NYC Bonds

To Our Investor Community:

February was a month of savings for New York City residents with both the New York City Municipal Water Finance Authority (NYW) and the Transitional Finance Authority (TFA) refunding higher coupon bonds to create budget savings. Mayor Bill de Blasio released his fiscal 2016 preliminary budget and the Comptroller gave commentary and testimony on the budget.  In addition, the Comptroller’s Office released a new report compares data showing actual capital commitments achieved and planned capital commitments by aligning units of appropriation (UA) with corresponding budget lines in the FY 2015 Executive Budget Capital Commitment Plan.  Over $14 billion in total planned capital commitments were examined.

$530 million NYW Bond sale

Strong investor demand allowed NYW to upsize the amount of bonds offered to $530 million compared to the original $475 million.  During the one day retail order period in which individual buyers had priority, over $205 million in orders were received.

During institutional pricing NYW received over $1.2 billion in priority orders.  This strong demand allowed NYW to reduce yields by up to ten basis points. Final yields varied by coupon and maturity, ranging from 2.35% in 2025 to 3.52% in 2037 and 3.20% for the term bond.   The refunding achieved budgetary savings of more than $143 million, or more than $102 million on a present-value basis, which should help hold down water rate increases.  
The bonds were sold via negotiated sale with Citigroup serving as book-running senior manager on the transaction. Barclays Capital, Ramirez & Co., Inc., and Raymond James served as co-senior managers.

NYW’s second resolution bonds are rated AA+ by Fitch Ratings, Aa2 by Moody’s Investors Service and AA+ by Standard & Poor’s

$785 million TFA Bond Sale

February also saw the TFA sell $785 million of refunding bonds, an increase from the original $700 million that was offered.  This refunding will provide over $102 million in budget savings for taxpayers, or more than $96 million on a present-value basis.

During the two day retail order period over $341 million of orders were received.  Strong investor demand carried over into institutional pricing with over $662 million of orders from institutional investors.

Final yields varied by coupon and maturity, ranging from 0.11% in 2015 to 3.25% in 2031 for a par bond and 2.83% in 2030 for a premium coupon bond.

The bonds were sold via negotiated sale through the TFA’s underwriting syndicate led by book-running senior manager Wells Fargo Securities with Barclays, BofA Merrill Lynch, Goldman, Sachs & Co., J.P. Morgan, Loop Capital Markets LLC, and Morgan Stanley serving as co-senior managers on the transaction.

Standard & Poor’s rates the TFA subordinate lien bonds at AAA, Fitch Ratings rates the TFA subordinate lien bonds at AAA and Moody’s Investors Service rates the TFA subordinate lien bonds at Aa1.

Mayor’s Fiscal Year 2016 Preliminary Budget

On February 9th, Mayor Bill de Blasio presented the Fiscal Year 2016 preliminary capital budget and the financial plan for fiscal years 2015 through 2019.  The financial plan reflects balanced budgets for both the current fiscal year 2015, which ends June 30th, and fiscal year 2016.  The preliminary expense budget for FY 2016 is $77.7 billion, with a City-funded portion of $56.9 billion.  You may also download the financial plan summary which provides an overview of New York City’s fiscal position.  The next step in the budget adoption process, leading to a new budget before the start of Fiscal Year 2016 on July 1, 2015, will be the Mayor’s Executive Budget proposal released in late April or early May. 

Comptroller’s Office Analysis of Preliminary FY 2016 Budget

The Comptroller is mandated by the City Charter to review and comment on the Mayor’s preliminary budget and financial plan.  Comptroller Stringer presented his preliminary analysis of the Mayor’s FY 2016 budget in the context of the city and national economies on February 24th.  His analysis projected $1 billion more tax revenue in FY15 and FY16 than the Mayor’s budget and nearly $3.5 billion more in the out years (FY 2017-2019) of the Financial Plan.  The higher projected revenue produces funds in FY15 and FY16 are nearly sufficient to close the remaining out-year gaps through 2019, an unprecedented budget position for New York City. This initial analysis is summarized in a press release. The detailed review and report are underway and report was released on March 4th in conjunction with the Comptroller’s testimony before the City Council’s Committee on Finance. 

FY 2014 Actual to Planned Capital Commitments

The Comptroller’s Office also unveiled a new report which provides the most complete picture to date of actual capital commitments as compared to planned capital commitments at 25 City agencies, spanning 40 project types and encompassing more than 1,600 budget lines.  The analysis indicates that in FY14, only 52 percent of planned commitments were achieved, the second lowest rate in ten years.  Since FY05, the City has achieved an average of 60 percent of its planned capital commitments

Looking Ahead

New York City will be selling General Obligation refunding bonds during the week of March 9th, with individual investors having priority in placing orders on March 10th and 11th.  For more information you may download the press release on our website. 

Information on how to buy New York City bonds is available on the Comptroller’s website.  You can subscribe on our website 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 bonds.  Please contact us if you have any questions or suggestions as to how we can improve our investor communications.

Carol S. Kostik 
Deputy Comptroller for Public Finance