Despite a $455 million budget surplus in the 1992 fiscal year, New York City faces an economic challenge unparalleled since the 1970s, which will force city officials to make deep spending cuts for much of the decade, a municipal analyst said Friday.

In a speech to finance officials and municipal bond analysts at the Downtown Athletic Club in New York City, analyst Michael Brooks predicted that the city will see large budget gaps at least through 1996.

Mr. Brooks, a senior municipal credit analyst for the investment banking firm Sanford C. Bernstein & Co., attributed the revenue shortfalls to a "severely weakened local economy" that will restrain future economic growth. Before joining the firm, Mr. Brooks was director of the New York state comptroller's Bureau of Fiscal and Economic Analysis.

Given the city's situation, its Aminus bond rating from Standard & Poor's Corp. is too high, Mr. Brooks said. He added that a rating of BBB-plus would be more appropriate.

"When you look at the city's credit fundamentals, when you look at its weak economy and finances, at its high levels of debt and infrastructure decay, and at continued fiscal pressure it will face, we believe S&P's rating of Aminus is too high," Mr. Brooks said.

Moody's Investors Service rates the city's general obligation bonds Baal. Fitch Investors Service does not rate city GOs.

In many ways, Mr. Brooks's speech mirrors a report that he had prepared in April. The report was published before the adoption of the city's 1993 fiscal-year budget, beginning July 1, and well in advance of Mayor David N. Dinkins's disclosure that the city will end the 1992 fiscal year with a budget surplus of $455 million.

As he did in his April report, Mr. Brooks said Friday that any action by the rating agencies will not force city GOs into the credit status of below-investment grade.

Moody's Investors Service rates speculative-grade bonds Ba or less. The Standard & Poor's junk bond category begins at BB. A junk rating would likely cause the city to pay much higher interest rates on its bonds, and hurt prices in the secondary market.

In his speech, Mr. Brooks said city bonds will continue to be a safe investment, secured in large part by prospects of improved economic growth and the fiscal controls put in place after the financial crisis of the mid-1970s.

"First, as we discussed, there is an economic recovery in sight that will improve tax revenue collections and ease the burden on city finances," Mr. Brooks said.

"Second, we believe that fiscal health is within the city's reach, and [the city] has a credible long-term strategy to control spending."

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