Last week, the Moody’s agency slashed the credit rating on New York City’s debt. Just like with your credit score, the lower it goes, the higher an interest rate the city pays, putting us further in the hole.
Gotham owes $116.1 billion in various types of debt. Of that total, Moody’s action covers $39 billion in “general-obligation” bonds — those secured by the city’s full faith, backed up by the city’s pledge to raise property taxes to whatever level needed.
As Bloomberg News notes, the city hasn’t suffered a Moody’s downgrade since the Dinkins days.
The cut already has had an impact on borrowing costs. A month ago, the interest rate on debt that comes due in 2034 was about 1.8 percent. Last Friday, it was 2.1 percent.
If we have to refinance our existing debt over the next 10 years, as the city comptroller predicts, that tiny difference means an extra $60 million in annual costs. (The rates are this low only because of the federal rescue we have already got — zero-percent base interest rates, set by the Federal Reserve.)
Plus, the city doesn’t want to just refinance, but borrow more. With rising debt levels, annual debt-service costs were already set to rise to $9.1 billion by 2024, from $6.8 billion in 2019.
The most worrisome aspect of the downgrade wasn’t the numbers, but the words. Ratings agencies shy away from criticizing elected officials. But this report came close. “The current budget assumes $1 billion in savings will come from labor concessions or headcount reductions, but those savings have not been formalized,” the analysts say.
Ratings-speak for: Mayor Bill de Blasio said he would cut $1 billion, then he dithered.
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