Featured Bond – City of New York $930 million in General Obligation Bonds
The City of New York is scheduled to issue $850 million in General Obligation Bonds to finance its 2020 budget and various capital projects planned for the new year. The sale is expected to be scheduled between October 1st to the 3rd, with Jefferies as the lead underwriter and many other large investment banks as co-managers. The city also intends to sell $130 million of taxable general obligation bonds by competitive sale on October 3, 2019, bringing the total sale to approximately $980 million.
About the Bonds
Subseries B-1 of tax-exempt bonds total $850 million, maturing between 2021 and 2044. The Tax-Exempt Bonds maturing on or before October 1, 2029 are not subject to optional redemption or mandatory tender prior to their stated maturity dates. The Tax-Exempt Bonds maturing after October 1, 2029 are subject to redemption or mandatory tender, at the option of the City.
Subseries B-2 of taxable bonds total $130 million, maturing between 2021 and 2029. Taxable bonds are subject to redemption or mandatory tender at the option of the City, in whole or in part, on any date, at a redemption price equal to the greater of the issue price the principal, or the sum of the present value of the remaining scheduled payments of principal and interest to the maturity date of such Taxable Bonds to be redeemed or tendered.
The City of New York’s general obligation bonds carry outstanding ratings of AA by Fitch, Aa1 by Moody’s and AA by S&P. The ratings by Moody’s and S&P are currently under review as of this writing, while the Fitch rating was affirmed on 9/27/2019.
Proceeds from the bonds will be used to finance the city’s budget for fiscal year 2020 and cover costs for a wide range of capital projects including reconstruction of the Brooklyn Queens Expressway, a collective bargaining agreement reached with the teachers union, and perhaps most interestingly, a congestion tolling program which is the first of its kind in the United States.
Congestion pricing is not new to European cities, but New York is leading the way in the US. A certain portion of Manhattan will require motorists to pay an entry fee during peak hours. The system will be based on a traffic cameras that record license plates and send fees to drivers. Many details are still being worked out, such as exceptions for delivery trucks and emergency vehicles, but ultimately, you will have to pay a surcharge to drive through the busiest part of NYC.
City Economic Information
Although the city’s MTA has serious infrastructure unfunded financing needs, New York has been on the cutting edge of non-traditional urban transportation for years by building out a huge network of bike lanes and adopting vision zero policies. Now, city officials are continuing work on reducing on-street parking while also implementing congestion pricing in Manhattan. The City of New York appears to be focused on the dual purpose of long term fiscal stability and public safety through the incremental dismantling of car culture. Fewer cars not only means fewer traffic deaths, it also means the city will have less overhead costs related to maintaining their roadways.
The Big Apple is well known for its dense urban landscape and monumental skyline. According to the Bureau of Labor Statistics, it also boasts a civilian labor force over 4 million strong and low unemployment rate of 4.9%. America’s biggest city is very racially diverse and is home to a foreign born population accounting for 37% of its total. The U.S. census reports the median home value of $538,700, and 36% having received higher education degrees.
These details and more on purposes, security, risks and other matters pertaining to these City of New York bonds can be found in the preliminary official statement, on the NYC Comptroller’s website.
Statistical Snapshot of the City of New York Finances as of September 30, 2018 with Comparison to City Sector FY 2017-2018 medians
Provided above is a quick snapshot of financial characteristics of the City of New York along with the medians for other sector issuers of all sizes, courtesy of Merritt Research Services, LLC. Merritt has many of the sector medians publicly available and regularly updated on their Benchmark Central page. (Merritt believes the data to be reliable but does not make any representations as to its accuracy or completeness).
These facts and numbers are for informational purposes, and should not be considered an official disclosure for potential investors. Investors should consult the official statement. None of the information provided should be construed as a recommendation by MuniNet Guide, MuniNet LLC, Merritt Research Services LLC, or any of their employees. Information and analysis is for informational purposes only.