NEW YORK (S&P Global Ratings) Nov. 3, 2021--As predicted by opinion polls, Eric Adams was elected New York City's mayor and will take office on Jan. 1, 2022. S&P Global Ratings' base case expects only modest changes in the city's day-to-day operations under his leadership, resulting in no near-term impact to the general obligation rating (AA/Stable). However, we have previously commented on political discord between the governor and mayor, as well as with labor groups, that led to difficulties in prioritizing service demands and expenditures. As a result, we view the change as potentially providing a clean slate relative to aspects of the city's governance under our environmental, social, and governance (ESG) factors. While the city's credit profile already benefits from risk management and oversight provisions under the Financial Emergency Act like a balanced budget requirement, we have viewed other aspects of its governance as mixed, similar to those of large peers.
We believe under the new administration, there is potential for certain governance structure aspects to evolve, including the following:
- New leaders at the helm of New York State and the city have an opportunity to reset relations and collaboratively oversee initiatives that ensure the state's economic engine remains a global business and tourist destination. In addition, as a former state senator, Adams could leverage his network in Albany to benefit the city's financial plan, including advocating for receipt of additional state aid provided in fiscal 2022 that continues through the remainder of the forecast. In our view, the previous strained relationship between the governor and mayor sometimes overshadowed what was best for city residents and ultimately its economy. For example, at the onset of the COVID-19 pandemic, consistent messaging may have allowed residents and businesses to improve planning for the disruption.
- The new mayor's background as Brooklyn Borough president provides insights into the city's operations and challenges, which could accelerate his transition into the role and bolster already strong planning practices. For example, while the city is ahead of peers in planning for environmental risks, we believe the outcomes from the COP26 summit may require even more austere greenhouse gas emissions reductions to limit global warming to 1.5 degrees Celsius, which will require successful partnering with federal, state, and business leaders.
- As a former police chief, the mayor may be able to facilitate an improved relationship with the New York City Police Department and labor groups generally. Although labor relations are typically considered under our human capital social factors, his background and prior advocacy for police reform could reset the narrative on policing practices and contract negotiations and potentially strengthen the city's risk management culture.
While New York City's leadership team successfully navigated the past 18 months, largely viewed as one of the toughest periods in recent history, the new mayor will face various issues that could define the city's economic recovery. They include balancing the financial plan beyond fiscal 2024 after federal stimulus funds are exhausted, motivating certain groups to agree to the employee vaccine mandate, and supporting business directives to accelerate return-to-office that bolsters demand for vacant office space, thereby restoring the tax base and property tax trajectory.
This report does not constitute a rating action.
|Primary Credit Analyst:||Nora G Wittstruck, New York + (212) 438-8589;|
|Secondary Contact:||Felix Winnekens, New York + 1 (212) 438 0313;|
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