When Bill de Blasio was elected mayor of New York City, there was very real concern that he would spend his mornings collecting treasure from the Scrooge McDuck-esque money pool beneath City Hall, his lunch time freeing carriage horses, and then wile away his afternoons callously dumping gold coins onto the pavement of the city's poorest neighborhoods.
Since he took office though, the mayor has apparently shown himself to be a much more prudent money manager than many on Wall Street expected him to be.
“He’s spending but not overspending,” said Howard Cure, director of municipal credit research for Evercore Wealth Management LLC.
In fairness, de Blasio has been playing with house money left over from the objectively strong economic performance of his predecessor, Michael Bloomberg. Under Bloomberg, the city's economy bounced like an over-inflated spaldeen in the wake of the financial crisis, a reality that has allowed de Blasio to propose the kind of spending everyone was freaking about in the first place...
The mayor also introduced a separate ten-year capital plan of $83.8 billion. More than $22 billion of this will help fund “One New York”, his grand agenda for fighting poverty and making the city more sustainable, unveiled last month. About $7.5 billion will be directed toward building or preserving 200,000 units of affordable housing, and another $1.8 billion will be used to retrofit city-owned buildings to lower greenhouse-gas emissions (part of his plan to lower city emissions by 80% by 2050). To divert more rubbish from landfills, Mr de Blasio plans to invest $37m into expanding a compost pilot programme for all New Yorkers. Nearly $2 billion will be spent on flood mitigation, particularly in a flood-prone area of Queens.
How's he gonna pay for all this hippie stuff, you ask?
Well, some if it will come from bonds, my man. Groovy bonds for groovy things.
To help reach this goal, the New York City Housing Development Corporation (HDC) expects to fund nearly a quarter of that amount (or $11 billion) with its inaugural Sustainable Neighborhood Bonds transaction under its Multi-Family Housing Revenue Bonds program.
This is the first social bond for affordable housing in the United States.
But now you're asking, who in their right mind would buy a bond issued by a 6'5" former Sandinista that operates to the political left of your hippie nephew, Calico (née Doug)?
Well, everyone apparently.
As New York sold $916 million of fixed-rate debt Tuesday, buyers accepted yields of 2.66 percent on tax-exempt 10-year bonds, just 0.35 percentage point more than top-rated securities, according to data compiled by Bloomberg. That gap has dropped from as much as 0.6 percentage point four weeks after de Blasio took office in January 2014, reflecting buyers’ improving confidence.
That kind of bond performance is forcing many of de Blasio's financier critics to wipe off their monocles and give him a second look.
“The mayor’s use of reserves, it’s excellent,” said Carol Kellermann, president of the Citizens Budget Commission, a business-sponsored group that advocates for fiscal restraint.
De Blasio is also drwing kudos from Wall Streeters and budget watchdogs for his growing propensity to stash cash away for rainy days.
De Blasio has salted away $500 million in a capital reserve fund to pay off debt if a recession causes revenue to slide. The mayor has also put $2.6 billion in a trust fund to cover retirees’ health-care benefits, with another $1 billion set aside to cover future deficits.
So, turns out that Bill de Blasio isn't exactly the freewheeling pinko that Wall Street feared he would be, but the city's debt outstanding situation appears to be increasingly alarming and the idea of a coming "market correction" soils more undergarments in NYC than anywhere else. Now that de Blasio is less able to exceed the low bar of Wall Street's expectations, he might need to find some new tricks.