KBRA Assigns AA+ Rating to City of New York's General Obligation Bonds

Strategic Insights -

The City of New York has issued General Obligation (G.O.) Bonds, Fiscal 2026 Series A, B, and C, consisting of Tax-Exempt Bonds and Taxable Bonds, which have been assigned a long-term rating of AA+ by Kroll Bond Rating Agency (KBRA). The rating reflects the City's role as an international business and cultural center, as well as its position as the hub of the country's largest metropolitan economy, which supports a diverse and resilient resource base for G.O. Bonds.

Key Takeaways:

  • The City's G.O. Bonds are secured by the City's faith and credit pledge, with approximately $46.72 billion of G.O. Bonds outstanding as of June 30, 2025.
  • The City's tax base is subject to ad valorem taxes, without limitation as to rate or amount, for payment of debt service.
  • The City's General Debt Service Fund has been fully funded at the beginning of each payment period since its inception in 1978.
  • The Fund is held by the State Comptroller as Custodian and receives payments of City real estate tax, which must be deposited into the Fund and retained under a statutory formula.
  • Key credit considerations include the City's diversified revenue portfolio, institutionalized financial management practices, and record reserves of $8.5 billion (approximately 10% of City Funds revenue).
  • Upward revisions to forecast tax revenues and decreases in pension contributions contribute to near-term budgetary stability and manageable out-year gaps.
  • Pension funded ratios and unfunded liabilities have trended favorably in recent years, with annual debt service requirements projected to remain below 15% of City tax revenues over the 2025-2029 forecast period.

Statistics:

  • Total outstanding G.O. Bonds: approximately $46.72 billion at June 30, 2025.
  • Fund reserves: $8.5 billion (approximately 10% of City Funds revenue).
  • Upward revisions to forecast tax revenues: $5.04 billion (2027), $6.10 billion (2028), and $5.96 billion (2029).
  • Annual debt service requirements: projected to remain below 15% of City tax revenues over the 2025-2029 forecast period.
  • Cost of compliance with State mandated class size requirements (estimated): $10 billion to $17 billion over five years.

Sources:

  • Kroll Bond Rating Agency's report dated April 7, 2025.
  • City of New York's General Obligation (G.O.) Bonds, Fiscal 2026 Series A, B, and C, consisting of Tax-Exempt Bonds and Taxable Bonds.