Moody’s Investor Service has lowered its credit rating for New York City and New York state because of the economic shutdown’s impact on their current and future revenue.
Both were downgraded one step to a rating of Aa2, which is the third-highest rating possible.
“The downgrade reflects the substantial financial challenges New York City faces, caused by the economic response to the coronavirus pandemic and our expectation that New York City is on a longer recovery path than most other major cities,” said Nicholas Samuels, a Moody’s senior analyst.
NYC accounts for about 60 percent of the state’s economy.
The shutdown’s economic damage to the city “will likely be amongst the most severe in the nation and require significant fiscal adjustments,” Moody’s said.
It was Moody’s first downgrade for the state or the city in three decades.
The downgrade means the city may face rising interest rates on its $38.7 billion of general obligation bonds and the state, with its $65 billion debt. Moody’s rates its outlook on the city as “negative,” meaning another downgrade may be coming.
“The outlook also reflects our opinion that the city cannot shift to a ‘back to normal’ economy until a vaccine is widely available,” Moody’s statement said.
The City already has cut $7.1 billion from its budget, reducing the total to $88.2 billion, and will chop as many as 22,000 workers from the city’s payroll, City officials have said.
Mayor Bill de Blasio has asked the state for permission to borrow $5 billion on the open market, but governor Andrew Cuomo opposes the idea.
The state, facing its own deficit of as much as $14 billion, will cut aid to cities and schools by $8 billion, Cuomo has said.
TREND FORECAST: As more people flee New York City and New York State, tax revenues will continue to decline and budget deficits will continue to grow.
Beyond cutting jobs and services, governments will increase fares and taxes despite unemployment rising and wages stagnating or declining… especially as inflation begins to climb.
Again, as we noted, anti-tax will be a major platform of newly forming political parties.
