The New York City Transitional Finance Authority sold $1.08 billion in bonds to finance general capital expenditures in the city as it enacts its 10-year capital improvement plan.
The authority issued the bonds in two series. The tax-exempt subseries A-1 bonds, consisting of $950 million, mature between 2025 and 2053, yielding between 2.67% and 4.1%. The taxable subseries A-2 bonds, consisting of $130 million, mature between 2028 and 2033, yielding between 4.6% and 4.7%. The securities received a rating of AAA from S&P Global Ratings, Aa1 from Moody’s Investors Service, and AAA from Fitch Ratings.
Fitch said that it “anticipates the bond structure can withstand changes in economic cycles and maintain solid debt service coverage.”
The issuance reflects New York’s willingness to tap the bond market as it finances its $165 billion capital improvement plan. The city has used that financing to significantly increase the amount of cash it holds on hand. In February of this year, the city’s cash balance stood at $14.6 billion, double its value a year earlier.
The bonds are backed by city revenue from personal income taxes and sales taxes. Last year, the city collected $16.7 billion in personal income taxes and $8.5 billion in sales tax revenue. It projects both of those figures to increase this year. However, the city expects personal income tax to dip down to $15 billion in 2024 amid uncertainty about remote work and its effect on New York’s commercial real estate market.
J.P Morgan Securities LLC served as lead underwriter on the issuance of the subseries A-1 bonds. Wells Fargo Bank served as underwriter on the subseries A-2 bonds.