Oct 1 (Reuters) - Moody’s Investors Service on Thursday downgraded credit ratings on billions of dollars of New York City and New York State debt in the wake of the coronavirus pandemic, which has hit their finances hard.
Once the epicenter of the pandemic, the city and state have been struggling with big budget gaps caused by plummeting revenue from the lingering effects of shutdowns and restrictions to curb the virus’ spread.
The credit rating agency cut the city’s and state’s general obligation ratings by a notch to Aa2 from Aa1 and the ratings on their appropriation-backed debt to Aa3 from Aa2.
Moody’s said the city’s downgrade “reflects the substantial financial challenges New York City faces caused by the economic response to the coronavirus pandemic and our expectation that New York City is on a longer recovery path than most other major cities.”
It added that the city has relied mainly on reserves, the possibility of direct federal aid, and a request for deficit financing from New York State, while delaying the implementation of recurring savings measures.
The state has resisted Mayor Bill de Blasio’s call for borrowing to avoid big layoffs due to a $9 billion revenue shortfall.
As for New York State, Moody’s said the downgrade “reflects the financial consequences to the state of the disproportionate impact of the coronavirus pandemic on the City of New York, the state’s economic engine, and on the Metropolitan Transportation Authority, the state controlled and funded transit system in the city and downstate region.”
Moody’s revised its outlook to stable from negative for the state’s lower ratings, but kept a negative outlook on the city’s ratings, noting a shift to a “back to normal” economy will not happen without a widely available vaccine.
In a statement, State Budget Director Robert Mujica called the downgrades a “wake-up call” for more federal aid. (Reporting by Karen Pierog in Chicago Editing by Matthew Lewis)
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