DIVISION OF THE BUDGET
ANDREW M. CUOMO, GOVERNOR
ROBERT L. MEGNA, DIRECTOR
October 15, 2014 CONTACT: Morris Peters
DIVISION OF BUDGET ANNOUNCES SUCCESSFUL BOND SALE, UNDERSCORING STATE TURNAROUND AND INVESTOR CONFIDENCE IN NEW YORK
Sale Follows Credit Upgrades by All Three Ratings Agencies; High Demand for New York’s Bonds Leads to Best Rates for Taxpayers in at Least 50 Years
The New York State Division of Budget today announced the successful results of the sale of $1 billion in New York State Sales Tax Revenue Bonds. Strong demand for high quality bonds and investor confidence in New York resulted in 30-year bonds being sold at the best rates for taxpayers in at least 50 years. The sale follows credit rating upgrades this year from all three major credit rating agencies.
“Coming on the heels of four on-time budgets and credit upgrades by all three major rating agencies, today’s bond sale is further proof that New York State is in a stronger fiscal position today than it has been in years,” State Budget Director Robert Megna said. “When the markets are volatile investors look for safety, and they have high confidence in New York.”
The yield on 30-year bonds in today’s sale was a historically-low 2.87 percent. Demand for New York bonds and favorable rates prompted the State to offer an additional $150 million in Sales Tax Revenue Bonds. All bonds are sold to fund previously authorized capital projects, including the construction of higher education facilities, highway and bridge projects, and grants for library construction, court facilities and hazardous waste remediation.
The enthusiastic reaction by the market to New York’s bond offering echoes the positive reception from the rating agencies. In rating the bonds Aa1, Moody’s Investor Services points to New York’s “strong financial management with stable reserves and low unfunded pension liability.” Moody’s gave the bonds a stable outlook, reflecting their “expectations that the State will preserve and improve upon the gains it has made in governance and its financial position.”
Standard and Poor’s gave the Sales Tax Revenue Bonds their highest rating, AAA. In their rating of the bonds, S&P points to New York’s “large and diverse statewide economy” and notes that “State unemployment rates have declined steadily.”
The recent reversal from a history of political gridlock reflected in four consecutive on-time budgets contributed to the upgrading of New York’s credit rating by all three major rating agencies. In June, Moody’s Investor Services upgraded New York’s General Obligation bonds to Aa1, their highest rating of the State since 1964, and Fitch Ratings upgraded New York to AA+, their highest rating ever for the State. In July, Standard and Poor’s upgraded New York’s GO bonds to AA+, their highest rating since 1972.
“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.”
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.