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Q&A
Council Member Brannan questions OMB on credit ratings and long-term liabilities
0:47:31
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179 sec
Council Member Justin Brannan engages in a Q&A session with Jacques Jiha from the Mayor's Office of Management and Budget, focusing on the potential impacts of the US credit downgrade on New York City bonds and the city's management of long-term liabilities.
- Jiha indicates no direct impact of US credit downgrade on city bonds, but possible indirect effects through treasury yields
- Discussion on the city's approach to managing long-term liabilities, including debt and pension obligations
- Jiha asserts that the city has sufficient coverage for its debts and is managing liabilities effectively
Justin Brannan
0:47:31
Thank you, madam.
0:47:32
Thank you, speaker.
0:47:34
I want to jump into the credit ratings.
0:47:36
So Moody's downgraded The US credit rating from triple a negative to double a one stable on May 16, believe, reflecting accelerated deficit growth and associated borrowing requirements.
0:47:51
A fiscal situation exacerbated by recently elevated borrowing costs.
0:47:56
Does OMB anticipate any indirect effects of The US credit downgrade on our bonds here in the city?
Jacques Jiha
0:48:05
Put it this way.
0:48:06
We do not anticipate a direct impact on city bonds.
0:48:10
However, there may be some indirect impact in the sense that to the extent that treasury yields increase because of the downgrade, you know, and municipal market track those treasury yield, there may be a slight increase, you know, in the years that but we do not anticipate a direct impact
Justin Brannan
0:48:31
Okay.
Jacques Jiha
0:48:32
On city bonds.
Justin Brannan
0:48:34
And each of the three major rating agencies have expressed concern about the city's long term liabilities including debt, unfunded unfunded pension liabilities and unfunded health insurance liabilities for retirees.
0:48:49
How seriously is the city taking the issue of long term liabilities including but not limited to pensions?
Jacques Jiha
0:49:00
Have some while we have considerable long term liabilities, we have to also remember that we are managing those liabilities within our ability to meet those obligations.
0:49:15
The coverage that we have is more than enough, to be quite honest with you, to support those debts.
0:49:22
For instance, the CD total debt outstanding has gone substantially slower than our own personal income or the value of taxable properties, which is what you usually use over the last ten years.
0:49:42
Meaning that the city can now afford to debt, to cover its debt today, okay, better than it was ten years ago.
0:49:51
So we have the debt coverage.
0:49:53
Personal income is growing faster than the pace at which we issue debt.
0:50:01
Our pension, another good example, was funded at 81% back in 2022.
0:50:07
Now we're at 86%.
0:50:09
And we continue to make the actual required contribution, which means that we would be 100% funded if all the assumptions are met.
0:50:21
So we feel comfortable with the way we have managed our long term debt.
0:50:25
So we have enough coverage for those debts, so therefore it's not a major issue for us.