By Janet H. Cho

Moody's Ratings has revised New York City's credit rating to "negative" from "stable," because of "sizable and persistent projected budget gaps" related to higher spending projections.

The ratings company affirmed its "Aa2" issuer rating, saying that despite the city's "still-favorable economic conditions," the projected budget gaps signal underlying structural imbalance and less financial flexibility.

Moody's said the revised outlook reflects updated spending projections, which could lead to larger multi-year budget gaps than previously forecast. "That the city projects large and persistent imbalances under still-favorable economic and revenue conditions highlights the extent of its underlying structural budget challenges," the agency said.

New York City Comptroller Mark Levine called the negative outlook "a sobering wake-up call about the fiscal challenges ahead for us," noting that it is the city's first negative outlook since the Covid-19 crisis.

"The underlying challenge is clear: New York City is currently spending more than it is bringing in," Levine said in a statement after Moody's made the call. "The fact that the preliminary budget achieves balance only by drawing down reserves underscores the need for a more sustainable fiscal plan."

Levine said the city's credit rating remains strong and that its bonds remain safe and secure. "With an economy--and tax revenues--that continue to grow, the City's present financial position is still solid."

The mayor's office couldn't immediately be reached.

Moody's said the Aa2 rating reflects the city's "very large and diverse economic base, which continues to support solid revenue growth and provides substantial credit strength," noting that employment remains near historic highs, assessed values have continued expanding despite some persistent commercial real estate challenges, and population trends reflect postpandemic recovery.

Among the city's competitive advantages, the ratings firm cited "a deep and highly skilled labor force, global financial and cultural prominence, strong higher education and healthcare institutions, and extensive domestic and international transportation links-underpin long-term economic resilience and provide substantial capacity to generate revenue across economic cycles."

Moody's said the Aa2 rating on the city's general obligation bonds is the same as New York City's issuer rating given the "city's full faith and credit pledge to pay the bonds."

Moody's said the ratings could be upgraded if the city maintains sustainable, structurally balanced budgets, builds stronger reserves and a mechanism to make regular deposits to its Revenue Stabilization Fund, and reduces its fixed costs ratio closer to an Aa median of about 11%.

Levine said the negative outlook underscores the need for a budget based on "realistic revenue projections," with sustainable spending growth, "fair funding from Albany," and strengthening city reserves ahead of potential economic risks next year.

New York City is the nation's largest city by population, with an estimated 8.48 million residents as of July 2024, and by the size of its economy, Moody's said. With a real gross domestic product of $1.1 trillion, the city's GDP is larger than all but four states.

Write to Janet H. Cho at janet.cho@dowjones.com

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March 11, 2026 17:59 ET (21:59 GMT)

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