MuniMetrics MVP v6.6.5

# Senior Credit Analyst Summary ## 1. Executive Credit View Preliminary only. The provided excerpt is primarily the State of New York’s fiscal year ended March 31, 2023 basic financial statements and audit materials, not the 2025 bond offering document. It supports that the State’s FY2023 financial statements received an unmodified audit opinion, but it does not provide sufficient bond-specific information for the Series 2025A, 2025B, or 2025C bonds, including par amount, maturities, debt service schedule, legal pledge language, ratings, or offering terms. Based only on the excerpt, the preliminary implication is **Watch**, not because the credit is necessarily weak, but because the excerpt is insufficient for a Buy conclusion and identifies material use or decline of temporary federal support, including ARPA operating funding and COVID-related unemployment insurance grant activity. Pages 19 and 21. ## 2. Issuer and Bond Facts Extracted | Item | Extracted Information | |---|---| | Issuer | State of New York. Pages 1, 3, 5. | | Bond name | Series 2025A Tax-Exempt Bonds, Series 2025B Taxable Bonds, and Series 2025C Tax-Exempt Refunding Bonds identified in analyst-entered context. Not identified in provided excerpt. | | Par amount | Not identified in provided excerpt. | | Bond type | Analyst context identifies General Obligation. Legal pledge details not identified in provided excerpt. | | Security pledge | Not identified in provided excerpt beyond analyst context that the bond type is General Obligation. | | Purpose | Not identified in provided excerpt. Series 2025C is described in analyst context as refunding, but use of proceeds is not detailed in the excerpt. | | Maturity range | Not identified in provided excerpt. | | Rating | Not identified in provided excerpt. | | Underwriter | Not identified in provided excerpt. | | Bond counsel | Not identified in provided excerpt. | | Municipal advisor | Not identified in provided excerpt. | | Registrar / paying agent | Not identified in provided excerpt. | | Tax status | Analyst context identifies Series 2025A and 2025C as tax-exempt and Series 2025B as taxable. Not detailed in provided excerpt. | | Financial statement period reviewed | Fiscal year ended March 31, 2023. Pages 1, 3. | | Auditor | KPMG LLP issued the Independent Auditors’ Report. Page 9. | | Audit opinion | Financial statements present fairly, in all material respects, in accordance with U.S. GAAP. Page 9. | ## 3. Security and Bond Structure Analysis The analyst context states the bonds are **General Obligation** bonds of the State of New York, but the provided excerpt does not include the official statement’s legal security language, constitutional or statutory pledge provisions, debt service appropriation mechanics, remedies, or bondholder protections. Bond structure items not identified in provided excerpt include: - Par amount. - Maturity schedule. - Principal amortization. - Interest rate mode. - Optional redemption provisions. - Mandatory sinking fund redemption. - Refunding escrow structure for Series 2025C. - Debt service reserve, if any. - Additional bonds test, if applicable. - Legal pledge details. - Continuing disclosure undertaking. The excerpt does provide a table of contents showing that a General Debt Service Fund budgetary schedule is included later in the full financial report, but the actual schedule is not included in the provided pages. Page 7. ## 4. Credit Strengths - **State-level issuer:** The issuer is the State of New York. Pages 1, 3, 5. - **Audited financial statements:** The FY2023 basic financial statements were audited. Page 9. - **Unmodified audit opinion:** The auditors state that the financial statements present fairly, in all material respects, the State’s financial position and changes in financial position in accordance with U.S. GAAP. Page 9. - **Comprehensive financial reporting framework:** The financial report includes government-wide statements, governmental funds, enterprise funds, fiduciary funds, component units, notes, required supplementary information, pension schedules, OPEB schedules, and other supplementary information. Pages 6-8. - **Major revenue base identified at a high level:** Governmental activities are financed by federal grants, personal income taxes, consumption and use taxes, business and other taxes, lottery revenue transfers, and bond proceeds. Page 14. - **Reported unrestricted grants and other revenues:** The State paid part of governmental activities with $21.2 billion in unrestricted grants and other revenues, including investment earnings. Page 18. ## 5. Credit Risks and Watch Items - **Insufficient bond-specific disclosure in excerpt:** The provided text does not include the 2025 bond offering details, security pledge, debt service schedule, maturities, call provisions, ratings, or legal covenants. - **Temporary federal operating support exposure:** Federal grant revenue decreased due to a decline in American Rescue Plan Act funding to the General Fund for use in operations. This is a recurring-credit watch item because ARPA is temporary and was used for operations. Page 19. - **Large COVID-related federal grant decline:** Operating grants and contributions decreased by $23.3 billion due to lower federal grants received in the Unemployment Insurance Benefit Fund used for payment of claims related to the COVID-19 pandemic. Page 19. - **Federal reimbursement timing risk:** Higher non-personal service spending was partly driven by a delay in federal FEMA reimbursement. Page 21. - **Reliance on federal grants as part of governmental activity funding:** Federal grants are listed among major financing sources for governmental activities. Page 14. The excerpt does not identify how much of this support is recurring versus temporary. - **Pension and OPEB exposure likely material but not quantified in excerpt:** The table of contents identifies multiple OPEB and pension schedules, including New York State OPEB, SUNY, CUNY, and retirement system schedules. Pages 6-7. Actual liability amounts and contribution trends are not included in the provided excerpt. - **Component unit audit reliance:** Certain business-type activities, fiduciary activities, and component units were audited by other auditors, and KPMG’s opinion relies on those reports for the applicable amounts. Page 9. This is not necessarily a weakness, but it is a disclosure and diligence item. - **Budgetary and debt service detail not provided:** The table of contents references budgetary schedules and General Debt Service Fund schedules, but the actual financial detail is not included. Pages 6-8. ## 6. Temporary / Artificial Funding Exposure | Source / Program | Amount | Fiscal Year / Period | Apparent Use of Funds | Classification | Risk Level | Why It Matters to Recurring Credit Strength | Citation | |---|---:|---|---|---|---|---|---| | American Rescue Plan Act / ARPA | Not stated | FY2023 discussion | Funding to the General Fund for use in operations; revenue decreased due to decline in ARPA funding | Operating Support / Temporary Funding | Medium | ARPA is temporary federal support. Because the excerpt says it was used in General Fund operations, the key credit issue is whether recurring State revenues replaced this support after it declined. | Page 19 | | COVID-19-related federal grants to Unemployment Insurance Benefit Fund | $23.3 billion decrease in operating grants and contributions | FY2023 discussion | Payment of unemployment insurance claims related to the COVID-19 pandemic | Restricted Funding / Pass-Through or Benefit Funding | Medium | Large federal pandemic-related revenues declined materially. This appears tied to unemployment benefit claims rather than broad payroll or debt service support, but the size of the decrease affects reported revenues and may distort year-over-year financial comparisons. | Page 19 | | Federal FEMA reimbursement | Amount not stated | FY2023 discussion | Reimbursement delayed; higher non-personal service spending was partly driven by delay in federal FEMA reimbursement | Reimbursement Funding | Medium | FEMA reimbursement is generally timing-related, but delays can create budgetary or liquidity pressure. The excerpt does not state whether the underlying costs are recurring or one-time. | Page 21 | | Miscellaneous receipts: reimbursements | Amount not stated | FY2023 discussion | Miscellaneous receipts exceeded estimates due in part to reimbursements, along with investment income, abandoned property, and extraordinary settlements | Reimbursement Funding / Unclear | Low to Medium | Reimbursements may be nonrecurring or timing-related. The excerpt does not identify whether these reimbursements supported recurring operations or were restricted to specific costs. | Page 21 | | Federal grants generally | Not stated | FY2023 financial statement discussion | Federal grants finance governmental activities, along with taxes, lottery transfers, and bond proceeds | Unclear | Medium | Federal grants are a material funding category, but the excerpt does not separate recurring program aid from temporary pandemic aid. Analyst should isolate recurring federal aid from COVID/ARPA/FEMA-related support. | Page 14 | | Unrestricted grants and other revenues | $21.2 billion | FY2023 discussion | Paid for part of the “public benefit” portion of governmental activities, including investment earnings | Unclear / Operating Support | Medium | The excerpt identifies unrestricted grants and other revenues as supporting governmental activities. It does not specify whether these grants are recurring or temporary. If temporary grants are included, reported operating strength could overstate recurring capacity. | Page 18 | ## 7. Reported vs. Recurring Strength Implications The excerpt suggests that reported FY2023 financial results may differ from recurring credit strength because several federal or reimbursement-related items affected revenues and spending: - ARPA funding to the General Fund for operations declined. Page 19. - COVID-related federal grants in the Unemployment Insurance Benefit Fund declined by $23.3 billion. Page 19. - FEMA reimbursement timing affected spending. Page 21. - Miscellaneous receipts exceeded estimates due in part to reimbursements and extraordinary settlements. Page 21. The most important recurring-credit concern is the explicit statement that ARPA funding went to the General Fund for use in operations. Page 19. That creates a follow-up need to determine whether the State replaced temporary federal operating aid with recurring revenues, reduced expenditures, or used reserves or other nonrecurring resources. The COVID unemployment insurance funding appears more restricted or program-specific and may be less indicative of core operating dependence, but the magnitude can distort operating grant trends. Page 19. ## 8. Missing Information / Analyst Follow-Up Before a final investment thesis, the analyst should obtain: - Official Statement or preliminary official statement for the Series 2025A, 2025B, and 2025C bonds. - Exact par amounts by series. - Maturity schedule and aggregate debt service schedule. - Security pledge and legal authorization for the State GO bonds. - Constitutional or statutory debt limitations, if applicable. - Call and redemption provisions. - Refunding details for Series 2025C, including refunded maturities, escrow structure, and savings profile. - Current ratings and rating reports. - Recent audited financial statements beyond FY2023, if available. - Current financial plan and enacted budget. - General Fund balance, rainy day reserves, liquidity, and reserve policies. - Updated revenue performance, especially personal income tax, sales/use taxes, business taxes, and federal aid. - Breakdown of recurring vs. nonrecurring federal aid, including ARPA wind-down. - Debt affordability report and State-supported debt trends. - Pension and OPEB liability tables and contribution trends referenced in the table of contents. Pages 6-7. - General Debt Service Fund schedule referenced in the table of contents. Page 7. - Continuing disclosure filings and any material event notices. - Economic and demographic trend data, including employment, income, migration, and tax base performance. - Medicaid, education, transportation, and other major expenditure trend detail. ## 9. Preliminary Buy / Watch / Pass Implications **Preliminary implication: Watch.** The excerpt supports neither a