As part of a proposed budget plan, New York City plans to issue as much as $1 billion of refunding bonds in a massive restructuring of outstanding debt, rating agency officials and city sources said yesterday.
The refunding will probably save money in fiscal 1995, which begins July 1, but increase costs in future fiscal years.
The bonding could also raise concern among the city's fiscal monitors and Wall Street bond raters that the city once again has addressed current budget problems by saddling future generations with higher costs.
City officials, including budget director Abraham Lackman, deputy budget director Mark Page, and budget spokesman Forrest Taylor, did not return telephone calls yesterday. Aides were putting the final touches on the city's first executive budget under Mayor Rudolph W. Giuliani.
The city is scheduled to release its fiscal 1995 budget and a financial plan covering 1996, 1997, and 1998, sometime today.
New York City faces a $2.3 billion budget gap in fiscal 1995. One of the ways the city plans to address its budget woes emerged yesterday, as city officials met with bond raters to discuss a massive refunding of city debt.
According to city sources, the city is proposing to sell between $800 million and $1 billion of general obligation refunding bonds.
The sale would take advantage of a recent state law that allows the city to finance certain projects with longer-dated debt. Under the proposal, the city would replace old bonds that have shorter maturities with bonds that have longer maturities.
By issuing longer term bonds, the city figures to produce budget savings of about $225 million in fiscal 1995, a city source said.
Wall Street bond raters and credit analysts have had mostly favorable reviews of Giuliani's budget proposals, which include plans to eliminate 15,000 jobs by 1995 and cut the budgets of many city agencies.
But rating agency officials and fiscal monitors said yesterday that the refunding plan is a step in the wrong direction, given the city's need to achieve long-term budget balance.
In addition to its $2.3 billion fiscal 1995 gap, the city faces budget gaps totaling more than $7 billion through the life of its financial plan. Monitors and raters have criticized previous city efforts to restructure debt service payments to address budget problems.
"We don't think it's the strongest thing the city could do," said Richard Larkin, a managing director at Standard & Poor's Corp., which rates city debt A-minus with a negative outlook.
Larkin, who said he must study the plan before commenting on its rating impact, said Standard & Poor's assessment of the transaction is "tempered by [the city's] serious efforts to reduce total spending."
Michael Johnston, a vice president at Moody's Investors Service, said the rating agency has yet to evaluate the plan. Moody's rates city bonds Baa1.
Separately, officials in the New York City Council say they want more proof that the city needs to carry out a proposed $215 million sale of delinquent property tax receivables.
To complete the sale, which helps balance the city's fiscal 1994 budget, the city needs council approval.
Council finance officials say they will probably not approve the plan unless the city can demonstrate why its fiscal 1994 surplus will not make up the difference.