A drop in the Big Apple’s credit rating will come with a price tag of up to $200 million right off the bat — and could trigger a disastrous chain reaction that costs the city more than $14 billion, a new analysis shows.
The study by the City Council warns that if major bond-rating companies follow through with their recent threat of a city downgrade, the move could devastate the city’s annual refinancing ability.
The current potential credit hit, the first since 2020, would increase the city government’s borrowing rates from 6% to 6.25% — raising the interest fees by $3.6 billion over the lifespan of the city’s various bonds, which total $65.5 billion.
But the internal report, obtained by The Post, issued an even more dire warning, saying that it’s “not unusual” for a downgrade to spark future poor ratings, and those could prove even more costly down the line.
If the interest rates to tick up to 7%, the annual cost for interest alone on loans would balloon to another nearly half-million dollars each, to a tune of $14.1 billion over the lifespan of the massive tranche of bonds the city currently has.
“The reality is, if there is a downgrade, it both increases the city borrowing cost — and we certainly borrow a lot for capital projects — and reduces the city’s opportunity to refinance, which it does often,” said Andrew Rein, the CBC’s president.
“It will cost the city some real money every year.”
The analysis was commissioned earlier this month after Moody’s changed the city’s credit rating to negative, a first step in potentially lowering its AA rating, in response to the Mamdani administration’s proposed pulling of $2.6 billion from its savings to prop up his massive $127 billion budget.
Hizzoner’s team scrambled in the days before the warning was issued, pleading with the debt-rating agency to keep it from releasing its report, according to sources, who said City Hall even created a PowerPoint presentation to try to convince Moody’s not to go ahead with the move.
Two other investor-service agencies issued similar warnings in the days after.
The council’s analysis, which was conducted by its finance team, added that a lower credit score would likely also affect the interest offered in the future on the city’s variable-rate loans, although it is unclear how much those costs would go up.
City Council Speaker Julie Menin has said drawing down the Big Apple’s rainy-day fund was a non-starter, proposing instead her own slate of savings to fill the gap.
“The responsible path forward is not to deplete our financial safety net, but to pursue real efficiencies and sustainable solutions,” Menin said.
Mamdani would need approval from the council to change the current fiscal year’s budget to pull the money from the savings.
That modification request, which The Post reported on last week, has been shelved, according to insiders.
City Hall will unveil its executive budget April 20.
The spending plan is expected to finally detail the $1.7 billion in savings that the administration has refused to release publicly, aside from around a relatively paltry $200 million that called for cutting some software, such as a $20,000 subscription to the Slack messaging service.
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