Moody’s Investor’s Service has raised New York City’s general obligation bond rating to “Aa3,” joining Standard & Poor’s and Fitch, which also rate the city’s bonds “AA.” Moody’s rating marks a highpoint for the city after a 30-year comeback from default in the 1970s. The rating has a “stable” outlook.
In raising its opinion of New York’s credit, Moody’s noted the city has institutionalized strong budget controls and conservative fiscal management. Moody’s was particularly complimentary about New York’s “robust revenue performance,” which exceeded projections. The rating affects approximately $36 billion of outstanding general obligation bonds. Standard & Poor’s previously raised New York City to “AA-“ and then “AA” in 2006.
Property tax important revenue source
The city’s strongest source of revenue is the property tax. Moody’s noted that property taxes tend to be a more stable source of income during both strong and weak economic cycles since assessed values tend to lag variations in market values.
Only six years ago, the devastating destruction of September 11th and its impact on New York’s economy would have made the current round of upgrades seem unlikely. Yet, New York, under guidance from its Financial Control Board, has demonstrated both economic growth and fiscal discipline allowing it to reemerge as a strong and vital model of competent governance.
While New York has much to celebrate, it will still have to manage projected deficits in the years ahead.
Nevertheless, the outstanding leadership that has led to achievement of its current high ratings evokes confidence that the city will meet future challenges.