The spiraling cost of caring for the surging influx of illegal immigrants and asylum seekers could affect the credit ratings of three large American cities, S&P Global Ratings said in a new report.
The S&P report concerns three cities: New York City, Chicago, and Denver. Since 2022, the three self-proclaimed “sanctuary” cities have received more than 200,000 unvetted immigrants—many entering illegally outside a Port of Entry—from the southern border, including a combined 83,600 that arrived on buses chartered by Texas Gov. Greg Abbott as part of his initiative to give the big cities a taste of what border communities are going through.
“As the number of migrants and asylum seekers rises, the budgetary strain on these cities has become increasingly visible,” the S&P strategists wrote.
New York City, which has an AA credit rating, reported that it has taken in more than 175,300 unvetted immigrants since April 2022. As of this February, the city has more than 65,800 individuals in its care, partly thanks to the “right to shelter” law that guarantees a bed to anyone who is in need.
In Fiscal Year 2023, New York City spent $1.45 billion on accommodating the needs of new arrivals, and expects to spend a combined $9.1 billion to provide housing for them in Fiscal Years 2024 and 2025. As expenses grow, the city has started to find ways to cut costs through tighter management of services.
“To accommodate rising program costs, NYC is implementing several cost-saving measures, including provisions for single migrants and asylum seekers to reapply for shelter after 30 days, and for families after 60 days,” the report noted.
New York City Mayor Eric Adams, who has repeatedly warned that the unending flow of migrants will “destroy” the city, on Tuesday condemned a state bill seeking to ban the 30-day and 60-day stay limits.
“Did the lawmakers who introduced this bill ... go to Washington and communicate that this should not be happening to our city? This is a national crisis that has been placed in New York,” Mr. Adams said at a press briefing. “If we followed that theory, we would have had 177,000 migrants and asylum seekers still in our care.”
Chicago, with a BBB+ credit rating, has a “Welcoming City” ordinance and claims to have a responsibility to provide unvetted immigrants access to shelter, food, and medical care while they stay in the city. It saw the arrival of under 40,000 unvetted immigrants between August 2022 and January 2024, with over 80 percent coming via bus or airplane from Texas.
As of this February, there were 13,250 migrants in Chicago’s shelters. The relocation of the new arrivals cost the Windy City $275 million in Fiscal Year 2023, although the city’s 2024 budget only set aside $150 million to such expenses.
“Currently, actually every day, we’re on meetings; on calls with the state and with the county to figure out what the long-term plan is to get through the calendar year together,” Cristina Pacione-Zayas, Chicago Mayor Brandon Johnson’s deputy chief of staff, said in a Feb. 9 interview with CBS News about paying to host unvetted immigrants.
“If support from the state and federal governments does not materialize as expected, the impact on Chicago’s bottom line could be sizable,” the S&P strategists commented. “How the city manages these pressures, particularly when faced with high costs for its underfunded pension programs, could have a longer-term effect on its credit quality.”
Denver, meanwhile, is a smaller city with a AAA credit rating, yet the impact of the unvetted immigration crisis is pronounced.
According to the report, Denver has provided services to more than 38,400 newcomers since the end of 2022. Given its full-time population of about 749,974, this makes Denver the recipient of the highest number of unvetted immigrants per capita for a non-border city.
For Fiscal Year 2023, Denver spent a total of $46 million across all programs supporting unvetted immigrants, including helping them file asylum claims and get shelter. Only one month into Fiscal Year 2024, however, the city has identified significant cost overruns related to those programs, contributing to a potential year-end operating deficit.
According to Denver Mayor Mike Johnston, the city would have to cut its services in order to make up for the $180 million shortfall, since at this point, there is no federal help in sight.
“We were hopeful that with federal support, those reductions might be smaller than we initially feared,” Mr. Johnston said last week. “Now, without federal support, we have to start operating towards that $180 million gap.”
Despite the current budgetary challenge, the S&P said it considers Denver’s “historically very strong reserve and liquidity cushion” as a “positive credit factor” to navigate near-term difficulties.
The mayors of all three cities are now asking their state governments as well as the Biden administration to help alleviate their fiscal burden. The S&P said it is unlikely that federal assistance will expand beyond its current scale.
In December 2022, the Bipartisan Year-End Omnibus spending bill authorized an $800 million grant program through the Federal Emergency Management Agency (FEMA), the report noted. Of those funds, New York City received more than $130 million in 2023. Chicago asked FEMA for between $39 million and $67 million, and received $43 million.
“Given current political dynamics in Washington D.C. and the upcoming presidential election, we do not consider additional federal support likely,” the strategists wrote. “Therefore, cities on the front line of migrant and asylum seeker inflows will have to face the uncertainty of rising costs without a guarantee of revenues to offset the expenditures.”
