Standard & Poor's Corp. on Friday affirmed its rating on New York City's general obligation debt, surprising some city officials and municipal market executives who thought the city's fiscal 1994 budget and multiyear financial plan were shaky enough to force a downgrade.

In a press release, Standard & Poor's said it will maintain an A-minus rating on $20.4 billion of city GO debt, and that the outlook on the bonds will remain negative.

The credit agency has held city GO debt at the A-minus, negative outlook level since June 1991. Moody's Investors Service last week affirmed city GOs at Baal.

"The city balanced its 1994 budget with reasonable revenue estimates and has reduced its expectation of new state and federal aid, which was not a reliable source of money," Standard & Poor's said.

"Although the city has a solid record of achieving budget balance on a year-to-year basis, maintenance of this rating depends upon the city making further progress towards reducing budget gaps in the outlying years" of its financial plan, the company said.

The affirmation shocked several bond analysts and startled some city officials, who privately worried that Standard & Poor's would downgrade city GOs because of Mayor David N. Dinkins' fiscal 1994 budget and the persistence of large, billion-dollar budget gaps throughout the city's multiyear financial plan.

Despite Standard & Poor's assessment, city GOs will continue trading in line with high-level BBB credits, said several analysts and large buyers of city debt. "It's a triple-B credit," said Ronald H. Fielding, chief executive officer of the Rochester Funds. "At least, that's where the money thinks the city should trade."

On Friday, city 6s of 2021 were quoted unchanged on the day at 6.07% bid, 6.05% offered, levels associated with the triple-B range, traders and analysts say. At least one Wall Street underwriter of city debt maintains an in-house rating of the city at triple-B-plus.

Michael Brooks, a senior market analyst for Sanford C. Bernstein & Co., said he "thinks Standard and Poor's made a mistake" in affirming the city's rating. "I think the gaps in the outyears are substantially larger than Standard & Poor's says," he said. "And given the city's budget, it's increasingly evident that the city is not an A-minus credit."

Fiscal monitors and private watchdog groups have charged that the Dinkins budget will probably dissolve into budget gaps before the end of fiscal 1994. Monitors also bashed the city for adopting a fiscal 1994 budget, which took effect Thursday, without addressing the structural, or long-term nature of the city budget problem.

In its latest official statement for a bond deal, the city projected budget gaps of $1.68 billion, $2.24 billion, and $2.6 billion in fiscal years 1995, 1996, and 1997, respectively. Officials at Standard & Poor's say the gaps are about several hundred million dollars larger than the city estimates.

But city officials, after a week of lobbying, convinced Standard & Poor's that a rating downgrade is unwarranted, city officials and Standard & Poor's executives say.

City officials said they tried to impress upon rating agency executives that nothing fundamental has changed in the city's credit during the past year to force a ratings change. "What has really changed?" one city official said. "We all know there's large, outyear gaps."

One city source said city Comptroller Elizabeth Holtzman met repeatedly with ratings officials in recent days. Richard Larkin, a managing director at Standard & Poor's. confirmed that during that time he has met with both Holtzman and Dinkins to obtain information about city plans for resolving the looming budget gaps. He said the rating affirmation was not linked to political pressure from the mayor or comptroller, both of who are running for re-election.

"There's always political pressure" during the ratings process, Larkin said. "If there was a ratings change, it's never a good time."

Larkin said one of the big reasons for the affirmation is a plan the city has developed to address the large budget gaps that appear between fiscal years 1995 through 1997. City officials, including Dinkins and Holtzman, also told Standard & Poor's that the city would take the steps necessary to deal with gaps that may appear in the fiscal 1994 budget.

In its press release announcing the ratings decision, Standard & Poor's said, "The city has identified additional gap closing measures that have recurring value and will reduce next year's budget gap of $1.9 billion by approximately $400 million."

The statement added that the plan "will be adopted in the next financial plan modification to be presented within the next few weeks. The city is also seriously examining other options to further reduce the gaps in 1995 and beyond."

Larkin described the plan dealing with the looming budget gaps as "pretty important information." City officials say they will soon make the plan publicly available.

"We didn't see any real crisis for fiscal year 1994," Larkin said. "Our concern was that the city didn't take substantial action to address the out-year gaps. During the past week, we had discussions on what they were planning to do."

In a four-page press release, Dinkins said the plan will include a "25% or $3.2 billion cut in capital spending in the next four years." But the cut, as detailed by Dinkins, will largely amount to a slowdown in the pace of capital spending, with the city pushing financing for many capital items into fiscal year 1998. City officials expect that to provide $25 million of savings in fiscal 1995, and much more in fiscal 1996 and 1997.

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