October 31, 2019 – New York City’s financials are a window into local government finances and the health of the U.S. economy (more specifically, financial services/insurance firms). The City Comptroller’s released its Comprehensive Annual Financial Report for Fiscal Year 2019 (ending June 30) at 1pm today. Here are ten highlights:
- Big Picture. FY19 expenditures increased by about 5% over FY18. The surplus rolled into FY20 amounted to $4.2 billion – still a historically high level but slightly lower than the previous year’s roll. As per practice in recent years, the surplus roll is used to prepay City debt service, as the City cannot formally retain a budget reserve
- Private Sector Employment (PSE). PSE grew for a 9th consecutive year, posting a gain of 2.0%, slightly lower than 2.4% in FY18. Employment growth was primarily from retail/F&B, hospitality, healthcare and social assistance jobs; average annual salaries of $63,000 p.a. are about half the average NYC income
- Unemployment. Unemployment fell to 4.2% – the lowest on record. Queens enjoyed the lowest unemployment (3.6%); Bronx had the highest (5.7%)
- Debt. City debt increased slightly from $88 billion to $90 billion. For the first time, as of FY19, there were more outstanding “TFA” (the City’s AAA-rated personal income and sales tax credit) bonds circa $38 billion than AA-rated General Obligation bonds at $37.5 billion
- Refinancing Savings. 39% of City, TFA and DEP/Water & Sewer issuance in FY19 involved refinancings. City debt entities achieved a whopping $950 million in debt service savings in FY19
- Investment Returns/Pensions. The City’s five main pension funds achieved a return of 7.2% in FY19, vs 8.7% in FY18. Pension funding stood at about $207 billion as of June 30, 2019, with about half of assets allocated to U.S. and international public equity. Funded ratios were close to 80% for teachers, non-uniform employees and police pension funds; but only 65% for fire workers
- Tax Cuts and Jobs Act (TCJA) Impact. The Comptroller’s Office, the City entity responsible for the CAFR – stated that TCJA-related limits on state+local deductions have not impacted the real estate market “in a measurable way” – an observation which seems to contradict market views that NYC real estate has substantially weakened
- OPEB. Unfunded Other Post-Employment Benefit (primarily retiree healthcare costs) soared from $98 billion to $108 billion. The unfunded OPEB liability seems highly sensitive to interest rates – a 1% decrease in the discount rate would add $20 billion to the unfunded liability, to $127 billion
- Forecasting. The City’s forecasting ability was generally on point / conservative. Between the adopted/modified budgets and actual results, receipts were higher in all categories with the exception of State/Federal grants
- Cash. “Primary Government” fiscal year-end cash declined from $7.7 billion to $7 billion.
The City is scheduled to issue an updated budget (which it issues 3 times a year) some time in November.
Contact Andy Gem at AGem@buymuni.com.
