New York City Avoids Credit Downgrade as Fitch and Moody’s Issue Warning

New York City escaped a debt downgrade on July 31 when Fitch Ratings and Moody’s Investors Service kept a negative outlook on its $53 billion of general‑obligation bonds. Both agencies warned the city must narrow projected deficits or face a future cut.

Mayor Zohran Mamdani and the city council avoided tapping reserves or raising property taxes to balance a $126 billion budget, but the spending plan is $10 billion larger than the prior year and relies heavily on one‑off measures such as extending pension‑debt pay‑off schedules and additional state aid. The city projects a $6.4 billion deficit for fiscal 2028, rising to $8.5 billion by 2030.

Deficits are driven by rapid growth in a rental‑assistance program for homeless residents, a voucher program for private‑school tuition that has ballooned to $1.8 billion, and rising health‑insurance costs for roughly 320,000 city employees. Moody’s rates the bonds Aa2, while Fitch assigns an AA rating. A newly enacted pied‑à‑terre tax is expected to generate about $500 million annually.