NYC Bonds

Reports on City’s Economy and Finances Point to Potential Risks

A report released by the Office of the Comptroller raises concerns about potential risks to New York City’s budget and economy in the coming years. Reduced business income and real estate transaction tax revenues, expiring labor contracts, and declining operating surpluses are all expected to put pressure on the City’s finances. Changes to federal tax policy and the loss of federal funds for critical services would also disproportionately harm New York City. The New York City Independent Budget Office recently released a report that drew similar conclusions. Read the Comptroller’s Report.

The Comptroller’s Office also released a report on the diversification of the City’s economy, detailing the importance of creating a resilient economy capable of weathering economic downturns. Read the Comptroller’s Economic Diversification Report. If you would like to receive notices and links for Comptroller reports, such as Budget Reports or the Comprehensive Annual Financial Report, subscribe here.

$950 Million General Obligation Bond Sale

New York City sold approximately $950 million of General Obligation refunding bonds via negotiated sale on December 5. The City received a record-setting $974 million of orders for the bonds from individual investors in an unusually crowded week of issuance, due in part to uncertainty surrounding tax changes. Because of this strong demand, the City accelerated its schedule and began final pricing a day earlier than planned. The City also increased the size of the transaction by $100 million in response to the demand. Yields were reduced across the yield curve by up to 12 basis points in final pricing. Ramirez & Co. served as book-running senior manager for the bonds. Read the full press release.

Monitoring Tool for New York City Bonds

Would you like to be notified when New York City or its related issuers post new information with the Municipal Securities Rulemaking Board (“MSRB”)? Investors have access to the MSRB’s alert tool on its Electronic Municipal Market Access (“EMMA”) website. Creating a profile on the website allows users to sign up for specific notifications about the securities that interest them, including New York City bonds.

Federal Infrastructure Proposals

A long-awaited infrastructure package is expected in 2018. The White House has reportedly circulated internally a 70-page memo with details of its plan, but the document has not been made public. Current press reports indicate federal spending in an infrastructure bill will likely be $200 billion or less, though neither Congress nor the White House has identified a funding mechanism for the initiative. Once considered a possible partner to tax changes, infrastructure was instead left out of the tax bill. Infrastructure is one of several policy areas that could come to the forefront in early 2018, though it remains to be seen whether other issues will take precedence.

Bond Fact

Bond Counsel certifies that bonds are legal and valid, but it wasn’t always this way. Defaults in the late 1800s called into question the security of municipal bonds. Many of these early municipal bonds were issued as “railroad-aid bonds”, but lacked approval, genuine public purpose, or some other critical element. Many investors lost money on bonds that were questionably issued. Today, Bond Counsel protects investors from this kind of illegitimate issuance. Lawyers provide an opinion with each sale, certifying the legality and validity of a municipal bond. For more information about the function and responsibilities of Bond Counsel visit the National Association of Bond Lawyers’ website.

Looking Ahead

The City does not expect to issue bonds in January, though the calendar remains flexible. To sign up for notifications of upcoming bond sales, subscribe to the Investor Relations Mailing List.

As always, we appreciate your interest in New York City bonds.

Carol S. Kostik
Deputy Comptroller for Public Finance