This month, the City issued $1.56 billion in general obligation bonds, including our first “tender solicitation.” It resulted in $108 million of savings for New York City and was one of the municipal bond market's most successful sales in New York City history! 

In challenging times of high interest rates and economic uncertainty, the Public Finance Team in the Office of the Comptroller is constantly looking at market conditions to inform our strategy on saving money and investing in infrastructure through debt management and bond issuances. 

But you shouldn’t have to be an investor or city official to understand how it all works. Let’s take a closer look at the important role that bonds play to fund the infrastructure that New Yorkers use every day. 

And please take a moment to watch and share our new “bond film” explaining how bonds work and the innovative tender offer strategy we used to save the City of New York money.

What is a general obligation bond?

A general obligation (GO) bond is how New York City raises money for infrastructure projects. 

A bond represents borrowing or a loan from one party to another. So, when the City of New York issues a GO bond, it's borrowing money from investors to pay for city infrastructure or to refinance existing debt. The bond represents the right to collect the repayment on that loan. The City repays principal of the original amount borrowed, plus interest on it, until all of it is repaid. 

What do municipal bonds fund?

Bonds finance the construction and maintenance of critical city infrastructure – from our roads and bridges to our parks and our schools. 

The very first municipal bond that New York City issued back in 1812 to finance canal construction. For hundreds of years since, we've been using municipal bonds to finance the infrastructure that makes city life possible. 

A New York City bond issued in 1969 by Comptroller Mario Procaccino and Mayor John Lindsay.

What’s a tender solicitation?

Over the past two decades, interest rates have hit historic lows, enabling the City to save money every time we conduct a bond sale. But in this moment of high interest rates, our Public Finance Team has been looking for creative new ways to save the city money when refinancing our debt. That’s where the tender solicitation comes in! 

The tender solicitation (or offer) is a public, open invitation by a prospective acquirer to all stockholders. In a tender offer, issuers – in this case, the City of New York – go to the market and ask investors whether they're interested in selling back their bonds. There is an auction, and then the City of New York decides what to buy and at what price. 

As part of the refinancing, we identified the bonds where a tender offer gave us the most savings. The result is $108 million of savings for New York City over the 4 year financial plan, with $26 million coming from the tender offer. 

Want to learn more? Take a moment to watch and share our latest video explaining what how bonds work in New York City.

Thanks, 

Brad