Daniel Zhao

In a sign of fiscal progress for the city and for newly re-elected mayor Justin Elicker, the S&P has raised its long-term debt rating and the underlying rating on New Haven’s General Obligation Bonds from ‘BBB+’ to ‘A-’, indicating that the city’s $54.6 million series of 2023 general obligation bonds have a stable outlook.

Municipal bonds are debt securities issued by states, cities and counties to finance general obligations and infrastructural projects, such as the construction of schools and highways. 

“S&P’s bond rating upgrade is another important validation of the financial path we’re on as a city and the progress we’re making from the budgetary reforms we’ve put in place in recent years,” said Elicker. “Through a combination of increased revenues, responsible spending, proper forecasting, limited borrowing and balanced budgets, we’ve been able to provide residents with the essential city services they need today while also improving the city’s long-term financial health and outlook in the future.” 

The S&P, which is one of the country’s leading bond-rating agencies — along with Moody’s and Fitch — uses a series of grades to determine whether the credit rating is either investment grade, speculative or high yield. 

New Haven’s improved rating follows three years of conservative budgeting to limit excess spending and balance the deficit. 

The Elicker administration cited increased city revenue as a reason for its optimism. Two drivers of city income — the doubling of New Haven’s state Payment In-Lieu of Taxes funding from $41 million to $91 million annually and the increase in Yale’s annual voluntary city contribution from $13 million to $23 million — have helped New Haven generate consistent revenue streams. 

Michael Piscitelli, the economic development administrator for New Haven, discussed the measures the city has taken to reach this improved grade, such as limiting excess spending. Piscitelli noted pensions, health care benefits and the general cost of running the government as costs the city has been addressing. 

After reviewing the city’s self-assessed fiscal health, the rating agency used its own research and data to reach a final conclusion. 

Piscitelli said that the city’s completion of recent infrastructure projects and residential housing units intimate its fiscal strength and ability to meet debt obligations.

The S&P report, which focused extensively on the city’s fiscal policy, emphasized the importance of New Haven’s budget.  

“The stable outlook reflects S&P Global Ratings’ view of New Haven’s stabilized budgetary conditions and expectation that management will likely continue to budget conservatively and make timely budget adjustments if necessary during the two-year outlook,” the report from S&P reads.

Despite a strong trend so far, the city is not entirely in the clear. There are still some underlying concerns raised by the S&P that could cause the city to return to its low ratings of years past. 

The S&P called into question the city’s “social capital factors,” like economic inequality, which pose a risk to its economy and finances. The report also noted that economic growth is concentrated in just a few parts of New Haven.

Additionally, given the significant number of “tax-exempt” institutions and properties, some of which are owned by Yale, New Haven has a high reliance on state aid. This in particular “could constrain the affordability of tax increases” and exacerbate long-term budgetary risks, per the report. 

The S&P does, however, believe that the city has put the right measures in place to mitigate these potential causes for concern. 

Following this achievement, Piscitelli thinks that New Haven is now in a position to be on par and compete with cities in New England and nationally to attract new residents. 

“When people are looking at investment decisions or life decisions, asking where to move or live, then New Haven is a competitive destination,” Piscitelli said. 

Recently, New Haven has used the proceeds from bond issuances to fund public infrastructure projects, although the News could not confirm what new projects this rating upgrade may enable. 

In 2021, Fitch, another prominent rating agency, raised New Haven’s grade from BBB to BBB+.