Bureau of Budget
Budget Report
FY 2013 Annual Report
on Capital Debt and Obligations
December 7, 2012
Executive Summary
New York City’s (the “City”) debt has grown from $2,951 per capita in FY 1990 to $9,378 by FY 2012, an increase of 218 percent. Over the same 22 year period, the NYC area Consumer Price Index (CPI) grew by 83 percent. This growth in the City’s capital spending for infrastructure is a corollary of the neglect of the 1970’s. While this spending is necessary, it is costly because New York City is the most populous City in the nation with a complex, varied, and aging infrastructure. The City’s debt finances the maintenance and upkeep of an infrastructure that must accommodate not only 8.3 million City residents, but also 800,000 daily commuters and 49 million tourists annually.
The City issues long-term debt only for capital purposes and only for assets with useful lives of five years or greater. Forty-six (46.3) percent of the outstanding debt of the three primary issuers of debt backed by City General Fund revenues — General Obligation (GO), New York City Transitional Finance Authority (NYCTFA) Future Tax Secured, and Tobacco Settlement Asset Securitization Corporation (TSASC) — is scheduled to come due over the next ten years.
Debt is issued by the City, or on behalf of the City, through a number of different mechanisms. This report assesses the debt condition of the City of New York in accordance with Section 232 of the City Charter. The Charter requires the Comptroller to report the amount of debt the City may incur for capital projects during the current fiscal year and each of the three succeeding fiscal years.
Despite its magnitude, the amount of outstanding City debt counted against the City’s debt limit is well under the City’s statutory debt-incurring power for the current year. New York City’s general debt limit, as set forth in the New York State Constitution, is 10 percent of the five-year rolling average of the full value of taxable city real property. The City’s FY 2013 general debt-incurring power of $76.85 billion is projected to increase to $79.76 billion in FY 2014, to $83.49 billion in FY 2015, and to $87.65 billion by FY 2016.
Outstanding City debt counted towards the debt limit totaled $52.68 billion as of July 1, 2012. This total included $41.88 billion of outstanding General Obligation (GO) debt, $6.09 billion of outstanding NYCTFA debt and $6.7 billion in contract and other liabilities, as shown in the Debt-Incurring Power Table on page vii. As a result, the City’s net debt-incurring power as of July 1, 2012 was $24.17 billion.
The City’s total indebtedness is expected to grow to $61.96 billion by the beginning of FY 2016. The City is projected to have remaining debt-incurring capacity of $21.33 billion on July 1, 2013, $22.16 billion on July 1, 2014, and $25.69 billion on July 1, 2015. Certain other entities issue debt for the financing of capital programs within the City. While the City may be obligated to pay a certain portion of these debts, they are not counted towards the City’s statutory debt limit. The City is responsible for the interest on Hudson Yards Infrastructure Corporation (HYIC) debt to the extent that revenues from the Hudson Yards district are insufficient to pay interest (but not its related principal of $3 billion). Significant funding for the City’s Capital Plan is also provided by debt issued by the New York City Municipal Water Finance Authority (NYW), which is backed by water and sewer system revenues. NYCTFA Building Aid Revenue Bonds (BARBs) are issued to finance construction in City schools and are funded through revenues the City receives from the State. While TSASC contributed a total of $1.3 billion to the City’s capital program between FYs 2000 and 2006, it is unlikely to provide further support to the City’s capital program.
Based on an analysis of financial statements released by other jurisdictions in FY 2011, New York City’s debt burden per capita was nearly double the average sample of large U.S. cities. Among the cities surveyed in this report, New York City also ranks the highest in two measures of debt burden that factor in a locality’s wealth, and is well above the averages of the sample cities and counties. New York City’s outstanding debt as a percentage of full value of real property in FY 2011 was 9.3 percent. This is almost twice the sample city average of 4.8 percent. Ratios for San Antonio at 8.7 percent and Philadelphia of 7.8 percent are the next highest. Other populous cities like Chicago at 5.8 percent and Los Angeles at 4.5 percent have much less debt as a percentage of their full market value of real property.
New York City’s debt as a percentage of personal income in FY 2010 was 16.3 percent, twice the average of the other sample cities in the survey. San Antonio and Houston were the next highest, at 15 and 13 percent, respectively, with Boston the lowest at 3.1 percent.
While New York City has a large amount of outstanding debt and great capital needs, its credit rating remains strong. The City’s GO credit is rated AA by Standard & Poor’s, Aa2 by Moody’s Investors Service, and AA by Fitch Ratings, and has a stable outlook from all three rating agencies. The NYCTFA FTS senior bonds are rated AAA by all three rating agencies, while its subordinate debt is rated AAA by Standard & Poor’s, Aa1 by Moody’s, and AAA by Fitch. NYW First Resolution bonds are rated AAA by Standard & Poor’s, Aa1 by Moody’s Investors Service, and AA+ by Fitch Ratings, while its Second Resolution bonds are rated AA + by Standard and Poor’s, Aa2 by Moody’s, and AA + by Fitch.