Moody's Investors Service on Monday called the expected federal aid for New York City Mayor Michael Bloomberg's $20 billion storm-resistance plan a credit positive.
"Federal responsibility for paying for disaster relief has long been a credit strength for U.S. state and local governments and is a factor that bolsters their ratings," Moody's said, citing the Federal Emergency Management Agency's track record of paying at least 75% of emergency response and cleanup costs after natural disasters.
Moody's rates the city's general obligation bonds Aa2, while Fitch Ratings and Standard & Poor's rate them AA.
Washington is paying 100% of certain emergency response and cleanup costs related to Sandy, including emergency power restoration and public transportation. New York plans to use some of its supplemental allocation to finance storm resiliency and climate change mitigation projects.
Federal aid will come through Community Development Block Grant allocations, housing recovery funding and Stafford Act hazard mitigation grants.
Last week, Bloomberg revealed his blueprint for hardening the city against the effects of storms such as Hurricane Sandy, which last October caused an estimated $19 billion worth of damage and lost economic activity.
A 430-page report called for projects to protect such infrastructure as the telecommunications and liquid-fuel distribution networks, and the transportation system from storms and climate change effects.
Moody's said the projects "will not unduly burden" the city's balance sheet.
According to Bloomberg, 5% of the population and 48 square miles of the city, or roughly 16%, lie in a 100-year flood plain, including all 14 wastewater treatment plants and 12 of 27 power plants. Power generation capacity, public housing and hospital beds are also at risk.
A city funding component, $5.5 billion, reflects spending already included in its $28 billion capital plan for fiscal 2014 through 2017. Bloomberg also expects to borrow an additional $1 billion.
Anthony Sabino, a Mineola, N.Y. attorney and law professor at St. John's University, called federal funding too much of a variable.
"My overarching concern is about the financing. It depends a lot on federal funding, Uncle Sam," said Sabino.
"New York City, as powerful as it is, cannot do this on its own. And it has competition for funds right across the river in New Jersey," he said. "What do you do, rob New Jersey to pay New York? That's not going to work."