Boasting one of the highest in the nation, New York City received an “AA” mark for its bond credit rating after lingering factors from the COVID-19 pandemic caused it to fluctuate in previous years.

During the pandemic, the city dealt with financial losses and inflation, which in turn led to rising interest rates and increasing real estate debt. A general obligation bond, or “GO” bond, is a kind of bond issued by a local government and backed by its credit and taxes within an area. New York City issues GO bonds to real estate development projects.

In December 2020, the finance and insurance company Fitch Ratings reported that the city had approximately $1.39 billion GO real estate bonds and assigned an “AA-” rating, which was a downgrade from the previous rating of AA.

In a turnaround from a previous rating of “AA-,” the city’s GO real estate bonds, which are approximately worth $677.5 million, received an “AA” rating in a Feb. 17 report.

“New York City stands on soliday financial footing coming out of the pandemic, thanks to the vibrancy and resilience of our economy and the support of federal aid,” New York City Comptroller Brad Lander said in a press release, adding that as people “face uncertainty in the the global economy in the coming months, the City of New York is well positioned to sustain services, invest in our infrastructure, and foster better shared economic opportunity for New Yorkers.”

The comptroller’s office estimated that the city has over $7.6 million in total debt service from real estate projects and payments for this year. One way that New York City has addressed its total debt was by issuing $3.53 billion in GO bonds, allowing the city to refund its projects and repay its loans.

Other bonds, such as building aid revenue bonds, also received a high rating. Fitch Ratings said it issued an “AA” rating to the approximately $629 million in S-1 series building aid revenue bonds from the New York City Transitional Finance Authority.

Additionally, S&P Global Ratings also affirmed its positive “AA-” for the Hudson Yards Infrastructure Corp. in a Feb. 17 report. One of the city’s major development projects, Hudson Yards last received an “A+” grade from Fitch Ratings.

In its Feb. 17 report, a spokesperson for Fitch Rating said that it boosted “the ratings on obligations the city supports through its commitment to appropriate debt service” from “A+” to “AA-.”

The upgraded rating for New York City’s bonds indicates that the city is taking action to lower its debt. But, the city is doing so in the face of inflation, which resulted from the pandemic.

The U.S. Bureau of Labor Statistics reported a 0.8% increase in area prices in the city and 6% increase over the year in January. The closure rate for businesses in the city was 28% in July 2022, according to Crain’s New York Business. This was up eight percentage points from the 20% closure rate for the nation.

General expenses, which includes rent and utilities, and salaries were impacted by inflation. Consequently, local businesses accrued debt and were forced to close or leave the city, causing the city’s debt to increase during the pandemic.

New York City took action to minimize the risk of raised interest rates on businesses and development projects by diversifying it. In his office’s annual report on the city’s capital debt and obligations, Lander said the city’s gross debt consisted of “both fixed and variable rate debt, with the bulk of the debt in fixed borrowing.”

By the end of the 2022 fiscal year, the fixed rate debt had accounted for 91.8% of the city’s gross outstanding debt, according to the report.

“We’re proud to be announcing that [Fitch Ratings is] raising the rating because of the hard, but necessary choices this administration was willing to make,” New York City Mayor Adams said in a press release.

Editor’s Note: An earlier version of this article used outdated information. This article has been updated on March 9, using data published on Feb. 17.