A second credit rating agency has raised serious concerns over the Big Apple’s massive budget plan under Mayor Zohran Mamdani that calls for draining the city’s savings accounts.
S&P Global Rating — one of the “Big Three” firms in the credit rating sector — warned Monday that it may downgrade the city’s financial health if Mamdani balances his $127 billion proposed budget by pulling from the city’s reserves meant for dire circumstances.
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“We believe the city has previously demonstrated resilience to weather fiscal challenges without deterioration of its credit quality,” the agency wrote in its report, first reported by Politico on Friday.
“That said, downside risk to our rating on New York City (GO debt: AA/Stable) could materialize if we believe two conditions persist: the city relies on nonrecurring budget solutions that fail to reduce the structural mismatch between recurring revenue and expenditures; and the city’s reserves erode to a point where its capacity to absorb an economic downturn or a federal funding shock is materially diminished.”
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.
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