In a growing chorus of concern, a second influential credit rating agency has voiced apprehension over New York City’s ambitious budget strategy under Mayor Zohran Mamdani. The plan, which involves tapping into the city’s financial reserves, is drawing scrutiny for its potential risks.
S&P Global Ratings, a leading authority in the credit rating industry, issued a cautionary statement on Monday. They suggested that New York City’s financial stability might be in jeopardy if the $127 billion budget proposal leans heavily on depleting savings intended for emergencies. This move could lead to a downgrade of the city’s credit rating.
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“Historically, the city has shown a strong ability to manage fiscal challenges without compromising its credit quality,” stated S&P Global in their analysis, first highlighted by Politico. However, they warned that the city’s credit rating (currently AA/Stable) could be at risk if it continues to rely on temporary budget fixes that do not address the ongoing imbalance between income and spending. Furthermore, if reserve levels fall to a point where the city cannot effectively handle an economic downturn or unexpected cuts in federal funding, the financial outlook could worsen significantly.
This warning follows a similar caution from Moody’s, another major credit rating agency. Just last Wednesday, Moody’s indicated it might lower New York City’s credit rating from stable to negative, reflecting growing unease about the city’s fiscal direction.
The news comes after another credit rating agency, Moody’s, warned on Wednesday that it was eyeing downgrading the city’s credit rating to negative from stable.
A downgraded bond rating would send borrowing costs spiking, creating a serious financial issue for the city.
S&P, which like Moody’s, still maintained the city’s AA rating, also said it may not be smart for the city to rely on Albany for a bailout, which Mamdani has repeatedly said is something that’s in the works.
The state has its own future budgetary issues as federal funding cuts loom, according to the agency.
“Therefore, a potential constraint for the city is the state’s fiscal capacity and appetite to provide additional one-time or long-term resource commitments approving new revenue measures that replace federal dollars.”
At odds is Mamdani’s proposal to draw $2.6 billion from savings and trusts, leaving the city vulnerable to any sort of economic slowing or downturn.
The young socialist mayor proposed his massive $127 billion budget last month, with no savings or cost-cutting spelled out, while calling for property taxes to be hiked by nearly 10%.
He’s used the budget to put pressure on Gov. Kathy Hochul to increase taxes on the highest earners and corporations. The governor has repeatedly refused to raise taxes as she seeks re-election in November.
