NYC Bonds

Monthly Public Finance Wrap-Up: October 2014

City Audited Financial Statements Released

With no New York City bond sales in October to report on, I would like to turn your attention to an important annual event in the City’s financial calendar.  On October 31st, Comptroller Stringer released the City’s Comprehensive Annual Financial Report (Annual Report) for Fiscal Year 2014.  FY 2014 is the year ended June 30, 2014. The Annual Report provides a detailed look at the City’s finances and shows that, for the 34th consecutive year, New York City completed its fiscal year with a General Fund surplus as determined under Generally Accepted Accounting Principles (GAAP).

The FY 2014 Annual Report reflects a major change in pension reporting one year ahead of the required deadline.  New York City is one of the first major city or state governments to implement the new pension reporting standard, known as Governmental Accounting Standards Board (GASB) Statement No. 68.  Concurrently, the City’s five major pension systems implemented GASB Statement No. 67 for pension system reporting.

GASB 68 changes the way pension liabilities are reported in the City’s government-wide financial statements.  The new reporting requirements do not affect the City’s budget or the determination of the City’s annual employer contribution towards its pension obligations.  As part of the GASB 67 and 68 implementation, financial statements from FY 2013 were restated to reflect the new standards, allowing for better comparability between the two years.

Major changes in the City’s financial reporting related to GASB 67 and 68 can be found in the following sections of the Annual Report, which should be read in its entirety for complete information:

• Management’s Discussion and Analysis, starting on page 7.  The MD&A provides a detailed description of the changes and summarizes the assets, liabilities and net pension liability for the City’s share of the five pension systems.
• Statement of Net Position, pages 38 (FY2014) and 39 (FY 2013).  This is the government-wide equivalent of a balance sheet. The Noncurrent liabilities break out the net pension liability, which was $46.6 billion in FY 2014 and $59.9 billion in FY 2013. The reduction in net pension liability from FY2013 largely reflects the strong investment returns achieved in FY2014. Below that, the Deferred Inflows of Resources identifies Deferred inflows from pensions, which largely reflects investment gains that have not yet been reflected in pension expense, under the new accounting rules, in the Statement of Activities on the following pages of the Annual Report.  The Statement of Activities reflects the full accrual cost of operating City government and pension expense as calculated under GASB 68 is included in the expenses reported for various government functions.
• Notes to the Financial Statements. Notes begin on page 60 and include important information throughout, with pension reporting under GASB 68 covered in detail in note E5 starting on page 113.

In addition to changes made to conform to the requirements of GASB 67 and 68, additional changes were made to increase transparency.  Reporting of fiduciary funds, including pension funds, in the supplemental section of the Annual Report has increased. Notes on bonds and notes payable now more clearly distinguish between the City’s General Obligation debt and that of its affiliated borrowers classified as blended component units. And the long-term liabilities section of the Statement of Net Position is now broken down in to more detailed categories for greater information.

We would also highlight, as noted above, that the new pension reporting standards do not change the City’s annual contribution for pensions.  This amount is shown in the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance that appear on pages 46 and 47, for FY 2014 and FY 2013 respectively. New York City has consistently made its full statutorily required pension contributions based on then-current actuarial valuations.

This is only a brief summary of changes in the FY 2014 Annual Report due to GASB 67 and 68.  Investors should download and read the entire Annual Report in order to evaluate the City’s financial condition.

Bond Sales    

The Transitional Finance Authority completed an $850 million taxable and tax-exempt transaction in the first week of November. The New York City Municipal Water Finance (NYW) is selling a $375 million combined refunding and new money transaction the week of November 10th, with a one-day individual investor priority order day on November 12th and final pricing on the 13th.  The NYW sale is expected to offer bonds with maturities in 2028, 2029, 2036 and 2045.

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