Fitch Ratings has raised to AA from AA- its rating on $677.5 million general obligation bonds for New York City, citing, among other factors, an "improved financial foundation" post-pandemic and projected stable net pension liabilities over time "assuming actuarial assumptions are met."
The rating upgrade noted that the city is "in a much stronger position to manage through future economic downturns, including near-term challenges due to an expected deceleration of revenue growth," said a Fitch report issued Feb. 17.
"The record revenue performance and strong recovery from the pandemic, as well as improvement in reserve levels … will help management mitigate these pressures and other uncertainties associated with inflation and future labor costs," the report said.
Fitch praised the city for "exceptionally strong budget monitoring and controls," adding that it anticipates the long-term liability attributed to pensions "will remain slightly elevated."
On a combined basis, the five pension funds within the $239.65 billion New York City Retirement Systems had a funding ratio of 81% on a reported basis for the 2022 fiscal year, or 73% using Fitch's investment return assumption, the report said.
The assumed annual rate of return for the combined system is 7%.
For the fiscal year ended June 30, the combined system had a net return of -8.65%, with individual pension fund net returns ranging from -7.17% to 9.77%
For the six months ended Dec. 31, individual pension fund net returns ranged from -.01% to 1.04%.
