The city of New York sold $1.25 billion in bonds to finance general capital expenditures. The bonds mature between 2025 and 2051 and yield between 2.59% and 4.45%.
The bonds consist of a primary issuance of $950 million in tax-exempt bonds, known as subseries F-1 bonds, and two taxable issuances of $180 million and $120 million, known as subseries F-2 and subseries F-3, respectively.
Interest on the bonds will be payable by the tax revenue of the issuer, the New York City Transitional Finance Authority. The bonds received a rating of AAA by S&P Global Ratings and Fitch Ratings, and a rating of Aa1 by Moody’s Investors Service.
Fitch cited “the city’s unique economic profile as an international center for numerous industries and a major tourism destination, as well as its proven resilience through the recent and prior severe economic disruption,” as reasons for its rating.
The issuance comes as the city continues its economic recovery from the COVID-19 pandemic, which decimated the New York economy. This financing marks a return to capital expenditures after a three-year period of decreased spending.
While the city has since recovered 90% of jobs lost during the pandemic, it notes a number of risks that could lead to lower tax revenue than pre-pandemic levels. These risks include remote work changing the residency status of taxpayers and the permanent relocation away from the city of high-net-worth individuals. The wealthiest 1% of earners comprise about 43% of New York’s personal income tax revenue.
Despite these risks, New York tax revenue in 2020 and 2021 stayed largely similar to pre-pandemic levels. Meanwhile, tax revenue in 2022 far exceeded 2019 levels. The city forecasts a slight decrease in tax revenue in 2023, with smaller increases forecasted over the next five years.
Ramirez & Co. acted as lead underwriter for the primary bond issuance, purchasing the subseries F-1 bonds at a discount of $4.33 million. The subseries F-2 bonds were sold to BofA Securities, Inc. at a discount of $900,000. The subseries F-3 bonds were sold to J.P. Morgan Securities LLC at a discount of $300,000.