NYC Bonds

To Our Investor Community:

The City’s 2015 Fiscal Year ended on June 30th, with 16 transactions and a combined issuance of $12.88 billion under the City’s General Obligation (GO), Transitional Finance Authority (TFA), Municipal Water Finance Authority (NYW) and Sales Tax Asset Receivable Corporate (STAR) credits. Of this total, $6.21 billion were sold to fund new capital projects and $6.66 billion were refinancings.

City issuers were able to take advantage of the current low interest rate environment and secure substantial savings by refunding higher interest rate debt. The budget savings to taxpayers and rate payers from GO, TFA, NYW, and STAR totaled over $1.55 billion, with about 42% of the savings coming from the STAR refunding.

Through these refundings, we provided critical budget-balancing relief to the City’s operating budget and to water and sewer rate payers. We continue to monitor refinancing opportunities.

Fiscal 2016 City Budget and Financial Plan

June is a critical month in the City’s budget process. On June 26th the City Council approved the budget for the fiscal year starting July 1st. The budget and four year financial plan for FY 2016 to 2019 are available on the City’s Office of Management and Budget website.

As mandated by the City Charter, the Comptroller released his Analysis on New York City’s Fiscal Year 2016 Adopted Budget on July 30th. The analysis projects additional tax revenues of $822 million in FY 2016, $1.1 billion in FY 2017, $1.3 billion in FY 2018 and $1.5 billion in FY 2019, above the financial plan projections, stemming primarily from higher forecasts of personal income, property and real estate transaction taxes.

The report also identifies risks to the financial plan, such as understated uniformed overtime costs and lower-than-budgeted federal Medicaid reimbursement for special education services. When those risks are combined with the Comptroller’s projected additional resources, the cumulative out-year budget gap is reduced to $1.85 billion – the lowest cumulative out-year gap at budget adoption in over twenty years.

NYC Cash Balance

The Comptroller’s Office Bureau of Financial Analysis released its August 2015 cash letter which projects the cash balance for the City through November 30, 2015. As of July 30, 2015, the NYC cash balance stood at $11.342 billion, exceeding last year’s figure by $495 million. Throughout FY15, the City maintained strong cash balances. The average cash balance for FY15 measured $9.460 billion, which was $1.680 billion, or 21.6%, above last year’s average balance. The City ended FY15 with $9.502 billion of cash on hand. You may download the entire report for further information.

NYC General Obligation Transactions

The City entered the market both in June and July selling new money and refunding bonds. In June, the City sold a total of approximately $1.3 billion General Obligation bonds. The complex structure included $300 million of tax-exempt fixed rate new money bonds, $315 million of tax-exempt bonds that were converted from variable rate demand bonds (VRDBs) to fixed rate, $350 million of new tax-exempt VRDBs, a conversion of $50 million of VRDBs to floating rate notes and $300 million of new money taxable fixed rate bonds. The new money VRDBs were sold in four series with three of the series resetting daily and one on a weekly basis. The VRDBs allowed us to utilize competitively priced bank support as well as take advantage of pricing at the short end of the yield curve for longer dated maturities.

The negotiated June sale was led by book-running senior manager J.P. Morgan with BofA Merrill Lynch, Citigroup, Jefferies, Morgan Stanley, and Siebert Brandford Shank & Co., L.L.C. serving as co-senior managers. The taxable fixed rate bonds consisted of two subseries with J.P. Morgan and Citigroup submitting the winning bids for the $100 million and $200 million respectively.

The July GO transaction was a $750 million negotiated refunding bond sale that was led by book-running senior manager Siebert Brandford Shank & Co., L.L.C with BofA Merrill Lynch, Citigroup, Jefferies, J.P. Morgan, and Morgan Stanley serving as co-senior managers. The sale closes in August.

The July refunding is providing more than $108 million in budget savings to City taxpayers which is more than $99 million on a present-value basis.

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.

New York City Municipal Advisors

During the month of July, New York City and its related credits completed a competitive Request for Proposal (RFP) process for new municipal advisors. In total, seven firms were selected to advise New York City and its related issuers on capital market transactions. (Read the Press Release). Three of the firms are minority and/or women-owned businesses and one is a service-disabled veteran owned firm. Disclosures can be found on the Comptroller’s website for GO Bonds and on the respective issuer websites for City-related issuers.

Looking Ahead

There are no bond sales scheduled for the month of August, but we expect to be in the market in September. 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