NEW YORK–(BUSINESS WIRE)–Fitch Ratings assigns an ‘AA-’ rating to New York City, New York’s (the city) $525,000,000 general obligation (GO) bonds, fiscal 2008 series L, consisting of $475,000,000 subseries L-1 tax-exempt bonds and $50,000,000 subseries L-2 taxable bonds. The bonds are scheduled to be sold on or about April 15 via negotiation, and will mature Apr. 1, 2010-2028. Early redemption provisions will be determined upon pricing. In addition, Fitch has affirmed approximately $34 billion in outstanding New York City GO bonds at ‘AA-’. The Rating Outlook is Stable.
The city’s credit strength is based on the breadth of the economy, high income levels, strong economic performance and financial operations, and exceptional budget management and controls, including a consistently demonstrated ability and resolve to close budget gaps. Offsetting factors include high and rising levels of debt and economic and revenue vulnerability to the cyclical securities industry, now under pressure, and to the real estate market.
With the continuation of several years of strong financial performance, primarily attributable to the robust performance of Wall Street and real estate, the city adopted a budget and financial plan in June 2007 that was characterized by prudent fiscal management and conservative revenue forecasting. The city used a large fiscal 2007 surplus to offset gaps in the three subsequent years of the financial plan and assumed softening in the securities industry and real estate.
The city has subsequently modified the June financial plan, most recently in January, to reflect negative financial market developments. While property taxes are projected to show relatively steady base growth, personal income tax growth is now expected to slow from 12.8% in fiscal 2007 to 1% in fiscal 2008 before dropping 5.6% in fiscal 2009. Sales tax base growth of 4.3% in fiscal 2008 is followed by a projected decline of 1% in fiscal 2009. Business tax growth has been revised downward significantly this year. Projections now show declines in both fiscal 2008 and 2009. Drops in real estate transaction taxes continue through fiscal 2011. Wall Street profits are estimated to have dropped from $20.9 billion in calendar 2006 to $2.8 billion in 2007, and are expected to rise to $9.2 billion in 2008. The bonus pool is estimated to have declined from $34.9 billion in 2006 to $31.2 billion in 2007, and is expected to fall further to $23.1 billion in 2008. Fitch believes that these forecasts are prudent given recent events, although the extent of actual securities industry losses and projected real estate declines remain an uncertainty.

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