NYC Bonds

To Our Investor Community:

The Bureau of Public Finance ended what was a banner year on a busy note, having achieved some $149 million in budgetary savings on bond refinancing and having raised the minority- and/or women-owned business component of our underwriting program to a record high. 

On Dec. 4, the New York City Municipal Water Finance Authority (“NYW”) sold $441 million second resolution, fixed-rate, tax-exempt new money bonds maturing in 2047.  These bonds will fund ongoing capital needs.

Fitch Ratings rates NYW’s second resolution bonds at AA+; Moody’s Investor Service rates these bonds at Aa2, and Standard & Poor’s rates them at AA+.

On Dec. 12, New York City sold $1 billion of tax-exempt refunding General Obligation (“G.O.”) bonds, an increase of $150 million from the previously announced $850 million deal size.  The refunding achieved budgetary savings of more than $149 million or more than $137 million on a present-value basis, with future savings discounted back to the sale date.  Most of the savings will occur in FY 2014, when the City faces a large projected budget gap.

Despite deteriorating general market conditions, strong investor demand made it possible to reduce yield in one maturity by one basis point.  Ten maturities had yields increase by one to three basis points, well below increases in yields in the general markets.  The City received approximately $146 million of retail orders for the bonds during the two-day retail order.  During institutional pricing, the City received approximately $1.2 billion of priority orders.

The ratings for New York City General Obligation Bonds are Aa2 from Moody’s Investor Service, AA from Standard & Poor’s and AA from Fitch Ratings.

2012 – Year in Review

In order to fund capital projects, New York City and its related issuers had 13 new-money transactions totaling $8.1 billion in calendar year 2012.  Given the historically low interest rates, the City also sold $6.6 billion bonds to refund higher-coupon bonds and reduce interest expense.  The refundings resulted in $1.1 billion of debt-expense savings over the life of the bonds.  By executing these refundings, we provided budget-balancing relief to the City’s operating budget and to water and sewer ratepayers.  In addition, the City also terminated three swap agreements for payments totaling $123,000 back to the City.

“Superstorm” Sandy highlighted the important role of municipal infrastructure and the large public and private investment that our City and State require.  As New York rebuilds from the storm, the municipal bonds that finance our infrastructure are facing a threat to their tax exemption status as Congress and President Obama continue to negotiate budget and tax policy.  The Comptroller reached out to the New York City Congressional delegation to detail the important role tax-exempt municipal bonds play in the development of our City and the negative financial impact of tax-exemption repeal.  As of now, tax-exempt bond status remains unchanged.

Despite Superstorm Sandy, the Comptroller was able to release the Comprehensive Annual Financial Report (“CAFR”) for Fiscal Year 2012 on Oct. 31, 2012, as required by the City Charter.  The report shows that for the 32nd consecutive year, New York City completed its fiscal year with a General Fund surplus, as determined by Generally Accepted Accounting Principles (“GAAP”). For further details please refer to the press release or you may download the CAFR.

The Comptroller’s Office, together with the Mayor’s Office of Management and Budget (“OMB”), completed a competitive request for proposal (“RFP”) process for new underwriting syndicates for New York City General Obligation, Transitional Finance Authority, and Municipal Water Authority Bond issues.  In total, 177 firms received the RFP, and 50 firms responded.  Eleven of the firms selected to underwrite New York City debt are minority and/or women-owned businesses (“MWBE”); a Service-Disabled Veteran Owned and Managed Enterprise was also selected for the first time.  Of the total bookrunning slots, 25% will be occupied by MWBEs, and 32% of total syndicate roles will be occupied by MWBEs – a record high.  A full list of syndicate assignments can be found in the press release.

In addition to the underwriter RFP, our office completed bond counsel and special-disclosure counsel RFPs jointly with OMB and the New York City Law Department.   The new underwriter syndicate and counsel slates took effect Jan. 1, 2013.

In further keeping with Comptroller John Liu’s push for more competition, the City sold two large bond issues on a competitive basis.  In March, the City sold $470 million G.O. bonds via competitive bid, and in November the New York City Transitional Finance Authority (“TFA”) competitively sold $914.8 million bonds.  This sale included TFA’s first-ever competitively bid refinancing.  The TFA received nine bids for the $552.8 million tax-exempt refunding bonds.  The winning bid was submitted with a weighted average interest cost of approximately 2.17 percent.  The refunding achieved budgetary savings of more than $95 million or more than $86 million on a present-value basis with future savings discounted back to the sale date. 

Information on how to buy New York City bonds is available on the Comptroller’s website. The City typically announces future financings one to two weeks before the sale date.  You can subscribe here to receive sale announcements and other City publications and reports.  The New York State Comptroller also maintains a website with a preliminary forward calendar for major State and City issuers.

As always, we appreciate your interest in New York City’s bonds.  Please contact us if you have any questions or suggestions as to how we can improve our investor communications.

Happy New Year!

Carol S. Kostik   
Deputy Comptroller for Public Finance