A major debt-rating agency warned investors Wednesday that it may soon to downgrade New York City’s credit rating — a major blow to the Big Apple that would trigger increased borrowing costs.
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Moody’s Ratings said it has changed the city’s credit status from stable to negative, the first step in potentially lowering its Aa2 issuer rating.
“The negative outlook reflects the emergence of sizable and persistent projected budget gaps that signal underlying structural imbalance and reduced financial flexibility, despite New York City’s still favorable economic conditions,” the agency said.
The potential rating slide, which warns lenders that the city could be a riskier client, leading to higher interest rates, comes as Mayor Zohran Mamdani pushes his massive $127 billion budget.
Hizzoner’s budget includes slapping property owners with a 10% tax and and the draining of city savings accounts to cover the ballooning financial plan that he proposed last month with few cuts.
Mamdani has used his unpopular revenue generator to put pressure on Gov. Kathy Hochul to bail out the city through increased taxes on the state’s highest earners and corporations.
City Comptroller Mark Levine called the news a “sobering wake-up call.”
“It is the first negative outlook the City has received since the COVID crisis,” he said. “The fact that this is happening at a time of relative health in our local economy is all the more remarkable.”
“The underlying challenge is clear: New York City is currently spending more than it is bringing in,” he added. “The fact that the preliminary budget achieves balance only by drawing down reserves underscores the need for a more sustainable fiscal plan.”
Under Mayor Eric Adams, the city repeatedly received positive reviews from the four debt-rating agencies, and repeatedly touted the accomplishment.
A City Hall rep downplayed the move as “premature,” saying state legislature’s one-house budgets signal Albany will soon ship out $5 billion and bail the city out.
“These proposals reflect a real commitment by Albany to investing in the services New Yorkers rely on, and the fiscal health of our city,” the spokesperson said. “We look forward to continuing our productive conversations with our partners in Albany and the City Council as we work to close the inherited deficit and restore the city to firm financial footing after years of underbudgeting and mismanagement.”
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