A long-awaited review of New York City's credit by Standard Poor's Corp. that focuses on large projected budget gaps has prompted the administration of Mayor David N. Dinkins to accelerate development of a contingency plan to address long-term budget problems, officials say.

The work on a contingency plan follows weeks of market speculation that the city's general obligation bonds may face a credit downgrade from Standard & Poor's. one of the two credit agencies that rate the city's general obligation bonds.

Richard Larkin, a managing director at Standard & Poor's, said officials at the rating agency are concerned about projected budget gaps in the city's financial plan after fiscal 1994. He indicated that any downgrade would reflect credit problems that emerged from the structural, or long-term, nature of the city's budget problems.

Larkin also said that the city's budget gap projections in its latest official statement for a bond issue are low, and that these gaps are in reality at least $300 million higher in each year than the city has indicated.

"We've been having discussions with the city about 1994 and beyond," Larkin said in an interview. "I know they've got problems in 1995. The FCB [Financial Control Board] says there is a permanent deficit. We're taking a look at that."

Larkin said the city's fiscal 1994 budget contains "a lot of soft spots," but termed the 1994 financial plan "reasonably balanced" and said the city can deal with gaps in 1994 as they arise. The city has balanced 13 straight budgets according to generally accepted accounting principles.

In May, the city announced that it had created an advisory panel to address its structural budget problems after three private members of the New York State Financial Control Board issued a statement criticizing the city's four-year financial plan.

While the possibility of a downgrade looms, city budget director Philip R. Michael confirmed in an interview Monday that the city is developing a contingency plan to deal with its structural budget problems. He refused to elaborate, but said the plan "would look at everything," including cuts in the city's 10-year capital program.

"There's been no formal decision, and it's nothing I want to talk about," Michael said. Michael did not return telephone calls yesterday to confirm any new budget or rating developments.

Other city budget officials also confirmed that City Hall is working on a plan to achieve structurally balanced budgets, but they said no decisions on the size or scope of the effort has been made.

As officials apparently iron out their plan, Standard & Poor's. which rates the city's GO bonds A-minus with a negative outlook, plans to update the city's GO rating before its next bond deal, scheduled for pricing in mid-July, according to officials at the agency. The officials there say they are reviewing the city's rating to determine the impact of the more than $1 billion in annual budget gaps projected for fiscal years 1995-97.

Moody's Investors Service, which rates the city's GOs Baal, says its Baal rating is secure for now. Michael Johnston, manager of Northeast ratings for Moody's, said the city's budget problems are already reflected in the Baal assessment.

The city's budget for fiscal 1994, which begins July 1, has been widely criticized by fiscal monitors and independent watchdog groups for relying on uncertain revenues and budget gimmicks. Many financial pundits say New York City's fiscal 1994 spending plan will likely dissolve by mid-year, causing a budget gap of close to $1 billion.

And budget monitors have sharply criticized the administration of Mayor David N. Dinkins and City Council officials for producing a budget that does little to address gaps of greater than $1 billion from fiscal years 1995-97.

The city faces a $1.6 billion gap in fiscal 1995, a $2.24 billion gap in fiscal 1996, and a $2.605 billion gap in fiscal 1997, according to its latest official statement for the upcoming GO bond deal. Market analysts said these gaps may grow even larger because they say the city's revenue projections from increased federal aid and higher projected property values will not materialize.

Larkin, for his part, said the city's fiscal 1995 gap is about $1.9 billion, and that its fiscal 1996 gap is about $2.54 billion. He said the city's fiscal 1997 gap is more than $300 million higher than the city estimates, but he could not be specific.

Meanwhile, the control board, one of the city's legislatively created fiscal monitors, blasted the Dinkins administration in a June 15 report, stating that budget decisions made in fiscal 1993, including the extensive use of one-shots to cover budget gaps, has contributed to a "permanent deficit." This condition, the report says, will cause the city to experience spending gaps well into the future unless it takes immediate budget-balancing actions.

Larkin said that Standard & Poor's officials have met with city officials, including Dinkins and comptroller Elizabeth Holtzman, to discuss rating issues. Both Dinkins and Holtzman are running for reelection, and a downgrade could be politically damaging.

One city budget official said the contingency plan is "a couple of days" away, and could be ready for the next Financial Control Board meeting on July 15.

Another budget official confirmed that officials are working on a plan, but said that "something related to the plan" has delayed its immediate production. The official refused to elaborate.

Allen J. Proctor, executive director of the Financial Control Board, said yesterday that the city has asked to postpone its July 15 scheduled meeting with the board until the end of the month. He said the city has not told the control board that it is preparing a plan to deal with its structural budget problems. "If the city is preparing something for the control board, they have not made any overtures," Proctor said.

Meanwhile, the tenuous nature of the budget, coupled with the existence of large, out-year budget gaps, has sent a chill through the municipal bond community, with most analysts predicting a downgrade by Standard & Poor's. If the city is downgraded, most analysts say, yields on city GOs could rise between five and 10 basis points.

Long-term city GOs have recently traded at yields between 6.05% and 6.15%, traders and analysts say. A much higher spike will probably be prevented by strong demand for tax-exempt municipal paper because of higher federal tax rates, as well as the July 1 redemptions of outstanding debt, analysts said.

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