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NY completes successful bond sale 

ALBANY - Strong results of the sale of $1.2 billion in New York State Personal Income Tax Revenue Bonds are another sign of confidence in New York, says Governor Andrew Cuomo. This sale follows two recent credit rating upgrades and displays continuous improvement with regards to New York’s economy. On Friday, Fitch Ratings upgraded New York’s credit rating to AA+ with stable outlook, following the upgrade from Moody’s Investor Services to Aa1, their highest rating of New York since 1964. This is solid evidence that investor interest is strong, which resulted in very favorable pricing for the State.

 “This latest display of investor confidence is another strong affirmation of the progress that we have made in turning around our state over the past four years,” said Governor Cuomo. “Following ratings upgrades from both Fitch and Moody’s last week, this sale of Personal Income Tax Revenue Bonds is continuing to show that New York is on the move and the best days are yet to come.”

The enthusiastic reaction by the market to New York’s bond offering echoes the positive reception from the rating agencies. Standard and Poor’s gave the bonds their highest rating, AAA. Rating agencies point to New York’s economic resiliency, growing rainy day reserves, modest unfunded liabilities, and a State pension system that is well funded compared to other states. Perhaps most importantly, the attractiveness of New York State bonds reflects the recent reversal from a history of political gridlock, reflected in four consecutive on-time budgets.

“The state has implemented a wide range of beneficial changes to its budgeting, including on-time budget enactment, consensus revenue forecasting, and curbs on expenditure growth, while avoiding significant reliance on one-time resources,” said Fitch Ratings in announcing their upgrade of New York.

“New York has reversed historic financial management patterns and now benefits from a sustained record of on-time budgets, contained spending growth, and lack of reliance on external borrowing for liquidity purposes,” said Moody’s Investor Services in their upgrading of New York. “The shift to more moderate spending increases signals a more sustainable approach to state finances.”

Investors look favorably at New York’s implementation of spending controls, such as the two percent limit on State Operating Funds growth, and the linkage of major spending categories to indices of affordability. Bold actions have been taken throughout the budget to improve New York’s financial standing, including landmark collective bargaining agreements, the consolidation of back-office and non-core agency functions to the enterprise level, a cap on local property taxes, and Tier VI pension reform that will save the State and local governments more than $80B over 30 years.

The State’s Capital Plan includes $9.4 billion in FY 2015 capital infrastructure spending, appropriately financed through a combination of bonds and pay-as-you-go, as approved by the State Legislature. Improved debt practices under this administration include coordinated capital planning through the NY Works Task Force and the creation of the first-ever 10-year Statewide Capital Plan.

New York State will continue to remain within its debt limit, and measures of debt affordability are steadily improving:

  • In every year of the Capital Plan, the debt to personal income ratio is expected to improve and represent the lowest level the State has recorded in decades.
  • State-related debt outstanding as a percentage of personal income declined from 5.9 percent in FY 2011 to 5.2 percent in FY 2014, and is expected to decrease further to 4.4 percent by FY 2019.
  • Debt outstanding actually declined by $680 million from FY 2012 to FY 2013 and declined again in FY 2014. This was the first time in over fifty years that debt outstanding has declined in two consecutive years.
  • Over the five-year Capital Plan, debt outstanding is projected to grow by 1.4 percent from FY 2014 to FY 2019. The growth rate is projected at 0.8 percent from FY 2011, when Governor Cuomo took office, to FY 2019. This remains well below the historical growth rate in debt and below inflation.