Moody’s, the influential credit rating agency, downgraded New York City’s outlook from “neutral” to “negative” recently, indicating that the largest city in America may be a riskier investment if Mayor Zohran Mamdani draws $1.2 billion from the city’s and retiree accounts’ reserves to balance the budget.
Mamdani is also promising to raise property taxes 9.5% to close a projected $5.4 billion revenue shortfall.
“Despite a stronger-than-expected economy—with real wages rising nearly 3%, Wall Street bonuses at record highs and most major city tax revenues growing—the city is facing a fiscal shortfall on a scale we haven’t seen since the Great Recession,” Mark Levine, the city comptroller, stated on Wednesday. “In other words, we’re spending more than we’re bringing in.”
But Levine sounded more optimistic in an interview with JNS.
“Right now, Moody’s has just sent us a warning that dipping into our reserves could impact our credit rating in the future,” he told JNS. “Our current rating remains strong. We will be in the market next week with City General Obligation bonds. We are confident that the negative outlook will not present an impediment to our financing program.”
Levine said that the city’s economy is “also doing incredibly well thanks to a 16-year bull run on Wall Street, which led to soaring bonuses last year.”
“Our goal now is to continue attracting employers to the city as well as making it affordable for workers to live, especially young, college-educated New Yorkers who are currently seeing alarming unemployment rates,” he told JNS.
The mayor is required by law to balance the budget by June 30.
Israel Shaked, an expert on distressed debt who taught finance at Boston University for more than four decades, told JNS that the Moody’s change and the comptroller’s plan to go to market with a new bond issue mean that “right away, the city will pay another several hundred million dollars in interest expense on bonds it issues.”
“General revenue bonds are definitely affected by the reduction in credit rating,” Shaked said.
The highest credit rating for a city is AAA. New York is now rated AA, and Chicago has the lowest rating (BBB) of any large American city, according to Shaked.
“New York isn’t in very bad shape, but it’s not the highest rating either,” he told JNS.
A Jewish New York City business owner told JNS that she is less worried about the impact of the city’s credit rating than she is about the tariffs imposed by U.S. President Donald Trump.
Barbara Barran started a high-end art rug business in 1999, with a showroom in Manhattan’s storied Decoration and Design Building, home to high-end furniture and other interior product showrooms, and open only to the trade. Today, she runs her business, Classic Rug Collection, out of the first floor of her Park Slope brownstone.
While she is worried about her property taxes being raised to help close the city’s budget gap, Barran is getting hit hard by federal tariffs on imports from many of the overseas nations where her wool and silk carpets are handwoven.
“Tariffs killed my business,” she told JNS.
The tariff on one of the countries where her carpets are made is more than half the price. “That is 56% straight to the federal government,” she said. “First, the tariff from Thailand was 36%. Then it went down to 10%. I never know what to charge.”
“When they were first instituted, I already had orders, and I couldn’t go back to them and add 37%, so I just had to eat that,” she told JNS. “I lost so many projects.”
Barran’s carpets, which are replicas of rugs in historical locations, as well as original designs, cover the floors of a home belonging to a member of the United Arab Emirates royal family and the presidential suite at the fanciest Mecca hotel, she told JNS.
“They didn’t know I was Jewish, of course,” she said.
Her carpets also cover floors in Eleanor Roosevelt’s bedroom and in a home where George Washington stayed in 1775, and she is working on a 20-foot diameter carpet for a branch of the Brooklyn Public Library, her third commission from the library system, she said.
Barran said her carpets are also in a Normandy chateau, an ambassadorial residence in Jeddah, Saudi Arabia, and covering the floors in the palatial home of a Russian oligarch, whom she told JNS she cannot name.
JNS asked if she is considering moving her business out of New York City to save on taxes. She said that she is not.
“This is the design center of the United States. I’ve done projects all over the world by having my business here,” Barran said. “Where else are we going to go? New Jersey?”
