Moody’s Ratings has projected a negative outlook for New York City’s finances, chalking it up to the city’s large and persistent projected budget gaps — and citing Mayor Mamdani’s plan to draw down from reserves in order to balance the budget this year.
The negative outlook won’t have any immediate impact on the city’s borrowing abilities or bond rating, which remains strong.
But it serves as a warning shot to the city over its financial footing, and could be a precursor to the rating being downgraded.
Mamdani and other officials have warned the city is in dire financial straits, largely blaming chronic underbudgeting under the previous mayoral administration. The undisclosed spending under ex-Mayor Eric Adams made the budget appear balanced when it was actually was operating at a loss.
To balance the city’s books, Mamdani has proposed taking nearly $1 billion from the city’s “rainy day” fund — an idea the City Council and comptroller have pushed back on.
“Moody’s decision to revise the outlook on New York City’s credit rating — while maintaining it at Aa2 — is premature,” said Dora Pekec, a spokeswoman for Mamdani, citing $5 billion in additional funding for the five boroughs that state lawmakers are pushing for in Albany.
“These proposals reflect a real commitment by Albany to investing in the services New Yorkers rely on, and the fiscal health of our city. 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.”
The mayor has been pressing the state to hand over more money to the city, including through tax hikes on the richest city dwellers and corporations.
While the upper and lower chambers have stood mostly in agreement with Mamdani’s stance, Gov. Hochul, who needs to sign off on the final state budget determining how much the city will get in state funds, has been stood firmly against tax hikes on the wealthy.
“Moody’s decision to revise New York City’s outlook to negative is a sobering wakeup call about the fiscal challenges ahead for us,” Comptroller Mark Levine said in a statement, noting it’s happening as the Big Apple is in a time of “relative health.”
Speaker Menin has criticized the mayor for turning to the city’s reserves and looking at a property tax hike, saying neither are feasible options.
“Moody’s revised outlook is a clear warning sign that New York City must take its long-term fiscal challenges seriously,” Menin and Council Finance Committee Chairwoman Linda Lee said in a joint statement in response to the new Moody’s outlook, adding that it agrees with the credit ratings company in that drawing from reserves in fiscally irresponsible.