OREANDA-NEWS. Fitch Ratings has assigned a 'AA' Long-Term rating to the following New York City adjustable rate general obligation (GO) bonds, fiscal 2017 series A:

--$200 million subseries A-4;

--$50 million subseries A-7.

The Rating Outlook is Stable.

The rating is being assigned in connection with the issuance of irrevocable letters of credit pursuant to reimbursement agreements with Citibank, N. A. (subseries A-4) and Bank of the West (subseries A-7).

SECURITY

The GO bonds are secured by a pledge of the city's full faith and credit and the levy by the city of ad valorem taxes (without limit as to rate or amount) on all real property within the city subject to taxation. The city is not subject to New York State's property tax cap.

KEY RATING DRIVERS

Exceptionally strong budget monitoring and controls have been in place since the city's fiscal crisis in the 1970s. Strong revenue-raising ability and positive economic prospects also contribute to sound overall credit quality and the expectation that the liability burden will not increase notably. The large long-term liability burden for the current rating level is an ongoing concern. Changes to the pension plan for newer employees should over time cause the pension liability to moderate. Fitch expects debt levels to be controlled by the city's longstanding policy cap on debt service to tax revenues.

Economic Resource Base

Fitch considers the city's unique economic profile, which centers on its identity as an international center for numerous industries and major tourist destination, to be a credit strength. The character of the New York City economy contributed to its relative employment stability during the recession and sound growth in recent years. The local economy (and operating budget) is still strongly linked to the financial sector, which accounts for approximately 27% of earnings according to 2013 data.

Revenue Framework: 'aaa' factor assessment

Revenue growth has been strong and shown little volatility. Future growth rates may be less robust given the slow shift of job growth away from the high-wage financial services sector to a more diverse mix, but Fitch expects revenue performance to remain strong. The city has strong ability to adjust property tax rates and a variety of fees and charges, although other important revenue sources (mainly income and sales taxes and state aid) are not within management's control.

Expenditure Framework: 'a' factor assessment

Carrying costs are sizable and many labor contracts are subject to binding arbitration, but the city has demonstrated adequate expenditure flexibility. Fitch expects the pace of spending growth to be similar to that of revenue growth over time.

Long-Term Liability Burden: 'a' factor assessment

Debt and pension liabilities are sizable and represent an elevated but still moderate burden in relation to the resource base. Debt needs will likely continue to remain significant and exceed the amount of outstanding debt that amortizes each year. The future trajectory of the liability burden will depend in part on whether economic growth matches the increase in debt levels, as Fitch expects pension liabilities to remain fairly stable. Large OPEB liabilities are likely to grow.

Operating Performance: 'aaa' factor assessment

The 'aaa' assessment reflects the city's tight budget monitoring and control as demonstrated by its ability to achieve consistent balance and manage out-year gaps. Growing budgetary reserves and expense prepayments along with adequate accumulated reserves and solid budgetary flexibility provide protection against cyclical downturns and unforeseen conditions. Budget oversight from a number of outside parties supplements the city's own careful and thorough planning and monitoring.

RATING SENSITIVITIES

STRONG BUDGET MANAGEMENT CRUCIAL: The rating is sensitive to the city's ability to continue to address budget imbalances and demonstrate financial flexibility through budgetary reserves and prepayments of future years' expenditures. Fitch expects financial flexibility to increase while the economy and revenues remain strong.

LONG-TERM LIABILITY CONTAINMENT: Fitch expects the burden of long-term liabilities on the budget to stay manageable. Notable growth in the budget burden associated with these liabilities would reduce overall financial flexibility and negatively affect the rating.