NYC Bonds

Monthly Public Finance Wrap-Up: June 2014

To Our Investor Community:

The City’s 2014 Fiscal Year ended on June 30 with more than $6.48 billion of bonds sold in order to fund capital projects and $4.25 billion sold to refinance high coupon debt and provide budget and ratepayer relief. The combined issuance for FY15 under the City’s General Obligation (GO), Transitional Finance Authority (TFA) and Municipal Water Finance Authority (NYW) credits totaled $10.73 billion.

City issuers took advantage of the low interest rate environment to secure substantial savings from the refinancings.  The budget savings to taxpayers and rate payers from GO, TFA, and NYW totaled $474.77 million, or more than $369 million on a present value basis with future savings discounted back to the sale date.  $246.1 million of budget savings will be realized in FY15 which started July 1.

Through these refundings, we provided critical budget-balancing relief to the City’s operating budget and to water and sewer ratepayers.  While some investors may be disappointed to lose the high-coupon bonds we are refinancing, these budget savings are important. We continue to monitor refinancing opportunities.

June was a busy month for New York City bond sales with both GO and NYW deals. 

Comptroller’s Analysis of Executive Budget for Fiscal Year 2015

On June 4th, the New York City Comptroller Scott M. Stringer released his analysis of the City’s Modified FY15 Executive Budget which includes a comprehensive look at the fiscal impact of labor agreements and stronger than expected tax revenue that has narrowed out-year budget gaps.

There are several important programmatic initiatives included in the Modified FY15 Executive Budget, including $23 million to ensure compliance with State mandates regarding arts education in public schools (the subject of a report by this office), $48 million to modernize and bring City services online and $80 million over the next four years for a working families rental assistance program to help prevent people from going into homeless shelters and to get them out of shelters more quickly. The budget was adopted by The City Council on June 25th. Detailed budget documents are available on the Office of Management and Budget website.

$1.02 Billion G.O. Bond Sale

During the week of June 9, The City of New York sold approximately $1.02 billion of General Obligation Refunding Bonds, Fiscal 2014 Series J and K. The transaction was comprised of $910,650,000 tax-exempt, Fiscal 2014 Series J and $107,390,000 tax-exempt, Fiscal 2014 Series K. Strong demand during institutional pricing allowed the City to upsize the deal by approximately $170 million.

At the close of the institutional order period, the City’s order book contained over $1.054 billion in orders consisting of $202.7 million of retail orders, $620.5 million of institutional orders, and $230.8 million of sealed bids. Oversubscribed maturities across the curve included 2022-2025, 2027, and 2030-2034.  Stated yields on the bonds ranged from 0.10% in 2014 to 3.87% in 2034. The refunding achieved budgetary savings of more than $117 million, or more than $110 million on a present-value basis, with future savings discounted back to the sale date. 

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, with “Stable” outlooks from all three rating agencies.

$200 Million NYW Bond Sale

On June 25th, the New York City Municipal Water Finance Authority competitively sold $200 million of second resolution, fixed-rate, tax-exempt new money bonds in a 2044 bullet maturity.
NYW received 10 bids for the bonds offered. RBC Capital Markets submitted the winning bid with a True Interest Cost of approximately 4.18 percent.

NYW also intends to price $400 million of tax-exempt new money variable-rate demand bonds on or about July 10, 2014, with liquidity provided by Bank of America, N.A. ($100 million), Sumitomo Mitsui Banking Corporation ($100 million), Wells Fargo Bank, N.A. ($100 million), and Mizuho Bank, Ltd. ($100 million).

Fitch Ratings rates NYW’s second resolution bonds at AA+.  Moody’s Investors Service rates NYW’s second resolution bonds at Aa2.  Standard & Poor’s NYW’s second resolution bonds at AA+. 

Independent Registered Municipal Advisors

New York City and its related credits have Independent Registered Municipal Advisors as defined under a new Securities and Exchange Commission Rule that took effect July 1.  The relevant notices are on our website.

Looking Ahead

July will be another busy month with a large New York City Transitional Finance Authority bond sale the week of July 14th.  There will be a two-day retail order period beginning on Monday, July 14, with institutional pricing scheduled for July 16th.   The new money transaction will have tax-exempt, fixed and floating-rate bonds and taxable fixed-rate bonds. 

Information on how to buy New York City bonds is available on the Comptroller’s website.  You can subscribe 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