-money bonds, after a two-day retail period.
Of that amount, $600 million will be tax-exempt sold through the TFA’s syndicate, led by book-running senior manager Citi. TFA also will sell $300 million of taxable new-money bonds by competitive sale, including $100 million of qualified school construction bonds.
Moody’s assigns a Aa1 rating to the subordinate-lien bonds. Standard & Poor’s and Fitch rate them AAA.
