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New York City, November 1975 - July 1976 (5)
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New York City, November 1975 - July 1976 (5)
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The original documents are located in Box 79, folder "New York City, November 1975
- July 1976 (5)" of the L. William Seidman Files at the Gerald R. Ford Presidential
Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald R. Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 79 of the L. William Seidman Files at the Gerald R. Ford Presidential Library
EMBARGOED FOR RELEASE
NOVEMBER 26, 1975
UNTIL 7:31 EST
Office of the White House Press Secretary
GERAL
LIBRARY
THE WHITE HOUSE
STATEMENT BY THE PRESIDENT
I would like to comment briefly on recent developments in New York. Since
early this year, and particularly in the past few weeks, the leaders of New
York State and of New York City have been working to overcome the financial
difficulties of the City which, as a result of many years of unsound fiscal
practices, unbalanced budgets and increased borrowing, threatened to bring
about municipal bankruptcy of an unprecedented magnitude.
As you know, I have been steadfastly opposed to any Federal help for New York
City which would permit them to avoid responsibility for managing their own
affairs. I will not allow the taxpayers of other States and cities to pay the
price of New York's past political errors. It is important to all of us that
the fiscal integrity of New York City be restored and that the personal security
of eight million Americans in New York City be fully assured.
It has always been my hope that the leaders of New York would, when the chips
were down, face up to their responsibilities and take the tough decisions that
the facts of the situation require. That is still my hope, and I must say that it
is much, much closer to reality today than it was last Spring. I have quite
frankly been surprised that they have come as far as they have. I doubted that
they would act unless ordered to do so by a Federal Court. Only in the last
month, after I made it clear that New York would have to solve its fundamental
financial problems without the help of the Federal taxpayer, has there been a
concerted effort to put the finances of the City and the State on a sound basis.
They have today informed me of the specifics of New York's self-help program.
This includes:
One, meaningful spending cuts have been approved to reduce the cost of running
the City; Two, more than $200 million in new taxes have been voted; Three,
payments to the City's noteholders will be postponed and interest payments will
be reduced through passage of legislation by New York State; Four, banks and
other large institutions have agreed to wait to collect on their loans and to
accept lower interest rates; Five, for the first time in years, municipal em-
ployees will be required to bear part of the cost of their pension contributions
and other reforms will be made in thepension funds; Six, the City pension system
is to provide additional loans of up to $2.5 billion to the City. All of these
steps--adding up to $4 billion--are part of an effort to provide financing and
to bring the City's budget into balance by the fiscal year starting July 1, 1977.
- MORE -
-2-
Only a few months ago, we were told that all these reforms were impossible and
could not be accomplished by New York alone. Today they are being done.
This is a realistic program. I want to commend all those involved in New York
City and New York State for their constructive efforts to date. I have been
closely watching their progress in meeting their problem. However, in the
next few months, New York City will still lack enough funds to cover its day-to-day
operating expenses.
This problem is caused by the City having to pay its bills on a daily basis
throughout the year, while the bulk of its revenues are received during the spring.
Most cities are able to borrow short-term funds to cover these needs, tra-
ditionally repaying them within their fiscal year.
Because the private credit markets may remain closed to them, representatives
of New York have informed my Administration that they have acted in good faith
but that they still need to borrow money on a short-term basis for a period of
time each of the next two years in order to provide essential services to the
eight million Americans who live in the Nation's largest city.
Therefore, I have decided to ask the Congress when it returns from recess for
authority to provide a temporary line of credit to the State of New York to enable
it to supply seasonal financing of essential services for the people of New
York City. There will be stringent conditions. Funds would be loaned to the
State on a seasonal basis, normally from July through March to be repaid with
interest in April, May and June when the bulk of its revenues come in. All
Federal loans would be repaid in full at the end of each year. The re will be
no cost to the rest of the taxpayers of the United States.
This is only the beginning of New York's recovery process and not the end. New
York officials must continue to accept primary responsibility. There must be
no misunderstanding of my position. If local parties fail to carry out their plan,
I am prepared to stop even this seasonal Federal assistance. I again ask the
Congress promptly to amend the Federal bankruptcy laws so that, if the New York
plan fails, there will be an orderly procedure available.
A fundamental issue is involved here: sound fiscal management is an imperative
of self-government. I trust we have all learned the hard lesson that no individual,
no family, no business, no city, no State and no Nation can go on indefinitely
spending more money than it takes in.
As we count our Thanksgiving blessings, we recall that Americans have always
believed in helping those who help themselves. New York has finally taken the
tough decisions it had to take to help itself. In making the required sacrifices,
the people of New York have earned the encouragement of the rest of the
country.
#
#
#
GERALD
STATE OF NEW YORK
EXECUTIVE CHAMBER
ALBANY 12224
HUGH L. CAREY
GOVERNOR
November 26, 1975
Dear Mr. President:
On behalf of the citizens of the City and State of New
York, I am pleased to inform you that the certain financial and
legal requirements requested as a precondition to any Federal
involvement in the fiscal crisis of New York City have been
accomplished, and achieved in full. Whatever decision you
make, in meeting your responsibilities, I must at the outset
commend to you the efforts of the people of New York. In an
unprecedented display of unity and purpose, trade unions, com-
mercial banks and, especially, a bipartisan coalition of elected
representatives, have succeeded in producing a result that will
prove memorable, - indeed, a model to others for years to come.
These achievements of New Yorkers are worthy in their own right,
and while I write to bring their efforts and sacrifices to your
attention, it 1s only proper that I use this opportunity to
express my deepest appreciation and respect to all the parties
involved.
Last evening, the Legislature of the State of New York
enacted new taxes of $200 million raised in and for the City of
New York. This was a general condition included in Federal loan
guarantee bills for New York City pending in both houses of
Congress and in our own discussions with members of your Admin-
istration. At the same time the State's Emergency Financial
Control Board for New York City met and adopted the necessary
resolutions effectuating the new taxes. In addition, the
Legislature enacted legislation that increases employee contri-
butions to the City's retirement systems, This legislation was
passed with union support in accordance with their desire
to meet their understandings with your Administration. These
acts were painful for all concerned, but undertaken in the
common hope of avoiding the chaos of default.
GENALD FORD LIBRARY
The President
- 2 -
November 26, 1975
In that same mixture of trust and sacrifice, the trustees
of the five City employees' retirement systems voted to purchase
additional bonds of the City or New York State Municipal Assistance
Corporation in the principal amount of $2,530,000,000 between
December 1, 1975 and June 30, 1978, conditioned principally upon
the passage of appropriate Federal legislation.
Finally, the Municipal Assistance Corporation, in connection
with its offer to exchange certain of its bonds for certain outstand-
ing short-term obligations of the City, has secured the agreement
of the eleven New York Clearing House Banks and City pension funds
not to tender their notes for exchange.
The agreement provides that $849.2 million in City notes
held by the eleven banks and five City pension funds will be
converted into a ten year City obligation at 6% interest.
Further, $200 million in City notes held by City Sinking
Funds, will be converted into City obligations on which there will
be no net amortization during the three-year moratorium period.
In addition, all MAC obligations now held by the banks,
$991.8 million, and by the pension funds, $665 million, irrespective
of their interest rates and maturities, will be exchanged for ten-
year MAC obligations at 8% interest.
These agreements, too, are conditioned upon the enactment
of appropriate Federal legislation.
Over the past weeks and months, Mr. President, I, on
behalf of the City and State, have accepted conditions laid down
by Federal authorities. Knowing full well the people of New York,
their resiliency and ability to perform in the face of a common
crisis, with complete trust I have not hesitated to take a
condition and turn it into a commitment. Now these commitments
have been fulfilled and with the same trust we await the response
of the Federal Government.
Sincerely,
The President
The White House
GERALD FORD JBHART
Emergency Financial Control Board
November 26, 1975
RESOLVED, that the taxes imposed by Chapter 887 of the Laws of
1975 are necessary; and be it further
RESOLVED, that the revenues derived from those taxes shall be
expended in accordance with the provisions of the New York
State Financial Emergency Act for the City of New York.
The Board hereby directs the Chairman to immediately provide
a copy of the above resolution to the appropriate officers
named in said Chapter.
GERALD FORD
11/26/75
we
/ Q.
What sacrifices do the long-term bondholders of New York
make under this arrangement?
P
Q.
Haven't you been less than candid in stating your position as
no help without default when you intended all along to give aid
under the Carey Plan?
3
Q.
Did you insist on New York passing taxes as the price of
Federal aid?
4 Q.
What about New York State's problem -- aren't you going to
have to give them financial assistance.
5/ Q.
How can you call these seasonal loans when they are outstanding
for 11 months of the year?
6
Q.
Do you consider that New York has defaulted under the plan they
have presented?
Q.
Isn't your plan accomplishable under the legislation already on
the Hill, so will you now support those bills?
8
a
What do you mean by a bailout and why isn't this one?
&
FORD & LIBRARY GERALI
9 Q.
Haven't you recommended help for other than essential
services?
10 Q.
What assurance do you have that New York will carry out its
plans?
11
Q.
Are you going to give loans or guarantees to the city?
12 Q.
What is the cost to the Federal Government and taxpayers
V
throughout the country of this proposed aid?
GERALD FORD
nge
11/26/75
The President will make a short statement on New York
City tonight at 7:30 followed by a Press Conference. He will
state that in the last month New York has taken a number of
important actions to cure their financial situation, including
budget cuts, financing from pension plans, moratorium on New
York City notes, deferral of debt by banks, and new City taxes.
The President believes that these strong actions would not have
taken place without the firm stand he has taken. But these
actions have been determined by New York officials without
direction from the Federal government. As a result of the work
done in the last month, New York now has a plan which will, if
carried out, put them on a financially sound basis.
The only financing which they lack is the funds for short-
term seasonal borrowings. This type of borrowing is used by
most cities and must be repaid within their fiscal year. New York,
however, is unable to use private markets for such seasonal
financing due to the way they have previously handled their finances.
The President will recommend legislation, narrowly defined
to allow short-term financial help to the City and requiring
that it be paid off at the end of each fiscal year. The amount
of such help at its peak during the year will be approximately
$1.3 billion in the first year and $2.2 billion in the second
year. The loans will be made on a month-by-month basis so the
U.S. Government can be sure the City is following its plan or
no additional loans will be made.
Based on this help, essential services will be able to be
maintained in New York and the actions of the City will have the
essential effect of default with respect to the interests of the
various parties involved.
The President will make a short statement on nationwide
television tonight at 7:30 p.m. on New York City. A Press
Conference will follow. He will say that in the last month New York
has taken a number of important actions to cure their financial
situation, including budget cuts, financing from pension plans,
moratorium on New York City notes, deferral of debt by banks, and
new City taxes. These actions would not have taken place without
the firm stand the President has taken. They have been determined
by New York officials without direction from the Federal government.
The actions of the City will have the essential effect of default
with respect to the interests of the various parties involved. As
a result of the work done in the last month, New York now has a plan
which will, if carried out, put them on a financially sound basis.
The only financing which they lack is the funds for short-term
seasonal borrowings. This type of borrowing is used by most cities
and must be repaid within their fiscal year. New York, however, is
unable to use private markets for such seasonal financing due to
the way they have previously handled their finances.
The President will recommend legislation, narrowly defined to
allow short-term financial help by the State to the City so that
essential services can be maintained. The loans must be paid off
at the end of each fiscal year. The amount of such help at its
peak during the year will be approximately $1.3 billion in the first
year and $2.2 billion in the second year. The loans will be made
on a month-by-month basis so the U.S. Government can be sure the
City is following its plan or no additional loans will be made.
11/26/75 - 1:45 p.m.
DEPARTMENT
OF
NYC
HOUSING
THE SECRETARY OF HOUSING AND URBAN DEVELOPMENT
AND
WASHINGTON, D. C.. 20410
URBAN
November 26, 1975
MEMORANDUM FOR: L. William Seidman
Assistant to The President for Economic Affairs
SUBJECT:
New York State Fiscal Problems/Possible Federal
Assistance
Please find attached a memo to me from Daniel P. Kearney,
President of the Government National Mortgage Association,
regarding the fiscal problems of New York State. The memo
details a discussion held on Tuesday, November 25, with
Mr. Peter Goldmark, Budget Director of the State of New York.
The discussion was initiated by Mr. Goldmark at the suggestion
of Treasury officials.
Mr. Goldmark described the fiscal problems faced by the
State with respect to its independent agencies in general,
and the New York Housing Finance Agency in particular. The
availability of Federal mortgage purchase programs under the
auspices of GNMA to assist the New York HFA were discussed
with Mr. Goldmark on an exploratory basis. The concept of
such assistance and the problems relating thereto are out-
lined in Mr. Kearney's memo.
Mr. Goldmark indicated that if Federal assistance were
to be forthcoming, it would be necessary to have an affirma-
tive response no later than the 8th of December. Beginning
on Monday next, i.e., December 1, Mr. Goldmark will be seeking
commitments from other participants in the overall plan and
will be pressing the Administration for an appropriate
characterization of the Administration receptivity to the
concept of Federal assistance.
I have been briefed by Mr. Kearney concerning the outlines
of any assistance that could be provided under the auspices
of GNMA. Before any arm of the Administration proceeds, I think
it wise that views be elicited from and perhaps a course of
action be jointly planned by the Treasury, the Economic Policy
Board, and the Office of Management and Budget.
GERATE FORD JARARY
2
At the suggestion of the OMB, I am, therefore, trans-
mitting this memo to you for review by the Economic Policy
Board. Your earliest consideration of the concept would
be advisable. If the response is to be negative, a prompt
decision is necessary. A delayed response may encourage
unwarranted expectations and could generate a momentum
which would ultimately leave an affirmative response as
the only viable option.
We stand ready to provide such additional materials
and information as you and the Board may require.
CC: Mr. William E. Simon
Mr. James T. Lynn
Mr. Alan Greenspan
Mr. James M. Cannon
DEPARTMENT
OF
HOUSING
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
AND
WASHINGTON, D.C. 20411
IN REPLY REFER TO:
November 26, 1975
SUBJECT:
New York State Fiscal Problem/Possible
GNMA Assistance
FROM:
Daniel P. Kearney
10K
President, GNMA
I.
Background
The fiscal crisis in New York City has received much attention
during the past six months, particularly as regards the
federal assistance, if any, to be provided in resolving
New York City's fiscal problems. Considerably less attention
has been devoted to the fiscal problem of the State of
New York and the fiscal solvency of its quasi-independent
state agencies.
Now that a plan to resolve the New York City problem appears
to be reaching fruition, New York State Budget officials have
been turning their attention to their own fiscal problems.
At the suggestion of Treasury Department officials, the Budget
Director of the State of New York, Peter Goldmark, met with me
on Tuesday, November 25 to explore possible GNMA assistance in
resolving the state and independent agency fiscal problem.
Mr. Goldmark stated that the State has a $6.5 billion problem,
$4 billion of which is connected with New York State notes
which mature in the first half of 1976 and $2.5 billion which
is connected with the quasi-independent state agencies.
Mr. Goldmark was particularly interested in exploring what
GNMA programs might be available to assist in the financing
problems of the New York State Housing Finance Agency, the
largest single quasi-independent state agency.
He prefaced the discussion by saying that it would be necessary
to have developed the "plan" for the state and independent
agencies by December 12. On December 15th, two independent
state agencies have a $250 million note maturing.
2
In response I outlined the available GNMA programs. The
mortgage-backed securities program whereby GNMA guarantees
a security backed by FHA-insured mortgages was quickly
dismissed as a viable option because of the time that would
be consumed to procure FHA mortgage insurance. Mr. Goldmark
was advised that GNMA did have the statutory authority to
guarantee conventional loans, but that the Administration
had not anticipated that this program would be implemented
and that securing quick Administration approval of such a
program would be difficult.
I then turned to a discussion of our mortgage purchase
programs -- the so-called tandem program. I described the
Emergency Housing Act of 1975, which conferred on GNMA the
authority to purchase conventional multifamily mortgage
loans bearing an interest rate of 7-1/2 percent, such mort-
gages to not exceed 75 percent of the "value", or 80 percent
of "value" with a qualified mortgage insurer. I advised him
that it had been widely speculated that as much as $3 billion
of a Congressionally authorized $5 billion in mortgage pur-
chase authority would be made available in the near future
for multifamily mortgage purchase program and that a signif-
icant percentage of this might be made available for conven-
tional loans that would be underwritten by the Federal
National Mortgage Association and the Federal Home Loan
Mortgage Corporation. Since this option seemed to be the
most promising, the bulk of our discussion was concentrated
on the tandem approach.
II.
Potential Problems with the Mortgage Purchase Approach
As this option was discussed in greater detail, I described
the following set of concerns which present obstacles to the
implementation of this form of assistance.
Under existing statutory authority, GNMA is precluded from
purchasing mortgages from any state or local instrumentality.
I admitted that in fact mortgages originated by state agencies
have been sold to GNMA utilizing a private mortgage banker
or commercial bank as an intermediary. There may be a
difference of degree and foreknowledge however when we
knowingly participate in an arrangement that circumvents the
statutory prohibition.
GERALD
3
On the other hand, there has been Congressional discussion
of amending the statutory authority to permit GNMA to buy
mortgages directly from state and local instrumentalities.
While this approach might be desirable because it obtains
Congressional approval for the assistance to the State of
New York, it has a very undesirable result of opening the
door for GNMA to buy mortgages from the many other state
agencies. For policy reasons GNMA does not wish to do this
in the absence of FHA insurance. This concern is related
to the question of "differentiation" which was the second
concern I expressed.
I advised Mr. Goldmark that it would be extremely desirable
and indeed necessary to distinguish any mortgage purchase
assistance to a New York State Agency in such a way so as
to make it unlikely that other agencies would qualify for
similar assistance. In that respect we discussed at length
an agreement whereby the State of New York would agree to
repurchase any loans that became delinquent. I insisted
that the "mechanism" be something more than a "moral obliga-
tion" as that term is used in the financial community. He
responded by saying that a tax "trigger" that would generate
funds to purchase these mortgages was not a politically
viable solution for the Governor; however, he suggested that
a mechanism similar to that employed in connection with the
resolution of the UDC difficulties could be possible. In
concept, this mechanism would have the New York State
legislature pass a resolution whereby they would agree to
repurchase any delinquent and/or defaulted loans up to a
maximum specified amount per year for as many years as
necessary to provide coverage for the entire portfolio of
mortgages purchased by GNMA. I suggested that such an
agreement might be acceptable to the Administration since
it would be unlikely that other states would be prepared to
make such an agreement in the absence of a fiscal crisis
similar to that which presently obtains in New York.
Mr. Goldmark also agreed in principle that the state agencies
would undertake no more construction until its traditional
financial sources had reappeared.
The third problem that I expressed was that of the budget.
If New York assistance were to be forthcoming, it would
require the President to release a portion of the remaining
LIBRARY
4
$2 billion of Congressional authorization for mortgage
purchase programs. I advised that this presented some
considerable political problem for the Administration
since it was anticipated by Congress that these funds
would be used to support "new construction" and that
there was considerable expectation that some of the
assistance would be directed toward single-family
housing. Moreover, the loans would not be saleable;
therefore, it would increase fiscal 1976 outlays
immediately. Mr. Goldmark responded by offering to use
their "best efforts" to secure FHA insurance on the loans
after they had been sold to GNMA and that it was his
opinion that many of the loans would so qualify. Thus,
to the extent that FHA insurance could be procurred, the
loans would then be saleable.
Another problem identified related to the stage of construc-
tion of New York HFA projects. Most, if not all, of the
New York projects have already commenced construction. It
is anticipated that any conventional multifamily purchase
program would be directed to projects which have not as yet
commenced construction. It is a fact, however, that we
have made available mortgage purchase programs for single-
family units which have been under construction since
October 1973 and that there is no statutory prohibition
which precludes GNMA from purchasing mortgages on units
under construction. Therefore, while the purchase of HFA
mortgages already under construction would be a deviation
from the provisions of the contemplated multifamily mortgage
purchase program, it would not be inconsistent with the
provisions previously enunciated in connection with single-
family mortgage purchase programs.
Our attention then shifted to the gross amount of mortgages
that would have to be purchased in order to generate the
cash needed by the state. Our rules preclude purchasing
mortgages in excess of 80 percent of "value" and I advised
him that this would require GNMA to purchase only 80 percent
of the outstanding principal balance of the mortgages.
Therefore, the New York State officials would have to find
somebody to purchase the top 20 percent participation in the
principal balance outstanding. Mr. Goldmark then provided
me with an outline of the financing requirements for the
state agencies which revealed that it will be necessary to
5
raise at least $353 million through this approach. It would
therefore appear that some $480 million worth of mortgages
would be involved although some of the other numbers in the
financing requirements are quite "soft" and Mr. Goldmark
advised that the figures involving GNMA assistance might
rise to as high as $600 million.
III. The discussion concluded with the agreement that I
would explore the mortgage purchase option with Secretary Hills
and officials at Treasury and if the preliminary reaction was
not negative, the matter would be raised with the OMB.
Mr. Goldmark reiterated the need for a definitive answer the
week of December 8 (in my judgement, an affirmative decision
that week would not require that we actually purchase the
loans during that week; I am quite confident that if a con-
tractual agreement committing GNMA to this approach has been
consummated by that time, private interim financing will be
available based on that commitment). Mr. Goldmark requested
that I communicate to him at the earliest opportunity, a
"characterization" of the possibilities of GNMA assistance
and a response to the question of whether we would "play"
only as a part of a total program.
We agreed for the time being the discussions would be char-
acterized as "exploratory" at the initiative of New York
State officials and that no further description of the
possibilities of this assistance would be forthcoming until
I had checked with all the responsible Federal officials.
Subsequently, I discussed this meeting with Secretary Hills
the afternoon of November 25. She expressed considerable
concern that we might be drawn into the New York situation
on a hurried basis and that the "numbers" in New York were
extremely fuzzy which might give rise to a potential scandal
for GNMA. Nonetheless, she indicated her disposition to
render such assistance as is necessary if the assistance has
been decided upon by the Administration in its entirety.
Therefore, our assistance would only be forthcoming if it
was clearly decided that such assistance would be necessary
and desirable by the Treasury, the OMB, the E.P.B. and with
the concurrence of the President.
Daniel P. Kearney
President, GNMA
Municipal Assistance Corporation
For The City of New York
Two World Trade Center
New York, N.Y. 10047
MR. L. WILLIAM SEIDMAN
ASSISTANT TO THE
PRESIDENT FOR ECONOMIC AFFAIRS
WHITE HOUSE
WASHINGTON, D.C.
BERAED
ARGUSTA
AGREEMENT made as of the 26th day of November, 1975, among the Municipal Assistance
Corporation For The City of New York (the "Corporation") and each of the undersigned New York City
Commercial Banks (the "Banks"), New York City Pension Funds (the "Pension Funds") and the New
York City Sinking Funds (the "Sinking Funds").
The Corporation is proposing to offer to exchange (the "Exchange Offer") certain of its bonds
(the "MAC Bonds") for certain outstanding short-term obligations of The City of New York, listed
on Schedule A attached hereto (the "City Notes").
The Governor of the State of New York on November 25, 1975 made the following public
announcement:
I wish to compliment the Legislative Leaders and the members of the New York Assembly
and Senate on their work today. We have met, I believe, all the conditions laid down by the
President as a prerequisite to his consideration of Federal involvement in the fiscal crisis facing
New York City. We fully anticipate a favorable Federal response in recognition of the unusual
and difficult steps taken by the people of New York.
While those achievements are a source of great satisfaction to all of us concerned about the
potential default of New York City, for the State of New York it is only the first step. I shall
ask the Legislature to return to Albany on December 3 to meet the problem of the State's own
budget gap and to fully dispose of that matter through legislation during this extraordinary session.
I am calling upon Comptroller Arthur Levitt to certify the existence and size of the gap on or
about November 30th using the latest revenue figures available to him at that time. In addition,
the Legislature will be asked to complete its work on the "moral obligation" agencies of the State—
strengthening their reserves and removing those programs that will not pass the most rigorous
credit test. This action is necessary to the long term build-out program that I shall then propose.
In my letter of November 14th to the Secretary of the Treasury Simon I committed myself to
this legislative program. That commitment remains.
In reliance on the foregoing announcement, each of the Banks, Pension Funds and Sinking Funds,
severally and not jointly, agree with the Corporation as follows:
1. Each of the Banks and Pension Funds hereby agrees, severally and not jointly, not to tender or
otherwise accept any offer for exchange of any City Notes held by it for MAC Bonds pursuant to the
Exchange Offer. Each of the Banks and Pension Funds understands that, as a result of its not tendering
or otherwise accepting any offer for exchange for its City Notes pursuant to the Exchange Offer, under the
provisions of the New York State Moratorium Act for the City of New York enacted by the State
Legislature at an extraordinary session and signed by the Governor on November 15, 1975 (the
"Moratorium Act"), its City Notes will be subject to the moratorium therein provided for (the
"Moratorium").
2. Notwithstanding any determination by any court of competent jurisdiction or by the State
Legislature, which determination is applicable generally to all City Notes subject to the Moratorium and
is not by its specific terms made applicable to the Banks or Pension Funds, that results in an increase in
the rate of interest paid upon City Notes subject to the Moratorium (but does not affect the validity of
the Moratorium on payment of principal), each of the Banks and Pension Funds hereby agrees that,
after the scheduled date of maturity thereof, no interest need be paid on City Notes held by it subject
to the Moratorium in excess of a rate of 6% a year.
3. Each of the Banks and Pension Funds hereby agrees to do one of the following: (a) at the
termination of the "moratorium period" under the Moratorium Act and any renewal or extension
thereof (i) to exchange City Notes held by it on the date hereof for short-term notes of the City, to
renew such City Notes or to purchase short-term notes of the City, in each case such renewed City
Notes or such short-term notes of the City bearing interest at the rate of 6% a year and being in a prin-
cipal amount equal to the principal amount of City Notes held by it on the date hereof, or (ii) to agree
to present such City Notes for payment (or, if the City SO agrees, to defer contractually the maturity of
such City Notes) at times and in amounts resulting in a reduction of original principal amount in accord-
ance with clause (b) hereof such City Notes to bear interest at the rate of 6% a year, and (b) there-
after from time to time upon the maturities of any such short-term notes of the City held by it hereunder,
to exchange such short-term notes of the City for, or at its option to purchase, other short-term notes
of the City bearing interest at the rate of 6% a year and in a principal amount which shall be reduced
annually, beginning with the first such exchange under this clause (b), by an amount equal to the
fraction of the original principal amount of its City Notes of which the numerator is four and the denomi-
nator is the number of full three month periods remaining from the end of the Moratorium or any
renewal or extension thereof to July 1, 1986; provided, however, that the foregoing obligations shall be
subject to the performance or existence of the following conditions: (A) the final maturity date of the
last short-term note of the City received in exchange or purchased hereunder shall not be later than
July 1, 1986; (B) the City timely pays (i) interest at maturity with respect to the City Notes, at their
respective stated rates to their respective scheduled dates of maturity, and thereafter interest at least
annually at the rate of 6% a year and (ii) interest at maturity with respect to such short-term notes at
the rate of 6% a year; (C) at the time of any exchange, renewal or purchase of such short-term notes
hereunder the City shall have timely paid when due principal and interest on all bonds of the City
outstanding at such time; (D) at the time of any exchange, renewal or purchase of such short-term
notes hereunder the City shall not be under the jurisdiction of any court pursuant to any proceedings
under the federal bankruptcy laws or Title 6-A of the Local Finance Law (or any statute analogous in
purpose or effect to any such law or to such Law) ; (E) at the time of any exchange, renewal or purchase of
such short-term notes hereunder there shall be delivered to and for the benefit of the exchanging or
renewing holders or purchasers an unqualified approving opinion as to legality from recognized bond
counsel and such other documents as counsel for the Banks and the Pension Funds shall reasonably
request in form and substance satisfactory to such counsel; (F) at the time of any exchange, renewal
or purchase of such short-term notes hereunder the Mayor and the Comptroller of the City of New
York and the New York State Emergency Financial Control Board if such Board is then in existence
shall have certified that the budget of New York City for the fiscal year of New York City in which
such exchange, renewal or purchase occurs is balanced. If at any time any option to exchange, renew or
purchase short-term notes pursuant to paragraph 3 could not be effected by reason of the non-satisfaction
of any condition specified in clauses (B) through (F) hereof, any City Notes retained pursuant to
paragraph 3(a) (ii) may be presented for payment in full.
4. The Sinking Funds hereby represent that the only short-term notes of the City held by them are
bond anticipation notes dated January 13, 1975 and maturing January 13, 1976, in aggregate principal
amount of $200,000,000 (the "Sinking Fund BANs"). The Sinking Funds hereby agree to purchase
serial bonds of the City, bearing interest at the rate of 6% a year, in aggregate principal amount of
$200,000,000 upon or in payment of the Sinking Fund BANs. The bonds so purchased by the Sinking
Funds shall mature and be subject to payment of such annual installments of principal as shall be necessary,
after first taking into account the other holdings of the Sinking Funds, to meet the legal obligations of
the Sinking Funds.
5. (a) Each of the Banks hereby agrees with respect to bonds of the Corporation held by it which
are listed on the schedule furnished by it to the Corporation prior to its execution of this Agreement and
identified as its schedule referred to in this Paragraph and which bonds consist of either Series C, D, E,
H OF Bonds of the Corporation (hereafter called "Bank Series Bonds"), and each of the Pension Funds
and Sinking Funds may at its election agree with respect to any of the bonds of the Corporation it holds
(hereinafter called the "Fund Bonds") that commencing February 1, 1976 (i) such Bank Series Bonds
2
and such Fund Bonds will, notwithstanding the terms thereof, bear interest at the rate of 6% a year
payable on February 1 and August 1 in each year; (ii) each such Bank Series Bond and Fund Bond
will mature on February 1, 1986, subject to redemption. in part, on February 1, in each of the years
1977 through 1985 in the respective principal amounts calculated to provide for level debt service on
such Bank Series Bond and Fund Bond held by it to February 1, 1986; (iii) such Bank Series Bonds will
be stamped by such holder with a stamp reading: "Principal of and Interest on this Bond are payable
in accordance with an Agreement dated as of the 26th day of November, 1975 among the Municipal
Assistance Corporation for The City of New York and certain Pension Funds, Sinking Funds and Banks";
(iv) no such Bank Series Bond and Fund Bond will be transferred, assigned or delivered by such
holder unless the same is first exchanged for a newly issued bond of the Corporation, in an amount
equal to the unpaid principal amount of such exchanged Bank Series Bond and Fund Bond which
newly issued bond shall be issued pursuant to the first General Bond Resolution of the Corporation dated
July 2, 1975 and shall bear interest and mature (subject to redemption in accordance with the first
General Bond Resolution) as hereinabove provided in this paragraph.
(b) Each of the Banks, Pension Funds and Sinking Funds hereby agrees on February 1, 1976
to exchange bonds of the Corporation, in an amount at least equal, in the case of Banks, to the amount
of Series A and B bonds listed on the above-referred to schedule by each Bank and, in the case of such
Funds, bonds equal to the amount of bonds of the Corporation that were heretofore purchased by
such Funds from the Corporation less Fund Bonds with respect to which an election has been made
under clause (a) above, for newly issued bonds of the Corporation issued pursuant to the first General
Bond Resolution of the Corporation, dated July 2, 1975, bearing interest at the rate of 6% a year
and maturing on February 1, 1986, subject to mandatory sinking fund payments calculated to provide
for level debt service from February 1, 1977 to February 1, 1986; provided, however, that if prior
to February 1, 1976 the consent of the requisite holders of Series A or B bondholders in the case of the
Series A or Series B Bonds, respectively, of the Corporation is obtained to a revised amortization schedule
for either or both of such Series held by the Banks (the Corporation agreeing to solicit such consents)
resulting in a maturity on February 1, 1986 and mandatory sinking fund payments calculated to
provide for level debt service from February 1, 1977 to February 1, 1986, such bonds so held by the
Banks shall be treated in the same manner as in the case of and for purposes of this Paragraph 5
shall be deemed to be Bank Series Bonds; provided, further, however, that if in the case of the Series A
term bonds such consent is not obtained prior to February 1, 1976, each Bank, unless, prior to August 1,
1976, it effects the exchange required by this clause (b) with respect to the Series A term bonds,
shall continue to hold its Series A term bonds, and hereby agrees to a reduction of the interest rate
on the Series A term bonds held by it to 6% per annum, commencing February 1, 1976, payable
February 1 and August 1 in each year, and may not otherwise elect to modify the sinking fund or
redemption provision of such bonds.
(c) The Corporation hereby agrees not to issue any new bonds of the Corporation based upon
debt service savings to the Corporation resulting from the operation of this Paragraph 5.
(d) Notwithstanding anything to the contrary in this paragraph 5, the undertaking of each such
holder under this paragraph shall be subject to the following (A) the Corporation shall adopt a Series
Bond Resolution and take such other steps on or before February 1, 1976 to permit the transactions
provided for in clauses (a) and (b) above; (B) the Corporation shall have paid interest on the bonds
held by such holder on February 1, 1976 at the respective rates of interest stated in such bonds; (C)
on February 1, 1976, the City shall not be in default in the payment of the principal of or interest on any
debt obligations of the City; and (D) there being no failure of any condition (which has not been
waived) to the performance of any obligation of the Pension Funds under Paragraph 7.
6. Each of the agreements referred to in Paragraphs 3 and 5 is subject to agreement to and fulfill-
ment of such agreements by all other parties referred to in such Paragraphs 3 and 5 and to enactment
prior to February 1, 1976 of Federal Legislation that would provide, by way of guarantees or otherwise,
for the seasonal financing needs of the City, over the period from the effective date thereof through a date
3
not earlier than June 30, 1978, in a maximum amount of not less than $2,500,000,000 at any time
outstanding.
7. The Pension Funds hereby agree, severally and not jointly, to purchase serial bonds of the City,
substantially in the proportions set out in Schedule B, in the principal amount of $2,530,000,000 as follows:
(a) Prior to January 1, 1976, $30,000,000 serial bonds of City bearing interest at the rate of
6% a year and maturing on such date or dates as shall be mutually agreed upon; (it being
understood that urban renewal notes of the City in the amount of $30,000,000, dated April 18, 1975
and maturing December 17, 1975, and held by the Pension Funds, are to be paid with proceeds of
federal grant funds segregated therefor) ;
(b) As soon as possible but prior to June 30, 1976, up to $500,000,000 serial bonds of the
City; during the 1976-1977 fiscal year of the City up to $1,500,000,000 principal amount of
serial bonds of the City; during the 1977-1978 fiscal year of the City up to $500,000,000 principal
amount of serial bonds of the City; all such bonds shall bear interest at the rate of 9% a year and
shall mature on such date or dates as shall be mutually agreed upon;
(c) To the extent the City is required by law to amortize, prior to June 30, 1978, any principal
of the bonds of the City purchased by the Pension Funds pursuant to this Paragraph 7, the Pension
Funds agree to purchase additional serial bonds of the City in an amount equal to such principal
amortization and bearing interest at the rate of 9% a year and maturing on such date or dates
as shall be mutually agreed upon;
(d) Any Pension Fund may, at its election, purchase MAC Bonds (issued pursuant to its
second General Bond Resolution), up to an amount equal to its proportionate share of the difference
between $1,600,175,000 and the principal amount of MAC Bonds issued pursuant to the Exchange
Offer, in fulfillment of its obligation to purchase an equal amount of bonds of the City pursuant to
this Paragraph 7, and any such MAC Bonds so purchased shall bear interest at the rate of 8% a year
and mature July 1, 1986, subject to mandatory sinking fund payments calculated to provide for level
debt service to July 1, 1986;
(e) The obligations of the Pension Funds to purchase bonds pursuant to this Paragraph 7
shall be subject to agreement to and fulfillment of such agreements by all other parties referred to
in this Paragraph 7 and shall be conditioned upon each of the following facts being true on the date
of each such purchase: (i) the City shall have timely paid when due principal and interest on all
bonds of the City outstanding at such time, (ii) the City shall not be under the jurisdiction of
any court pursuant to any proceedings under the federal bankruptcy laws or pursuant to title 6A
of the Local Finance Law. (iii) a State law containing provisions with respect to the legal
status of the Pension Funds and their Trustees' responsibilities, satisfactory to such Trustees,
shall have been enacted and shall be effective, (iv) the City shall have made to the Pension Funds
all contributions and other payments required by law, (v) the City shall, in connection with
each purchase prior to February 1, 1976, or the first date on which the first seasonal financing
moneys have been received by the City pursuant to the Federal Legislation referred to in Paragraph 6
(whichever is earlier), deliver to any Pension Fund so requesting a report of essential facts of
the City in the form promulgated by the State Department of Audit & Control, and in connection
with each purchase thereafter shall deliver to any Pension Fund so requesting an official statement
with respect to the City in form and substance satisfactory to the Trustees of the Pension Funds,
each of which shall include a current status of the City's financial plan as required and approved
by the Emergency Financial Control Board, (vi) the Internal Revenue Service shall have ruled,
or the Congress of the United States shall have provided, that purchases of obligations by the
Pension Funds pursuant to this Agreement shall not constitute prohibited transactions or otherwise
adversely affect the qualified status of the Pension Funds for the purposes of the Internal Revenue
Code of 1954, as amended, and (vii) the Federal Legislation referred to in Paragraph 6 above
shall have been enacted and shall be in force; and
4
(f) If any of the Pension Funds elects not to make any purchases of bonds of the City as a
result of a failure of any conditions set forth in clause (v), (vi) or (vii) of Paragraph 7(e), such
Pension Fund shall nevertheless, as soon as possible but prior to June 30, 1976, purchase its
proportionate share of $500,000,000 of MAC Bonds pursuant to Paragraph 7(d) above.
8. This Agreement shall become effective upon its execution by the Corporation and by each of
the Banks, Pension Funds and Sinking Funds.
9. Any reference herein to "City Notes held" or "short-term notes of the City held" by a Bank
shall refer only to City Notes or short-term notes of the City, respectively, owned by such Bank for its
own account.
10. Any Bank or Pension Fund which is the holder of a City Note subject to Paragraph 3(a) (ii)
hereof may sell, assign or transfer any such Note provided that the transferee shall be satisfactory to the
City and shall have agreed in writing in form and substance satisfactory to the City to exercise the same
options and on the same terms and conditions as the Bank or Pension Fund so selling, assigning or trans-
ferring such Note has agreed to exercise under Paragraph 3.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be executed by its duly
authorized officer as of the date first above written.
MUNICIPAL ASSISTANCE CORPORATION FOR THE
CITY OF NEW YORK
By
BANKS
FIRST NATIONAL CITY BANK
MORGAN GUARANTY TRUST COMPANY
By
By
BANKERS TRUST COMPANY
IRVING TRUST COMPANY
By
By
UNITED STATES TRUST COMPANY
BANK OF NEW YORK
By
By
THE CHASE MANHATTAN BANK
MANUFACTURERS HANOVER TRUST COMPANY
By
By
MARINE MIDLAND BANK
CHEMICAL BANK
By
By
NATIONAL BANK OF NORTH AMERICA
By
5
PENSION FUNDS
NEW YORK CITY EMPLOYEES' RETIREMENT
TEACHERS' RETIREMENT SYSTEM FOR THE
SYSTEM
CITY OF NEW YORK
By
By
BOARD OF EDUCATION RETIREMENT SYSTEM FOR
NEW YORK CITY POLICE PENSION FUND
THE CITY OF NEW YORK
By
By
NEW YORK CITY FIRE DEPARTMENT
PENSION FUND
By
SINKING FUNDS
SINKING FUND OF THE CITY OF NEW YORK
WATER SINKING FUND OF THE CITY OF
NEW YORK
By
By
RAPID TRANSIT SINKING FUND OF THE CITY OF
NEW YORK
TRANSIT UNIFICATION SINKING FUND OF THE
CITY OF NEW YORK
By
By
6
SCHEDULE A
(amounts in millions)
Type
Amount
Date of Issue
Date of Maturity
R.A.N
$400.0
12/13/74
12/11/75
R.A.N.
500.0
1/13/75
1/12/76
R.A.N.
120.0
1/13/75
1/12/76
R.A.N.
290.0
2/14/75
2/13/76
B.A.N.
341.270
3/14/75
3/12/76
B.A.N.
150.0
3/14/75
3/12/76
B.A.N.
220.0
6/30/75
5/28/76
T.A.N.
90.0
6/11/75
6/10/76
T.A.N.
190.0
6/11/75
6/10/76
B.A.N.
51.5
6/11/75
6/11/76
B.A.N.
250.0
10/17/75
10/ 1/76
B.A.N.
59.875
10/17/75
10/15/76
R.A.N.
6.750
11/10/75
11/ 9/76
7
GERALD LISBARY
SCHEDULE B
(amounts in millions)
New York City Employees' Retirement System
$1,175
Teachers' Retirement System for The City of New York
860
New York City Police Pension Fund
365
New York City Fire Department Pension Fund
50
Board of Education Retirement System for The City of New York
50
$2,500
The fund(s) owning the urban renewal notes referred to in Paragraph 7(a)
shall purchase an additional $30,000,000 of bonds of the City pursuant to such
Paragraph 7(a) (in proportion to their holdings of such urban renewal notes).
8
GERALD
AISKARY
Resolution adopted by the Emergency Financial
Control Board at its meeting on
November 19, 1975
RESOLVED, that the Emergency Financial Control Board
accepts and endorses the City's commitment, after receipt of a
report from the Mayor's Management Advisory Committee, to update
the assumptions regarding interest earnings, salary progressions,
mortality tables and similar matters in the computation of the
City's contribution to its actuarial pension funds; to initiate
any legal and legislative steps required in that connection; and
to revise its financial plan as appropriate and to submit it to
the Board by January 31, 1976; and, included in such revisions,
there should be no further extension of the provisions of law
(Chapter five hundred ninety-five of the Laws of nineteen hundred
seventy-four and Chapter eight hundred one of the Laws of nineteen
hundred seventy-five) which authorized the City of New York to
reduce the City's contributions to its retirement systems by
the income in excess of four percent estimated to be earned on
pension fund investments during the fiscal year.
GERALE
Resolution adopted by the Emergency Financial
Control Board at its meeting on
November 19, 1975
WHEREAS, payment for excess overtime work in the last year
of employment before retirement is considered as
part of the salary of that year for purposes of
computing pension benefits; and
WHEREAS, overtime work should be limited to the minimum
required for efficient operations; and
WHEREAS, it appears that excessive overtime work by employees
of the City of New York and covered organizations in the
last year of work preceding retirement has inflated
the pension costs of the City;
NOW THEREFORE, be it
RESOLVED, that the City and the Executive Director of the
Emergency Financial Control Board are directed to report
to the Board, within thirty days, concerning overtime
practices and costs in the City government and covered
organizations, and t.o eliminate abuses of overtime,
particularly as it inflates pension costs.
Emergency Financial Control Board
November 25, 1975
RESOLVED, that the taxes imposed by Chapters 877, 879, 880,
883, 884 of the Laws of 1975, and Chapter 882 of the
Laws of 1975 as amended by Chapter 886 of the Laws of
1975, are necessary; and be it further
RESOLVED, that the revenues derived from those taxes shall
be expended in accordance with the provisions of the
New York State Financial Emergency Act for the City of
New York.
The Board hereby directs the Chairman to immediately provide
a copy of the above resolution to the appropriate officers
named in such Chapters.
FORD LIBRARY 07VH39
Emergency Financial Control Board
November 26, 1975
RESOLVED, that the taxes imposed by Chapter 887 of the Laws of
1975 are necessary; and be it further
RESOLVED, that the revenues derived from those taxes shall be
expended in accordance with the provisions of the New York
State Financial Emergency Act for the City of New York.
The Board hereby directs the Chairman to immediately provide
a copy of the above resolution to the appropriate officers
named in said Chapter.
LIBRARY
NEW ISSUE
In the opinion of Bond Counsel, under existing statutes and court decisions, interest on the 1975 Bonds is exempt from Federal
income taxes and shall at all times be free from New York State and New York City personal income taxes.
EXCHANGE OFFER
TO HOLDERS OF CERTAIN SHORT-TERM NOTES OF
THE CITY OF NEW YORK
$1,600,175,000
MUNICIPAL ASSISTANCE CORPORATION FOR THE CITY OF NEW YORK
(A Corporate Governmental Agency and Instrumentality of the State of New York)
8% 1975 BONDS DUE JULY 1, 1986
SERIES 1 THROUGH 4
The Municipal Assistance Corporation For The City of New York hereby offers to exchange with any and all holders of certain
revenue anticipation notes and bond anticipation notes of The City of New York outstanding on the date hereof (the "City Notes"),
its 1975 Bonds in an aggregate principal amount equal to the aggregate principal amount of the City Notes tendered hereunder, subject
to the terms and conditions stated herein. Persons tendering City Notes pursuant to the Exchange Offer will receive 1975 Bonds in
exchange therefor and will retain the right to receive interest from the City on the scheduled maturity dates of their City Notes.
Holders tendering City Notes maturing December 11, 1975 will be paid in cash by the City. All other tendering holders will receive
acknowledgment of their rights to receive such interest from the City. The Corporation does not assume any obligation by reason
of this Exchange Offer to pay or otherwise provide for the payment of interest on such City Notes.
The Exchange Agent is United States Trust Company of New York.
The Exchange Offer will expire on December 10, 1975. At the election of the Corporation, the
Exchange Offer may be extended one or more times with respect to City Notes of one or more issues
being tendered. All tenders are revocable until the close of business on December 4, 1975, and thereafter
are irrevocable. See "Exchange Offer" as to the procedure for tendering City Notes.
Interest on each series of the 1975 Bonds accrues from the scheduled maturity date of the City Notes exchanged therefor and is
payable on July 1, 1976 and semi-annually on each January 1 and July 1 thereafter. Fully registered bonds in denominations of $5,000
or any integral multiple thereof will be issued initially. After 30 days, such registered bonds will be exchangeable for coupon bonds
in denominations of $5,000 each, such coupon bonds to be registrable as to principal only. Coupon and registered bonds are inter-
changeable as more fully described herein. The Trustee for the 1975 Bonds is United States Trust Company of New York.
The 1975 Bonds are subject to optional and mandatory redemption, including redemption by operation of the sinking fund, as
described herein.
The 1975 Bonds will be the first bonds of the Corporation issued under the Second General Bond Resolution and are
payable from certain per capita state aid and, to the extent not required for payment of certain other obligations of the
Corporation, revenues derived from certain sales and compensating use taxes imposed by the State of New York within The
City of New York and, under certain conditions commencing with the State's fiscal year beginning April 1, 1976, the State
stock transfer tax. The State is not bound or obligated to continue to appropriate or apportion from its General Fund
or otherwise such per capita state aid or to impose such taxes or to make the necessary payments of such per capita state aid
or to appropriate revenues received from such taxes. The Corporation has no taxing power. The 1975 Bonds do not
constitute an enforceable obligation, or a debt, of either the State or the City and neither the State nor the City shall be
liable thereon. Neither the faith and credit nor the taxing power of the State or the City is pledged to the payment of
principal of or interest on the 1975 Bonds.
See
accompanying Letter of Transmittal for the names and addresses of the Exchange Agent and of the Forwarding Agents
through whom City Notes may be tendered.
November 26, 1975
LIBRARY
No person has been authorized to give any information or to make any representations,
other than those contained in this Official Statement, and if given or made, such other infor-
mation or representations must not be relied upon as having been authorized. This Official
Statement does not constitute an offer to exchange or the solicitation of an offer to exchange
nor shall there be any exchange of the 1975 Bonds for City Notes by any person in any juris-
OFFICIAL STATEMENT
diction in which it is unlawful for such person to make such offer, solicitation or exchange. The
information herein is subject to change without notice and neither the delivery of this Official
OF
Statement nor any exchange made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Corporation since the date
MUNICIPAL ASSISTANCE CORPORATION FOR THE CITY OF NEW YORK
hereof. This Official Statement is submitted in connection with the exchange of the securities
(A Corporate Governmental Agency and Instrumentality of The State of New York)
referred to herein and may not be reproduced or used, in whole or in part, for any other purpose.
TABLE OF CONTENTS
EXCHANGE OFFER
General
PAGE
EXCHANGE OFFER
3
This Official Statement of the Municipal Assistance Corporation For The City of New York (the
General
3
"Corporation") is being provided for the purpose of setting forth information concerning the offer (the
Provisions for Other Short-Term Obligations
3
"Exchange Offer") by the Corporation to exchange certain of its bonds due July 1, 1986, subject to
Tender Procedure
4
mandatory redemption, bearing interest at the rate of 8% per annum, as more particularly described
Tax Consequences
6
herein (the "1975 Bonds") for certain outstanding notes of The City of New York (the "City")
BONDS BEING OFFERED
7
MORATORIUM AND STAY LEGISLATION
9
described below (the "City Notes"). The 1975 Bonds are to be issued pursuant to the New York State
Moratorium
9
Municipal Assistance Corporation Act, as amended by the Municipal Assistance Corporation For The
Stay Legislation
10
City of New York Act, both as further amended (the "Act"), the second general bond resolution dated
RIGHTS OF THE NOTEHOLDERS
11
November 25, 1975 of the Corporation (the "Second General Bond Resolution") and the four series
THREE-YEAR FINANCIAL PLAN
12
resolutions of the Corporation authorizing the 1975 Series 1 through 4 Bonds (the "1975 Series Resolu-
City Financial Plan
12
Proposed Sources of Required Moneys
13
tions"). The Second General Bond Resolution and the 1975 Series Resolutions are sometimes collectively
Other Potential Sources of Money
15
referred to herein as the "Resolutions."
THE CORPORATION
15
For a description of the rights of holders of City Notes who do not exchange their City Notes, see
MARKET CONSIDERATIONS AFFECTING 1975 BONDS AND CITY NOTES
16
OUTSTANDING DEBT OF THE CORPORATION
16
"Rights of the Noteholders" and "Moratorium and Stay Legislation."
PROVISIONS FOR PAYMENT OF THE BONDS
17
For a description of the 1975 Bonds, see "Bonds Being Offered" and "Description of the 1975
General
17
Bonds."
Appropriation by Legislature
20
Municipal Assistance State Aid Fund
21
The City Notes are entitled Revenue Anticipation Notes ("RANs") and Bond Anticipation Notes
Municipal Assistance Tax Fund
22
("BANs"). The following table sets forth information provided to the Corporation by the Office of the
Per Capita Aid
24
Sales Tax
24
Comptroller of the City with respect to the outstanding principal amounts of, and the stated rates of
Stock Transfer Tax
26
interest and the aggregate amounts of interest payable at the scheduled date of maturity on, the City
Estimated Amounts Available for Debt Service and Debt Service
Notes, the dates on which the City Notes are scheduled to mature and the designation of the Series of
Coverage
27
1975 Bonds being offered in exchange for such City Notes:
Restoration of Capital Reserve Aid Fund
30
TRUSTEE
31
Stated
Annual
Series of
DESCRIPTION OF THE 1975 BONDS
31
Scheduled Maturity
Principal
Interest Rate
Interest
Total
Type
1975 Bonds
MANAGEMENT
32
35
(In Millions)
(In Millions)
LITIGATION
Establishment and Functions of Corporation
35
December 11, 1975
$ 339.5
9.50%
$ 32.3
$ 371.8
RANs
Series 1*
Diversion of Revenues
35
January 12, 1976
596.7
9.40%
56.1
652.8
RANs
Series 2*
State Pension Funds Investment in Securities of the Corporation
36
February 13, 1976
281.5
7.55%
21.3
302.8
RANs
Series 3*
State Pension Funds Investment in State Securities
37
March 12, 1976
382.5
City Pension Funds Investment in Securities of the Corporation
37
8.75%
33.5
416.0
BANs
Series 4*
Lawsuit Affecting the UFT Contract
37
$1,600.2
$143.2
$1,743.4
State Loan of Credit
37
*
Interest on each Series of the 1975 Bonds accrues from the scheduled maturity date of
Illegal Expenditures
38
Moratorium
38
the City Notes exchangeable for such Series of the 1975 Bonds.
Lawsuits Alleging Fraud in the Sale of City Securities
38
On the date of this Exchange Offer, President Ford announced that he would recommend legislation
VARIOUS CONTROL PROGRAMS
38
to the Congress to provide up to $2,300,000,000 of Federal short-term loans to the State, subject to condi-
Conditions to Payments by the Corporation
38
Powers of the Corporation
41
tions and with repayment secured, to be used on behalf of the City solely for intra-fiscal year borrowings to
Review by the Corporation
42
maintain essential services during the next two years. See "Market Considerations Affecting 1975 Bonds
Action by the Corporation
42
and City Notes".
Control Board
42
Other Developments
44
Provisions for Other Short-Term Obligations
SUMMARY OF CERTAIN PROVISIONS OF THE SECOND GENERAL BOND
The foregoing table does not include the balance of the City's outstanding notes that are held by
RESOLUTION
44
the Corporation, the eleven New York Clearing House Banks, certain City pension funds, certain City
AGREEMENT OF THE STATE OF NEW YORK
56
LEGAL INVESTMENT
57
sinking funds and the State of New York (the "State").
APPROVAL OF LEGALITY
57
TAX EXEMPTION
57
3
OPINION OF BOND COUNSEL
Exhibit A
Lazard Frères & Co.-Financial Advisor
LIBRARY
2
The eleven New York Clearing House Banks and certain City pension funds have informed the
Corporation that they hold an aggregate of $819,220,000 principal amount of short-term notes of the
Date, and the same are actually SO delivered. More detailed instructions concerning tender of the City
City scheduled to mature on December 11, 1975 and on various dates thereafter to November 9, 1976. This
Notes are contained in the Letter of Transmittal.
Exchange Offer is not being made to such banks and pension funds, but the notes of the City held by such
The Exchange Agent is:
banks and pension funds will be subjected to the moratorium described under "Moratorium and Stay
UNITED STATES TRUST COMPANY
Legislation-Moratorium." See "Three-Year Financial Plan-Proposed Sources of Required Moneys."
OF NEW YORK
The banks and pension funds have agreed to effect a deferral of the payment of principal of such notes
of the City until July 1, 1986 (or the end of any extended moratorium period, if later), conditioned
By Hand
By Mail
upon enactment of Federal legislation providing, by way of guarantees or otherwise, for the seasonal
130 John Street
130 John Street
financing needs of the City, through June 30, 1978, in an amount of not less than $2,500,000,000. For a
20th Floor
New York, N. Y. 10038
description of the Federal legislation to be recommended by the President, which differs in certain respects
New York, N. Y. 10038
Attention Corporate Trust and
from this condition, see "Exchange Offer-General." Such banks and pension funds have also agreed
Attention: Corporation Trust and
Agency Services (MAC Exchange)
that, during the moratorium and deferral period, the City need not pay interest at a rate in excess of
Agency Services (MAC Exchange)
6% per annum on such principal. Such pension funds also hold, in addition to the notes of the City
The availability of the documents discussed in this Official Statement at any office of the Exchange
referred to above, an aggregate of $30,000,000 principal amount of urban renewal notes of the City
Agent, any of the Forwarding Agents or any other bank or securities dealer does not imply any recom-
maturing December 17, 1975. Such urban renewal notes will not be subjected to the moratorium, but
mendation by them as to the merits of the Exchange Offer or any representation by them as to the accuracy
are expected to be paid from federal grant funds segregated therefor. In connection with any such
or completeness of this Official Statement.
payment, such pension funds have agreed to purchase an aggregate of $30,000,000 principal amount of
bonds of the City bearing interest at the rate of 6% per annum. For further agreements of the pension
A tendering holder of City Notes scheduled to mature on December 11, 1975 will receive, as
funds to provide additional financing to the City, see "Three-Year Financial Plan-Proposed Sources of
promptly as practicable following the Expiration Date, the aggregate principal amount of 1975 Bonds to
Required Moneys."
which such holder is entitled and a check in the amount of the interest on such City Notes to the
scheduled date of maturity. The amount of interest shall be paid by the City and the Corporation assumes
The City sinking funds (which contain the funds to be applied to the amortization of outstanding
no obligation to pay such interest. A tendering holder of City Notes scheduled to mature on January 12,
term bonds of the City) have informed the Corporation that they hold an aggregate of $200,000,000 in
principal amount of bond anticipation notes of the City maturing January 13, 1976. Such notes will not be
1976, February 13, 1976, and March 12, 1976 will receive, as promptly as practicable following the Expira-
tion Date, the aggregate principal amount of 1975 Bonds to which such holder is entitled together with the
subjected to the moratorium, but such sinking funds have agreed to purchase bonds of the City, upon or
Corporation's Acknowledgment of Interest Right (the "Acknowledgment"), which Acknowledgment
in payment of such notes, bearing interest at the rate of 6% per annum and with maturities and annual
will not be transferable. The Acknowledgment will state that the Corporation acknowledges the reserva-
installments of principal which shall meet the legal obligations of such sinking funds.
tion of the right of the tendering holder of the City Notes of his entire right, title and interest to receive
As of the date of this Official Statement, the Corporation holds notes of the City in the aggregate
from the City on the scheduled maturity date of the City Notes the entire amount of interest due on
principal amount of $2,097,300,000 maturing on several dates from December 11, 1975 to October 15,
his City Note on such date. By executing the Letter of Transmittal, the tendering holder of City
1976. The City may issue additional notes to the Corporation in connection with future advances to the
Notes appoints the Corporation as such holder's attorney-in-fact to enforce the contractual right of
City from the Corporation. The notes of the City held on the date hereof by the Corporation will not
such holder to receive such interest in the event the same is not paid by the City when due, and to
be subject to any exchange offers by the Corporation and will not be subject to the moratorium. Upon
remit the amount of such interest, as and when collected, after payment of the expenses of collection,
the maturity of notes which it holds, including the City Notes received by the Corporation as a result
including attorney's fees and disbursements, in the manner specified in the Letter of Transmittal. The
of this Exchange Offer, the Corporation has determined that it will, if requested to do so by the City,
Corporation does not assume any obligation to pay or otherwise provide for payment of interest on such
exchange such notes for notes of the City maturing at later dates, provided that the City is in compliance
City Notes.
with the conditions set forth in the Act and has paid all interest to the scheduled maturity date on such
City Notes.
The Corporation reserves full discretion to determine whether the documentation with respect to
The State holds a note of the City in the principal amount of $250,000,000 maturing on October 1,
tendered City Notes is complete and generally to determine all questions as to tenders, including the date
1976. This note of the City held by the State will not be subject to any exchange offers by the Corporation
of receipt of a tender, the propriety of execution of any document and other questions as to the eligibility
or acceptability of any tender. The Corporation reserves the right to reject any tenders not in proper form
and will not be subject to the moratorium.
or to waive any irregularities or conditions, and the Corporation's interpretation of the terms and condi-
Tender Procedure
tions of the Exchange Offer will be final. All improperly tendered City Notes will be returned, unless
Holders of City Notes may tender them pursuant to the Exchange Offer by completing and signing
irregularities are waived, without cost by the Exchange Agent to the tendering holder. No such tender
the Letter of Transmittal accompanying this Official Statement and, on or prior to the Expiration
will be deemed to have been made until all irregularities have been cured or waived.
Date (as defined in the Letter of Transmittal), delivering such Letter of Transmittal and the City
Tendering holders will not be obligated to pay brokerage commissions, fees or transfer taxes on
Notes being tendered to the Exchange Agent (by hand, or by mail) at the address indicated below or
the exchange by the Corporation of City Notes, pursuant to the Exchange Offer.
to one of the Forwarding Agents (by hand only) at the respective addresses indicated in the Letter
of Transmittal. Tender of the City Notes may also be effected by delivery to the Exchange Agent by
The Exchange Offer is scheduled to terminate as to each particular maturity of City Notes
a member firm of a national securities exchange in the United States or a bank which is a member of the
on December 10, 1975, unless extended by the Corporation as to such maturity of City Notes, as
Federal Reserve System, if such firm or bank shall have advised the Exchange Agent in writing by
provided in the Letter of Transmittal.
telegram or otherwise at or prior to the Expiration Date that it has a duly completed and signed Letter
Except for the withdrawal benefits described in the following paragraph, tenders are irrevocable.
of Transmittal and the accompanying City Notes in its possession and guarantees that the same will be
Upon delivery to the Exchange Agent or any Forwarding Agent of City Notes accompanied by a
delivered to the Exchange Agent by the close of business on the fifth business day following the Expiration
5
4
properly executed Letter of Transmittal, the sole right of a tendering holder of City Notes maturing
of the original issue discount which bears the same ratio to such original issue discount as the number
December 11, 1975 will be (i) to receive 1975 Bonds and (ii) to receive from the City interest to the
of days he has held such 1975 Bond bears to the term of the Bond. After the exchange, for the
scheduled date of maturity on such City Notes. Upon such delivery, the sole right of a tendering holder
purpose of determining gain or loss at the maturity, earlier redemption or sale of the 1975 Bonds,
of City Notes maturing on January 12, 1976, February 13, 1976 and March 12, 1976 will be (i) to
their basis will be equal to their fair market value on the date of the exchange, subject to adjustments
receive 1975 Bonds, (ii) to receive the Acknowledgment and (iii) to receive from the City interest
to basis required by the Code.
on such scheduled date of maturity on such City Notes to such date.
It is recommended that holders of City Notes consult their tax advisors as to the extent to which
City Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to 3:30
they may have tax liability as a result of such an exchange.
P.M., New York time, December 4, 1975. To be effective, any notice of withdrawal must be in writing,
must specify the name of the tendering holder of City Notes, the principal amount of City Notes to be with-
drawn, and, if City Notes have been submitted, the serial numbers shown on the particular City Notes to be
BONDS BEING OFFERED
withdrawn and must be received in a timely manner by the Exchange Agent at its address specified above.
Any City Notes withdrawn will, for purposes of the Exchange Offer, be deemed not to have been
All bonds issued under the Second General Bond Resolution (herein collectively referred to as the
duly tendered. City Notes withdrawn pursuant to the provisions of this paragraph will be sent to
"Bonds") will be general obligations of the Corporation payable out of certain revenues of the Corpora-
the withdrawing holder of such City Notes at such holder's address as specified in the Letter of Trans-
tion and are secured by an equal charge and a first lien on all moneys and securities in the Corpo-
mittal by registered mail, return receipt requested, at the Corporation's expense, as soon as practicable
ration's bond service fund and capital reserve fund established under and defined in the Second General
after due receipt of the notice of withdrawal.
Bond Resolution (the "Bond Service Fund" and "Capital Reserve Aid Fund", respectively). The
1975 Bonds will be the first bonds of the Corporation issued under the Second General Bond Resolution
and are payable from certain per capita state aid and, to the extent not required for payment of certain
Tax Consequences
other obligations of the Corporation, revenues derived from certain sales and compensating use taxes
The provisions of the Internal Revenue Code of 1954 (the "Code") relating to gains and losses
imposed by the State within the City and, under certain conditions, commencing with the State's fiscal
on the sale or exchange of bonds, notes or other evidences of indebtedness will apply to the exchange of
year beginning April 1, 1976, the State stock transfer tax. The Corporation has previously issued an
City Notes for 1975 Bonds. A person who exchanges City Notes for 1975 Bonds will realize gain or
aggregate of $3,078,685,000 principal amount of bonds under another and separate general bond resolution,
loss measured by any difference between his adjusted basis for his City Notes and the fair market value
dated July 2, 1975 (the "First General Bond Resolution"). The Corporation has also previously issued
of the 1975 Bonds which such person receives. If such fair market value is greater than such adjusted
an aggregate principal amount of $298,500,000 in promissory notes, of which $250,000,000 mature on
basis, such person will realize gain to the extent of the difference. If such person's adjusted basis for
September 14, 1976, $25,000,000 mature on January 15, 1976 and $23,500,000 mature on December 31,
his City Notes is greater than the fair market value of the 1975 Bonds which he receives, he will realize
1976. The holders of the bonds issued under the First General Bond Resolution (the "First Bonds") and
loss to the extent of the difference.
the holders of the promissory notes referred to above (the "Promissory Notes") have a claim prior to
that of the holders of the Bonds, including the 1975 Bonds, on all amounts received by the Corporation
In the case of a person who is neither a dealer in securities nor a financial institution described
from the State as payments from the Municipal Assistance Tax Fund, including the revenues from the
in Section 582(c) (1) of the Code and who exchanges City Notes which he held for investment purposes
Sales Tax and the Stock Transfer Tax (as defined below). Additional obligations may be issued under
for 1975 Bonds, the gain or loss realized (i) on the date of such exchange and (ii) at the maturity,
the First General Bond Resolution to the extent provided for therein but subject to the limitations of
earlier redemption or sale of the 1975 Bonds, will be treated as capital gain or loss. Such gain
the Second General Bond Resolution. No additional promissory notes may be issued having a claim prior
or loss (as the case may be) will be a long-term capital gain or loss if the holder of the City Notes
to that of the holders of the 1975 Bonds on any amounts received by the Corporation from the State
or of the 1975 Bonds (as the case may be) has held the same for more than six months. If the holding
as payments from the Municipal Assistance Tax Fund. The Bonds being offered hereby are not on
period has been six months or less, then the gain or loss will be a short-term capital gain or loss.
a parity with the First Bonds issued under the First General Bond Resolution. See "The Corporation,"
A portion of any such long-term capital gain will, under certain circumstances, be subject to the
"Provisions for Payment of the Bonds" and "Summary of Certain Provisions of the Second General
minimum tax on tax preference items under Section 56 of the Code.
Bond Resolution."
The gain or loss of a dealer in securities on his City Notes or his 1975 Bonds will be considered
As described herein, the Corporation's revenues pledged to the payment of the debt service
an ordinary gain or loss. A dealer in securities is a person who does not hold the City Notes or the
on the Bonds are derived from amounts that otherwise would have been payable to the City as per capita
1975 Bonds for investment purposes and who holds the City Notes or the 1975 Bonds primarily for
state aid pursuant to Section 54 of the State Finance Law ("Per Capita Aid") and from certain State
sale to customers in the ordinary course of business.
tax revenues to the extent that such tax revenues are not required to pay principal of or interest on the
First Bonds and the Promissory Notes. Under the Act, Per Capita Aid is payable to the Corporation
With respect to the tax consequences to financial institutions described in Section 582(c) of the
for the payment of its obligations issued under the Second General Bond Resolution after certain claims
Code, the exchange of the City Notes for the 1975 Bonds is not considered an exchange of a capital
on Per Capita Aid have been paid in full. See "Provisions for Payment of the Bonds."
asset and any gain or loss resulting therefrom will not be treated as a capital gain or loss.
Amendments to the State Finance Law provide for the establishment of a Municipal Assistance
If the fair market value of the 1975 Bonds on the date of issue is less than the face amount of
State Aid Fund (the "Municipal Assistance State Aid Fund") and a Municipal Assistance Tax Fund
such Bonds, the difference may constitute original issue discount. To the extent that such difference
(the "Municipal Assistance Tax Fund") and, within each such Fund, special accounts for the benefit
does constitute original issue discount, it will be treated as tax exempt interest under Section 103(a)
of the Corporation (the "Special Aid Account" and the "Special Tax Account"). The Special Aid
of the Code with the result that each holder will be entitled to exclude from the proceeds realized
Account will include the moneys derived from appropriation and apportionment of Per Capita Aid.
at the maturity, earlier redemption or sale of the 1975 Bonds, as interest exempt from tax, that portion
The Special Tax Account contains the revenues derived from State sales and compensating use taxes
6
7
within the City (the "Sales Tax"), less such amount as the State Commissioner of Taxation and
Additional Bonds then proposed to be issued) issued pursuant to the Second General Bond Resolution
Finance determines to be necessary for reasonable costs in administering, collecting and distributing
at least 1.2 times for each such fiscal year of the Corporation.
the Sales Tax.
The Corporation has no taxing power. The Bonds do not constitute an enforceable obligation,
Amounts of Per Capita Aid apportioned and paid to the Special Aid Account are to be paid
or a debt, of either the State or the City and neither the State nor the City is liable thereon. Neither
to the Corporation at such times and in such amounts as are annually certified by the Chairman of
the faith and credit nor the taxing power of the State or the City is pledged to the payment of principal
the Corporation (the "Chairman") as necessary to fund the Corporation's Bond Service Fund and
of or interest on the Bonds.
Capital Reserve Aid Fund at the levels required by the Act. In addition, subject to the payment in
See "Litigation" with respect to litigation relating to the security and source of payment for the Bonds.
full of all amounts required to be paid to the Corporation for the payment or security of the Corporation's
outstanding obligations, (and to the extent the amounts in the Special Aid Account are insufficient)
For a more complete description of the funds to be used to pay the principal of, and redemption
amounts of Sales Tax collected and deposited in the Special Tax Account are to be paid to the Corpora-
premium, if any, and interest on, the Bonds see "Provisions for Payment of the Bonds."
tion at such times and in such amounts as are annually certified by the Chairman as necessary to fund
the Corporation's Bond Service Fund and Capital Reserve Aid Fund at the levels required by the Act.
MORATORIUM AND STAY LEGISLATION
Payments of amounts of Per Capita Aid into the Special Aid Account are subject to annual appro-
Moratorium
priation by the State Legislature. Payments of amounts of Sales Tax out of the Special Tax Account
On November 15, 1975, the State Legislature enacted at an Extraordinary Session and the Gov-
to the Corporation are subject to annual appropriation by the State Legislature. The State Legislature
ernor signed the New York State Moratorium Act for The City of New York (the "Moratorium Act").
has appropriated the Sales Tax beginning July 1, 1975, for the State's fiscal year ending March 31, 1976,
In the legislative findings accompanying the Moratorium Act, the Legislature stated that there is
and Per Capita Aid for the State's fiscal year beginning April 1, 1975. See "Provisions for Payment
imminent danger that the City will be unable to pay its outstanding short-term indebtedness and even to
of the Bonds-Appropriation by Legislature."
provide those basic services essential to the health, safety and welfare of its inhabitants and the continuation
The amount that will be required to fund the Bond Service Fund in any fiscal year is the
of orderly government in the City. It further stated:
amount needed to pay all interest on and principal of, and sinking fund installments as well as any
"The legislature recognizes and insists that the pledge of the 'faith and credit' of the city
redemption premium on, the Corporation's outstanding Bonds maturing or otherwise coming due during
to the payment of its obligations must be respected. The legislature further recognizes that in the
that fiscal year (see "Provisions for Payment of the Bonds"). The amount that will be required to
current financial crisis, this pledge can be honored only if the viability and resources of the city are
fund the Capital Reserve Aid Fund is a fixed percentage of the amount of principal of and interest
preserved and that the continuation of essential services is vital to such preservation. The preserva-
on the Corporation's outstanding Bonds maturing or otherwise coming due during a specified calendar
tion of the city, the honoring of its obligations and the restoration of public confidence in the agencies
year, including for such purpose any unpaid amounts of such principal and interest owing in respect
of the state and of the state itself are all matters of imperative state concern and require the extraordi-
of prior calendar years. The Corporation is not obligated to maintain any amount in the Capital
nary exercise of the state's essential reserve and emergency powers set out in this Act to protect
Reserve Aid Fund in 1975 or 1976; thereafter the fixed percentages are 25% for 1977, 50% for 1978,
the vital interests of the people by sustaining the public credit and maintaining local government."
75% for 1979 and 100% for 1980 and every calendar year thereafter. In the event that the aggregate
amount in the Special Aid Account and the Special Tax Account shall at any time be less than the
The Moratorium Act provides that during the "moratorium period," the enforcement of judgments and
amount referred to above, as certified by the Chairman, an amount equal to the deficiency in the Special Tax
liens, on account of any short-term obligations of the City, including the City Notes, and the commence-
Account will be transferred, subject to appropriation by the State Legislature, to the Special Tax Account
ment or continuation of any action upon such short-term obligations are suspended, although the payment
from the Stock Transfer Tax Fund (the "Stock Transfer Tax Fund"). Such Fund consists of the revenues
of such short-term obligations may be due by the terms thereof. The term "moratorium period" is defined
derived from the tax imposed pursuant to the Tax Law on sales or transfers of stock and certain
in the Moratorium Act to mean the period expiring three years from the effective date of the Moratorium
other certificates (the "Stock Transfer Tax").
Act unless shortened by act of the Legislature. The Legislature may, by a subsequent amendment of the
Additional Bonds may be issued under the Second General Bond Resolution on a parity with the 1975
Moratorium Act, extend the moratorium period if it deems such an extension necessary. The Moratorium
Bonds ("Additional Bonds"), provided that (i) the amount equal to the lesser of the collections of the Sales
Act further provides that a court shall, upon the application of a person who would otherwise have the
Tax and Stock Transfer Tax for a twelve consecutive calendar month period (or, in the event the Sales Tax
right to do the acts or commence or continue the actions suspended by the Moratorium Act, terminate
shall not have been in effect for such period, the collections of the sales and compensating use taxes pre-
such suspensions if it finds that either of the following two conditions shall not have been met:
viously imposed by the City for those months the Sales Tax was not in effect) ended not more than two
(A) That, either before the date of maturity of the short-term obligation held by such person
months prior to the date of such determination or the amounts estimated to be collectible during the suc-
or not later than sixty days after such date of maturity, an offer shall have been made to exchange
ceeding twelve month period from such sources as estimated by the State Commissioner of Taxation, plus
such short-term obligation for a bond, note or other obligation of the Corporation having a date of
(ii) the amount of Per Capita Aid to be apportioned and paid to the Special Aid Account for the fiscal
maturity no more than twenty years after the date of maturity of such short-term obligation and
year of the State during which such Additional Bonds are to be issued, less (iii) the maximum amount
bearing interest, payable at least annually, at a rate of not less than 6% per annum; and
of principal, including sinking fund installments, and interest maturing or otherwise coming due in
the then current or any future fiscal year on any outstanding obligations of the Corporation issued pursuant
(B) That interest on the short-term obligation held by such person, who does not accept the
to the First General Bond Resolution and the Promissory Notes, less (iv) estimated operating expenses
offer, shall be paid to such person at the rate stated in such short-term obligation to the date of its
of the Corporation for its then current fiscal year, is sufficient to pay the aggregate amount of the
maturity and, thereafter, at least annually, at a rate of not less than 6% per annum and not less than
principal of, including sinking fund installments, and interest maturing or otherwise becoming due in the
the interest rate payable to any holder of such short-term obligations who has entered into an agree-
then current or any future fiscal year on all Bonds (including the particular series or series of
ment with the City which provides for issuance of an evidence of indebtedness in payment, renewal
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LIBRARY
or refunding of short-term City obligations or which provides for the extension of the maturity of
entry unless, prior thereto, an amended Repayment Plan is filed with the court. Upon the filing of the
the short-term obligations held by such holder, until the principal of such short-term obligation is
first such amended Repayment Plan, Title 6-A provides that the court shall extend and, in its discretion,
paid or otherwise discharged and at such time shall have paid such additional interest, if any, as
upon the filing of any further amended Repayment Plans it may extend the stay then in effect for such
may be held to be mandated by the State Constitution or the United States Constitution.
additional period of time as is required to permit the court to enter an order further extending the stay
and containing the findings described above with respect to the amended Repayment Plan.
The Moratorium Act further provides that the statute of limitations for the commencement of
actions on short-term notes of the City shall not run during the time period when the suspensions
Title 6-A provides that the Repayment Plan may, with court approval, be modified by the City or
described above are in effect.
the Control Board and that any order extending the stay may be vacated or modified if, upon motion
of any creditor affected thereby, the court finds that the City has failed to comply with a mate-
This Exchange Offer by the Corporation will fulfill the condition described in paragraph (A) with
rial provision of the Repayment Plan or that, because of a material change in circumstances, the Re-
respect to the City Notes. Separate exchange offers are being made to the holders of all other short-term
payment Plan no longer complies with the requirements described above. Upon the occurrence of
obligations of the City other than the Corporation, the State and certain City sinking funds. Accordingly,
the final act necessary to carry out fully all of the terms and provisions of the Repayment Plan with
the Moratorium Act will apply to all short-term obligations of the City other than those held by the
respect to those creditors who accept the plan or any benefits thereunder, Title 6-A provides that the
Corporation, the State, and certain City sinking funds.
court shall enter an order vacating any stay then in effect and permanently enjoining any creditors who
An action has been commenced contesting the constitutionality of the Moratorium Act under the
accepted the Repayment Plan or any benefits thereunder from commencing or continuing any action
New York State Constitution and the United States Constitution. See "Litigation-Moratorium".
or doing any other act relating to any contract, debt or obligation included in the Repayment Plan.
In the event that the constitutionality of the Moratorium Act is sustained by a court of final
Title 6-A also provides that no action may be commenced against the City during the Emergency
jurisdiction, such judicial determination could support the constitutionality of similar legislative enact-
Period (defined in the Financial Emergency Act as the period commencing September 9, 1975 and ending
ments which may adversely affect certain terms and conditions of the Bonds and the Resolutions,
on the date when the Control Board determines that the expense budget of the City shall have been
including the payment of principal and interest thereon, and the enforceability thereof. For a further
in balance for one fiscal year in accordance with the accounting methods prescribed for such budget
description of the effect of the moratorium on the rights of holders of short-term City obligations
by the State Comptroller pursuant to the Act) unless thirty days have elapsed since the making and
see "Rights of the Noteholders."
serving of a written demand for payment upon the City in accordance with the procedures specified in
Title 6-A.
Stay Legislation
On November 3, 1975, a national bank purporting to represent all holders of the City's bonds ac-
quired before June 10, 1975 served a summons and complaint addressed to the Corporation, the City,
Prior to the adoption of the Moratorium Act and as part of the Financial Emergency Legislation,
the State and certain officers of the City and State. The suit seeks, among other things, a declaratory
referred to under "Three-Year Financial Plan," the Legislature adopted certain amendments to the
judgment that the stay provisions, the Repayment Plan provisions and the demand for payment provisions
Local Finance Law constituting Title 6-A of such law ("Title 6-A") pursuant to which, if the City
of Title 6-A violate the State Constitution, the Federal Bankruptcy Act and the United States Con-
is unable to pay its debts or obligations as they mature, the City or, in the event the City refuses to do
stitution. For a more complete description of this lawsuit, see "Litigation-Diversion of Revenues."
so, the Emergency Financial Control Board (the "Control Board") may file in the State Supreme
Court in any county within the City a petition which shall operate for a period of ninety days to
RIGHTS OF THE NOTEHOLDERS
prohibit the doing of any act and to stay the commencement or continuation of any action seeking to
apply or enforce against the City or its funds, property, receivables or revenues, any order, judgment,
The City Notes are general obligations of the City. In accordance with Article 8, Section 2 of the
lien, set-off or counterclaim relating to any contract, debt or obligation of the City, including the City
State Constitution, the full faith and credit of the City has been pledged to the payment of such principal
Notes, or seeking the assessment, levy or collection of taxes by or for the City or the application of any
and interest. The City has power to levy ad valorem taxes upon all the taxable real property within the
funds, property, receivables or revenues of the City. Title 6-A further provides that upon the filing of
City without limitation as to rate or amount to make such payments. Article 8, Section 12 of the State
such a petition, a repayment plan (the "Repayment Plan") may be filed by the City or, in the event the
Constitution provides that the Legislature shall not restrict the power of the City to levy such taxes
City refuses to file such a Plan, by the Control Board. Title 6-A provides that upon the filing of the
for the payment of indebtedness. The holder of any City Note has a contractual right (subject to applic-
Repayment Plan the court shall enter an order approving the Repayment Plan and extending any
ability of the Moratorium Act) to payment of principal and interest at maturity in the full amount as
stay then in effect as against all creditors of the City for such additional period of time as is required
provided by the obligation; upon failure of payment of interest or principal or both the holder has the right
to carry out fully all of the terms and provisions of the Repayment Plan with respect to those creditors
to sue and is entitled to a judgment for the full amount due including interest thereon to maturity at the
who accept the Repayment Plan or any benefits thereunder if the court finds: (a) that the Repay-
stated rate, and at the legal rate of 3% thereafter. The General Municipal Law of the State provides that
ment Plan provides for the eventual satisfaction of all debts and obligations of the City, including the
if the City fails to pay the judgment, and the levy on such judgment is unfulfilled, the Board of Estimate of
City Notes; (b) that, giving due regard to the financial condition of the City and to the necessity
the City is empowered to assess, levy and cause to be collected, at the same time and in like manner as other
for the City to expend moneys for services and purposes determined to be necessary by the Control
moneys for expenses are then next thereafter to be assessed, levied and collected, a sum of money suffi-
Board, the Repayment Plan provides as prompt payment to all creditors affected thereby, on a fair
cient to pay said judgment with interest thereon and necessary fees and expenses. Any moneys so col-
and equitable basis, as is practicable in the circumstances; (c) that the Repayment Plan preserves
lected shall, from time to time, be paid to the judgment creditor.
any applicable priorities among creditors or classes of creditors; and (d) that the Repayment Plan
The Moratorium Act provides for a suspension of enforcement of City Notes, including the com-
was approved by the Control Board. In the event that the court is unable to make such findings as to
mencement or continuation of any action in any court in any jurisdiction seeking to apply to the payment
the Repayment Plan, Title 6-A provides that the court shall enter an order disapproving the Repayment
of the City Notes, any revenues or the assessment, levy or collection of any taxes and the commencement
Plan and vacating the stay then in effect, which order shall become effective within ten days from its
or continuation of any action upon the City Notes, although the payment on such City Notes may be
10
11
GERALD
due by the terms thereof. If the Moratorium Act is held unconstitutional in the suit discussed herein
As required by the Emergency Act, the City submitted the City Financial Plan to the Control Board
under "Litigation-Moratorium" or any suit seeking the same relief, a holder of City Notes could pursue
on October 15, 1975. Such Plan is based upon a variety of estimates and projections with respect to
his rights to obtain a judgment on his City Notes and seek enforcement of the judgment. However, it
revenues and expenditures during the period covered by the Plan which may vary substantially from
such holder exchanges his City Notes pursuant to this Exchange Offer he would probably be deemed to
actual revenues and expenditures of the City during such period. As modified at the request of the Con-
have relinquished any rights to judgment on or enforcement of the City Notes exchanged.
trol Board, the City Financial Plan was approved on October 20, 1975. As approved, the City Financial
In the litigation discussed herein under "Litigation-Diversion of Revenues" the plaintiff bond-
Plan is based on a number of assumptions including the following:
holders seek a declaratory judgment that they "are entitled to have set aside sufficient sums, and be paid
(1) Expenditures of the City will be reduced by an aggregate of $200,000,000 during its
first, the interest and principal on their City bonds from the first revenues received by the City". The
current fiscal year and by $270,000,000 during each of its 1976-1977 and 1977-1978 fiscal years.
Corporation cannot predict the outcome of the litigation as it relates to such claim nor can it predict
Although the budget for the current fiscal year has been reduced by the required $200,000,000,
the outcome of litigation alleging a similar cause of action relating to City Notes. If such a claim were
there can be no assurance that the City will be able to effect such expenditure savings during this
upheld as to the City Notes and the Moratorium Act held unconstitutional, the holder of a City Note
year or that the City will make or implement the required budget cuts in the two subsequent fiscal
would have the right to receive the first revenues received by the City applied to the payment of his Notes.
years.
However, if the holder exchanges his City Notes he would probably relinquish such rights.
Several lawsuits alleging fraud under the Federal securities laws in connection with the sale of the
(2) There will be no increases in salary scales for municipal workers above the previously
City Notes have been instituted and are discussed more fully under "Litigation-Fraud in the Sale of
scheduled 1975-76 level and the City will realize the anticipated cash savings from the voluntary
City Securities". If such fraud is established holders of City Notes may have the right to seek
one-year deferrals in increases in salary scales agreed to by certain municipal workers in or after
damages or rescission of such purchases. Such actions would be maintained in the Federal courts and
August 1976. The Emergency Act imposes a one year wage freeze for workers who do not volun-
would not be subject to the Moratorium Act. If a holder of City Notes exchanges his City Notes he
tarily agree to such deferrals but the constitutionality of the wage freeze is being challenged and
would probably be deemed to have relinquished his right to rescind, but he would probably not be deemed
definitive wage deferral agreements have not yet been signed. There can be no assurance that the
to have relinquished his right to seek damages.
City will be able to fulfill this assumption during all or any part of the period covered by the Plan.
It is noted that nothing in the Moratorium Act precludes the City from paying the principal of or
(3) The City's expenditures for welfare and medicaid programs will remain constant for the
interest on the City Notes; however, as discussed under "Various Control Programs-Control Board,"
period covered by the Plan. The City's expenditures for welfare and medicaid programs are largely
all moneys, including all taxes and revenues of the City, received by the City must be deposited in a
mandated by Federal and State legislation and the City has only limited control over the number
special fund, disbursements from which are subject to approval by the Control Board in accordance with
of persons participating in its largest welfare and medicaid programs. There are, however, discre-
the City Financial Plan. The Corporation does not believe that the City has sufficient funds available at
tionary programs that could be eliminated and management changes that could, if implemented,
present or in prospect to pay all of the City Notes as and when they become due and, as permitted by the
reduce costs. Unless the level of participation in such programs and certain of the discretionary
Emergency Act (defined below), the City Financial Plan does not now provide for any repayment
programs are reduced, it is unlikely that the City will be able to fulfill this assumption.
of principal on the City Notes during such three-year period. See "Three-Year Financial Plan". In the
event that this exchange results in a substantial amount of tenders of City Notes, there can be no assurance
Although the City Financial Plan does provide for a balanced budget for the City's fiscal year
that the City will not have moneys available to pay the balance of the City Notes, as to both principal
ending June 30, 1978, the Plan is based upon the assumption that over the life of the Plan there will
and interest.
be available $6,800,000,000, in cash or cash savings, from sources not committed at the time of its adoption.
The City Financial Plan includes deficits for the current fiscal year as well as the fiscal year ending
THREE-YEAR FINANCIAL PLAN
June 30, 1977. In addition, the City Financial Plan does not address the questions concerning accrual
City Financial Plan
and funding of the City's pension plans, pending recommendations from the Mayor's Management
As a part of certain legislation adopted by the State Legislature at an Extraordinary Session and
Advisory Board headed by Richard Shinn. It is expected that such study will show an under-accrual
signed by the Governor on September 9, 1975, constituting Chapters 868, 869 and 870 of the Laws of
in the pension plans, which may require increased funding of the pension system. In providing for a
1975, as amended (the "Financial Emergency Legislation"), the State Legislature adopted the New
balanced expense budget for the City's fiscal year ending June 30, 1978, the Plan permits substantial
York State Financial Emergency Act for The City of New York (the "Emergency Act") which, among
amounts of expense items to continue to be included in the City's capital budget. The Act provides for
other things, created the Emergency Financial Control Board (the "Control Board"). See "Various
the elimination of such expense items from the City's capital budget over a ten-year period. See para-
Control Programs-Control Board."
graph 5 under "Various Control Programs-Conditions to Payment by the Corporation."
One of the Control Board's primary functions is to develop, in conjunction with the City, a financial
plan for the fiscal years ended June 30, 1976, 1977 and 1978 for the City and so-called "covered organi-
Proposed Sources of Required Moneys
zations," which are defined as certain governmental agencies, public authorities and public benefit corpora-
In order to attempt to provide the approximately $6,800,000,000 in cash or cash savings required
tions which receive or may receive monies directly, indirectly or contingently (other than for the sale of
by the City Financial Plan, the State, the City and the Corporation have proposed a plan to pro-
goods or services or for loans to the City) from the City (the "City Financial Plan"). Under the Emer-
vide such amount. This proposal (the "Three-Year Plan") contains the following elements, some
gency Act, the City Financial Plan is to constitute a program by which (1) the City will achieve a budget
of which have not yet been definitely committed to by the parties involved, as described below, and
for its fiscal year ending June 30, 1978 balanced in accordance with the accounting principles set forth in
others of which may not be realized to the extent projected.
the State Comptroller's Uniform System of Accounts for Municipalities, as the same may be modified by
the State Comptroller in consultation with the City Comptroller, and (2) the State imposed limitations
1. The holders of the $1,600,175,000 of City Notes are being given an opportunity to exchange
contained in the Act on outstanding short-term obligations of the City will be observed at all times.
their City Notes for 1975 Bonds of the Corporation pursuant to this Exchange Offer. All City
12
13
GERALD
Notes not exchanged pursuant to this Exchange Offer will be subjected to the moratorium described
6. It is anticipated that an increase in the City's real estate tax will be required to fund additional
under "Moratorium and Stay Legislation-Moratorium."
debt service requirements of the City arising out of the Three-Year Plan. However, it is expected
that a portion of the debt service paid to the City pension funds, which will be purchasing City
2. Each of the eleven New York Clearing House Banks, and certain City pension funds (the
securities as described in paragraph 4 above, will be utilized to purchase additional City securities.
"Institutional Holders"), owning an aggregate of approximately $849,220,000 principal amount
In this manner it is anticipated that the increased real estate taxes indirectly will be available as a
of short-term obligations of the City, have agreed not to tender such obligations pursuant to any
new cash source to the City. The Three-Year Plan contemplates approximately $400,000,000 of
exchange offer by the Corporation but to continue to hold such short-term obligations of the City
additional cash from this source over the last two years of the Three-Year Plan.
subject to the moratorium. In addition, the Institutional Holders agreed to continue to hold short-
7. On November 26, 1975, at the Extraordinary Session of the State Legislature, provisions
term obligations of the City after the termination of the moratorium, in the aggregate initial principal
for new or increased taxes were enacted, with application only within the City. City sources have
amount equal to the short-term obligations of the City they now hold. Such obligations will bear
estimated that such additional taxes will produce approximately $500,000,000 in City revenues
interest at 6% per annum and will not be paid in full until July 1, 1986, but shall be reduced annually in
during the Three-Year Plan.
substantially equal amounts over the period commencing with the end of the moratorium and ending
on July 1, 1986. The $200,000,000 of short-term obligations of the City held by the City sinking
If all of the agreements or proposals referred to in paragraphs 2 through 7 above are carried out
funds will not be subjected to the moratorium, but such sinking funds have agreed, upon or in pay-
in full and achieve the results projected under the Three-Year Plan and if the moratorium remains in
ment of such Notes, to purchase City bonds bearing interest at 6% per annum, with maturities and
effect, such sources are projected to provide the approximately $6,800,000,000 in cash or cash savings
annual principal installments meeting the legal obligations of such sinking funds. The agreement
required by the City Financial Plan, but there can be no assurance that such cash or cash savings will
not to tender City Notes pursuant to an exchange offer is unconditional but the other agreements of
be realized.
the Institutional Holders are subject to certain conditions, including the condition that Federal
legislation be enacted that would provide, by way of guarantees or otherwise, for the seasonal
Other Potential Sources of Money
financing needs of the City through the Three-Year Plan, in a maximum amount of not less than
The Corporation cannot predict whether the City may receive amounts of money from one or more
$2,500,000,000. For a description of the Federal legislation recommended by the President, which
potential sources which the City could apply to the payment of all or a part of the City Notes.
differs in certain respects from this condition, see "Exchange Offer-General."
3. The Institutional Holders have also agreed, with respect to approximately $1,700,000,000
THE CORPORATION
principal amount of bonds of the Corporation now owned by them, to adjust the terms thereof or
The Corporation, a corporate governmental agency and instrumentality of the State constituting a
to exchange such bonds for new bonds to be issued by the Corporation so that all of such bonds
public benefit corporation, was created in June 1975, by the Act, for the purposes of assisting the City
will, commencing February 1, 1976, bear interest at the rate of 6% per annum and mature on
in providing essential services to its inhabitants without interruption and in creating investor confidence
February 1, 1986, subject to mandatory redemption or sinking fund payments commencing on
in the soundness of the obligations of the City. To carry out such purposes, the Corporation is empowered,
February 1, 1977, calculated to provide for substantially level debt service. Such outstanding bonds
among other things, to issue and sell bonds and notes and to pay or lend funds received from such sale
now owned by the Institutional Holders bear interest at rates ranging from 6% per annum to 11% per
to the City and to exchange the Corporation's obligations for obligations of the City. See "Various
annum and mature at various times between 1977 and 1990. The Corporation estimates that the
Control Programs-Powers of the Corporation."
aggregate debt service savings to the Corporation through June 30, 1978, as the result of such
adjustments or exchanges, would be approximately $62,000,000. The Corporation has agreed not
The Act provides that no bond or note of the Corporation shall mature more than 20 years from
to issue any new bonds of the Corporation based upon such debt service savings so that such savings
the date of the original issue of such bond or note, and that no such bond or note shall be issued later
will flow directly to the City if not otherwise required by the Corporation. Such agreements of the
than June 10, 1980, unless such bond or note is a renewal or refunding of an outstanding bond or note.
Institutional Holders are subject to certain conditions, including the same condition regarding Federal
The present Directors of and Representatives to the Corporation are as follows:
legislation as is set forth in paragraph 2 above.
Directors
Representatives
4. The trustees of various City pension funds agreed to purchase for such funds an aggregate
Felix G. Rohatyn, Chairman
Zane Klein
of $2,530,000,000 of newly issued obligations of the City (provided that some portion of the securities
Francis J. Barry
Edward M. Kresky
so purchased might be Bonds of the Corporation). Under the agreement the newly issued City
John A. Coleman
Leonard Nadel
bonds would bear interest at 9% per annum (the Bonds of the Corporation would bear interest
at 8% per annum). Such purchases would be made from time to time over the course of the
Thomas D. Flynn
Nicholas L. Pitaro
period included in the City Financial Plan. Such agreement of the City pension funds is sub-
George D. Gould
Arthur J. Quinn
ject to certain conditions, including (i) the enactment of a State law respecting the legal status
Dick Netzer
Robert W. Seavey
of such pension funds and the responsibilities of their trustees, (ii) the enactment of a Federal
Donna E. Shalala, Treasurer
M. Peter Schweitzer
law or issuance of a tax ruling relating to the qualified status of such pension funds following such
Robert C. Weaver
purchases and (iii) the enactment of the Federal legislation referred to in paragraph 2 above.
5. In the City's fiscal year ended June 30, 1975, the State advanced $800,000,000 to the City
Herbert Elish is the Executive Director of the Corporation and Daniel B. Goldberg is Counsel and
that was otherwise due in the fiscal year ending June 30, 1976. The State has been asked to
Secretary of the Corporation. Mr. Elish is also the Executive Director of the Control Board.
continue to make such advances to the City during each fiscal year of the Three-Year Plan. If
For additional information as to the Board of Directors of and the Representatives to the Corporation
the State is financially able to continue such advances, the cash available to the City during the
and related matters, see "Management."
Three-Year Plan would be increased by $800,000,000.
15
14
MARKET CONSIDERATIONS AFFECTING 1975 BONDS AND CITY NOTES
the amounts available to the Corporation from the Municipal Assistance State Aid Fund and the
Municipal Assistance Tax Fund for payment of the principal of and interest on the 1975 Bonds to be
The Corporation believes that, in addition to being affected by general conditions in the bond market,
less than 1.2 times the annual debt service on such 1975 Bonds.
market prices of the First Bonds issued pursuant to the First General Bond Resolution may have been
affected, and market prices of the 1975 Bonds may be affected, by developments with respect to the City's
The Corporation may not issue any additional bonds, notes or other obligations as defined in and
financial condition notwithstanding the fact that bonds of the corporation do not constitute obligations
issued pursuant to the First General Bond Resolution unless both of the following conditions are met
or debts of the City. The Corporation believes that its ability to repay such bonds is not dependent upon
the financial condition of the City. See "Provisions for Payment of the Bonds."
1. The amount equal to (a) the lesser of (i) the most recent collections for the 12 consecutive
calendar months ended not more than two months prior to the date of such determination, of the Sales
Since their issuance in July 1975, the First Bonds have generally traded substantially below their initial
Tax and Stock Transfer Tax, and such other taxes, which as of the date of issuance of any such
offering prices. During this period, the market for City Notes has been limited and those sales that have
series of bonds, notes or other obligations, are levied and collected by the State and are payable into
been effected are believed generally to have been at prices substantially below par value. There can be
the Special Account in the Municipal Assistance Tax Fund established for the Corporation (in the
no assurance that there will exist any substantial market for the 1975 Bonds at or near par value of the
event such Sales Tax or such other taxes have not been in effect for such 12 months, collections of
City Notes exchanged for such Bonds nor can there be any assurance that there will exist any substantial
the sales and compensating use taxes previously imposed by the City or collections of the tax similarly
market for the untendered City Notes or, if such a market will exist, whether the market price will be at
based to the other taxes referred to above if such tax was previously imposed by the City, may be
or near par value. In addition, although bonds of the Corporation are not obligations of either the City
utilized in lieu of actual collections of the Sales Tax or other taxes, for those months the Sales Tax
or the State, financial developments with respect to the City or the State, or agencies of either, may affect
or other taxes were not in effect) or (ii) the amounts estimated to be collectible during the succeeding
the existence of a market as well as the market price for such bonds. Financial developments with respect
12-month period from such sources as estimated by the State Commissioner of Taxation and Finance,
to the City or the State, or agencies of either, will probably have an effect on the existence of a market as
less (b) the estimated amount of operating expenses of the Corporation for the then current fiscal
well as the market price for the City Notes.
year of the Corporation, is at least two times (c) the amount of principal, including sinking fund
installments, and interest maturing or otherwise coming due in the then current or any future fiscal
The enactment of Federal legislation providing financial assistance to the City by way of short-term
year of the Corporation on all bonds, notes and other obligations as defined in and issued pursuant
Federal loans to the State for the benefit of the City, as now proposed by the President (see "Exchange
to the First General Bond Resolution (including the particular series or series of additional bonds,
Offer-General"), would not appear to provide any amounts, or release any funds from other requirements,
notes or other obligations then proposed to be issued) and
for payment of City Notes not tendered pursuant to this Exchange Offer. There can be no assurance
that such legislation will be enacted, but the enactment or implementation of any such legislation would
2. The amount of Sales Tax collections or the amount determined in lieu of such collections as
probably have an effect on the existence of a market as well as the market price for such City Notes.
set forth in clause (a) (ii) of paragraph 1 above, less the estimated operating expenses of the Corpora-
tion for the then current fiscal year of the Corporation, is at least 1.5 times the amount determined
under clause (c) of paragraph 1 above.
OUTSTANDING DEBT OF THE CORPORATION
The Corporation at present has outstanding $3,078,685,000 in aggregate principal amount of First
PROVISIONS FOR PAYMENT OF THE BONDS
Bonds issued pursuant to the First General Bond Resolution. It also has outstanding Promissory
Notes in the aggregate principal amount of $298,500,000. The First Bonds should not be confused with
General
the 1975 Bonds being offered holders of the City Notes pursuant to this Exchange Offer.
The Bonds are general obligations of the Corporation payable out of any available revenues of the
The holders of the First Bonds and the Promissory Notes have a claim prior to that of the holders
Corporation not otherwise pledged. The Bonds are entitled to a lien created by the pledge under the
of the 1975 Bonds on all amounts received by the Corporation from the State as payments from the
Second General Bond Resolution of all moneys and securities paid into the Bond Service Fund and the
Municipal Assistance Tax Fund (including the Sales Tax and the Stock Transfer Tax). The holders of
Capital Reserve Aid Fund held by the Trustee. Such moneys and securities include each of the following:
the 1975 Bonds have no claim on any of the moneys or securities in the funds or accounts established
(i) all amounts received by the Corporation from the State as payments from the Municipal Assistance
pursuant to the First General Bond Resolution SO long as the First Bonds, or any other bonds issued
State Aid Fund (see "Municipal Assistance State Aid Fund") for deposit in the Bond Service Fund
pursuant to the First General Bond Resolution, or any notes or other obligations as defined in and issued
and in the Capital Reserve Aid Fund; (ii) amounts received by the Corporation from the State as pay-
pursuant to such First General Bond Resolution, are outstanding. The holders of the First Bonds have no
ments from the Municipal Assistance Tax Fund annually from such Fund to the Corporation of the
claim, however, on any Per Capita Aid received by the Corporation through the Municipal Assistance
amounts required to fund the Debt Service Fund, the Capital Reserve Fund and the operating fund
State Aid Fund.
established by the First General Bond Resolution) for deposit in the Bond Service Fund and the Capital
Reserve Aid Fund; (iii) all other amounts received by the Corporation from the State as payments for
The Corporation has reserved the right to issue additional bonds pursuant to the First General Bond
deposit in the Capital Reserve Aid Fund (pursuant to the certification annually, on or before December
Resolution and notes and other obligations as defined in and issued pursuant to the First General Bond
1, by the Chairman to the Governor and the State Director of the Budget, of the sums necessary to restore
Resolution, but has covenanted in the Second General Bond Resolution that it shall not issue any such
the Capital Reserve Aid Fund to the required amount, see "Restoration of Capital Reserve Aid Fund")
bonds, notes or other obligations if at the time of issuance the effect of such issuance would be to cause
and (iv) any income or interest earned as a result of investments of such amounts so deposited in such
Funds. See "Summary of Certain Provisions of the Second General Bond Resolution-Additional Bonds."
16
17
Set forth below is a chart which illustrates the flow of funds as described above:
Payment of the amounts referred to in clauses (i) and (ii) above will be subject to the certification,
not later than February 12 in each year or thereafter if revision is required, by the Chairman to the State
Comptroller and to the Mayor of a schedule setting forth the cash requirements of the Corporation
for such fiscal year and the time or times when such cash is required. The certification is required
to include the total amount required to be deposited in the Bond Service Fund to pay all interest on and
PER CAPITA AID
SALES TAX
STOCK TRANSFER TAX
all principal of and redemption premium, if any, on Bonds maturing or otherwise coming due during such
fiscal year and the total amount required to be deposited in the Capital Reserve Aid Fund during such
fiscal year in order to maintain the Capital Reserve Aid Fund at the required amount. The amount that
1
will be required to fund the Capital Reserve Aid Fund is a fixed percentage of the amount of principal
of and interest on the Corporation's outstanding Bonds maturing or otherwise coming due during a speci-
fied calendar year, including for such purpose any unpaid amounts of such principal and interest owing in
PRIOR CLAIMS ON
PER CAPITA AID
STOCK TRANSFER
respect of prior calendar years. The Corporation is not obligated to maintain any amount in the Capital
TAX FUND
2
Reserve Aid Fund in 1975 or 1976; thereafter the fixed percentages are 25% for 1977, 50% for 1978, 75%
3
for 1979 and 100% for 1980 and every calendar year thereafter.
Payment to the Corporation of the amounts referred to in clauses (i) and (ii) above are required
SPECIAL ACCOUNT
IN THE MUNICIPAL
to be made by the State only if and to the extent that monies have been appropriated by the State Legis-
ASSISTANCE TAX FUND
SPECIAL ACCOUNT IN
lature from the Special Aid Account and the Special Tax Account or that revenues have otherwise been
THE MUNICIPAL
ASSISTANCE
made available therefor by the State (see "Municipal Assistance State Aid Fund" and "Municipal Assist-
STATE AID FUND
ance Tax Fund"). The source of moneys in the Special Aid Account is the Per Capita Aid, which is
DEBT SERVICE ON
appropriated by the Legislature from the General Fund of the State and is apportioned and paid on audit and
FIRST BONDS AND
warrant of the State Comptroller pursuant to Section 54 of the State Finance Law. The Per Capita
PROMISSORY NOTES
Aid may be paid into such Special Aid Account only after statutory claims on such aid having a priority
over the claim of the Corporation have been paid. Such statutory claims are described below under
"Municipal Assistance State Aid Fund." The source of moneys in the Special Tax Account is the Sales
4
4
4
Tax and, beginning with the State fiscal year commencing April 1, 1976, if required, the Stock Transfer
Tax Fund, the moneys in which are derived from the Stock Transfer Tax imposed by Article 12 of the
Tax Law. In the opinion of Bond Counsel, the State has the right and power to apportion and pay such
BOND SERVICE
CAPITAL RESERVE
OPERATING
FUND
AID FUND
FUND
aid and to impose such taxes and to increase or decrease the amount of such aid and such taxes, to estab-
©
lish the Municipal Assistance State Aid Fund, the Municipal Assistance Tax Fund, the Special Aid Ac-
count and the Special Tax Account therein and the Stock Transfer Tax Fund and to make any such
appropriation, but is not bound or obligated to continue the procedure for apportionment and payment of
DEBT SERVICE
such aid or the imposition of said taxes, to maintain the existence of the Municipal Assistance State Aid
ON BONDS
Fund, the Municipal Assistance Tax Fund, any special accounts therein or the Stock Transfer Tax Fund
THE CITY OF
or to make any appropriations. See "Appropriation by Legislature."
NEW YORK
The Corporation, in accordance with the Act and pursuant to the express provisions of the Second
General Bond Resolution, has covenanted to cause its Chairman to certify each year (at the time or times
Subject to appropriation by State Legislature.
required) to the State Comptroller and to the Mayor schedules setting forth the cash requirements of the
See "Municipal Assistance State Aid Fund."
Corporation for such fiscal year and the time or times when such cash is required, all as described above.
3
After March 31, 1976, available, if necessary.
After certification by the Corporation as to its requirements.
In addition to the moneys that become available to the Corporation from the Special Aid and the
Special Tax Accounts, or otherwise from the State, which are deposited in and subject to the afore-
0 Subject to appropriation by State Legislature and after payment of all amounts certified by
the Corporation, if any.
said pledge of and lien upon the Bond Service Fund and Capital Reserve Aid Fund, the Corporation
may from time to time receive payments from the City of the principal of and interest on obligations
Available, if necessary.
of the City purchased or exchanged by the Corporation. Such payments may be used for the further
After payment of all amounts certified by the Corporation.
purchase or exchange of obligations of the City or for other corporate purposes of the Corporation.
Subject to appropriation by State Legislature.
The amount the Chairman is required to certify for debt service on the Bonds may not be reduced by
any amounts payable to the Corporation in respect of obligations of the City. Such obligations of the
City held from time to time by the Corporation are not subject to the lien created by the pledge under
the First or Second General Bond Resolutions.
19
18
Neither the Corporation nor the holders of the Bonds shall have any lien on the moneys in the
deposited into the Special Tax Account and the Stock Transfer Tax Fund, do not constitute revenues
Special Aid Account or Special Tax Account. Any provisions of the Second General Bond Resolution
applicable to the General Fund of the State and hence such collections would likewise not be authorized
and the Bonds with respect to provision for payment by the State to the Corporation of Per Capita Aid,
or mandated to be set apart, aside or applied by the State Comptroller for the payment of State obligations.
the Sales Tax or the Stock Transfer Tax out of the Special Aid Account and the Special Tax Account or
However, the source of moneys in the Special Aid Account is the apportionment and payment of Per
by transfer to the Municipal Assistance Tax Fund from the Stock Transfer Tax Fund are executory only
Capita Aid from the General Fund of the State and upon a failure of the Legislature to make the
to the extent of the moneys available to the State in such Funds from time to time, which moneys shall
appropriation referred to above, there can be no assurance given that there will be sufficient moneys
have been theretofore appropriated to the Corporation, and no liability on account thereof shall be incurred
available in the General Fund of the State to permit any apportionment and payment of Per Capita
by the State beyond the moneys available in such Funds.
Aid after the State Comptroller sets apart a sum sufficient to pay any State obligations.
The Corporation has no taxing power. The Bonds do not constitute an enforceable obligation, or a
Municipal Assistance State Aid Fund
debt, of either the State or the City and neither the State nor the City shall be liable thereon. Neither the
faith and credit nor the taxing power of the State or the City is pledged to the payment of the principal
The Municipal Assistance State Aid Fund has been established by the State Finance Law and is
in the custody of the State Comptroller. Within the Municipal Assistance State Aid Fund, the
of or the interest or any redemption premium on the Bonds.
Special Aid Account is established for the benefit of the Corporation. The Special Aid Account receives
Appropriation by Legislature
revenues from the Per Capita Aid after certain claims, described below, having a priority on the payment
Per Capita Aid is subject to appropriation by the State Legislature for the benefit of the City as a
of such aid have been satisfied. The State Finance Law provides for the allocation and payment of the
part of the State budgetary process. The State Finance Law provides that the State Legislature shall
Per Capita Aid subject to prior appropriation by the Legislature (although the Legislature is not obli-
appropriate the Sales Tax and Stock Transfer Tax to the Corporation. Under the State Constitution in
gated or bound to make such appropriation) of (i) any amounts, limited by the Financial Emergency
order to appropriate State funds, the State Legislature must approve such appropriation at least every
Legislation to a maximum of $65,000,000 in any fiscal year of the City, required to be paid to the City
two years. The State Legislature may not be bound in advance to make such an appropriation. It is
University Construction Fund ("CUCF") pursuant to the City University Construction Fund Act, (ii)
contemplated that the State Legislature will make an annual appropriation of the Per Capita Aid, Sales Tax
any amounts required to be paid in any fiscal year to the New York City Housing Development Corpora-
and Stock Transfer Tax.
tion ("HDC") pursuant to the New York City Housing Development Corporation Act to restore the
capital reserve fund established for HDC's General Housing Bonds to the amount required to be on
The Sales Tax is now imposed at the same rate and upon the same base as the previously imposed
deposit in such fund, which amount was limited by the Financial Emergency Legislation to the lesser
City sales tax. The Sales Tax is a new tax source for the State which, under the State Finance Law, is
of $85,000,000 or an amount equal to the maximum annual debt service, including principal of, sinking
deposited in a special fund of the State (the Special Tax Account in the Municipal Assistance Tax Fund)
fund installments, if any, and interest on bonds issued by HDC in an aggregate principal amount out-
rather than in the State's General Fund. The provisions of the State Finance Law relating to the creation
standing of $800,000,000 or, (iii) the amount equal to any deficiency in certain payments required to
of the Municipal Assistance Tax Fund provide that in no event shall the State Comptroller pay over and
be paid by the City to the New York City Transit Authority pursuant to the provisions of Chapter 7
distribute any moneys in the Special Account (other than the amount to be deducted for administering,
of the Laws of New York State of 1972, (iv) the amount equal to any deficiency in annual payments
collecting and distributing the Sales Tax) to any person other than the Corporation unless and until the
required to be paid by the City to the State to repay an advance made pursuant to the provisions of
aggregate of all cash requirements of the Corporation as certified to the State Comptroller have been
Chapter 3 of the Laws of New York State of 1974, whereby the State made a loan to the City in order to
appropriated and have been paid to the Corporation in full. Subject to appropriation by the Legislature
subsidize the fare of the New York City Transit Authority, (v) $500,000 to the chief fiscal officer of the
and once the Per Capita Aid has been paid into the Municipal Assistance State Aid Fund, similar
City for payment to the trustees of the Police Pension Fund of the City pursuant to Section 54 of the
provisions of State Finance Laws restricting use of moneys by the State Comptroller are applicable.
State Finance Law and (vi) the balance to the Special Aid Account.* The Act provides that any pro-
The Corporation believes that any failure by the State Legislature to make annual appropriations
vision therein or in any agreement by the Corporation with the holders of the Corporation's securities
as contemplated would have a serious impact on the ability of the State and its agencies and public
which relates to certain revenues, including Per Capita Aid, or to certain funds, including the Municipal
benefit corporations to raise funds in the public market.
Assistance State Aid Fund and the Special Aid Account, shall be deemed executory only to the extent
The foregoing discussion does not constitute an assurance that the State Legislature will appro-
of the moneys available to the State in such Funds from time to time which moneys shall have been there-
priate the Per Capita Aid, Sales Tax and Stock Transfer Tax as contemplated.
tofore appropriated to the Corporation and no liability on account thereof shall be incurred by the State
beyond the moneys in such Funds.
Article 7, Section 16 of the New York State Constitution provides that if the State Legislature
shall fail to make an appropriation for the payment of principal of and interest on State bonds or notes,
The Act provides that the State Comptroller shall make payments from the Special Aid Account to the
including sinking fund payments, as the same shall fall due, the State Comptroller " shall set apart
Corporation in the amounts and at the times certified by the Chairman to the State Comptroller and the
from the first revenues thereafter received, applicable to the general fund of the State, a sum sufficient
Mayor. In the event that the amounts in the Special Aid Account that have been appropriated to the
to pay such interest, installments of principal, or contributions to such sinking fund, as the case may be,
Corporation shall at any time be less than the amount certified by the Chairman, the State Finance Law
and shall so apply the moneys thus set apart."
provides for the transfer from the Special Tax Account, subject to prior liens thereon, to the Special Aid
Account of an amount equal to the deficiency. See "Municipal Assistance Tax Fund."
In the opinion of Bond Counsel, under existing law, upon any failure of the State Legislature to
make the required appropriations as aforesaid, moneys on deposit in the Stock Transfer Tax Fund and
*
Although the Financial Emergency Legislation purports to limit claims on the Per Capita Aid pur-
the Municipal Assistance Tax Fund, including the Special Tax Account therein (each such account
suant to (i) above, such limitation may not be effective in the event that the outstanding bonds of CUCF
or fund as presently constituted being a Special Fund of the State), would not constitute revenues
are accelerated pursuant to the occurrence of an event of default under the CUCF bond resolution. In
applicable to the General Fund of the State and hence said Article 7, Section 16 does not authorize
such event, all the outstanding bonds of CUCF would be due and would, to the extent of fifty percent of
or mandate such moneys to be set apart by the State Comptroller for the payment of State obligations.
such principal amount, have a prior claim on the Per Capita Aid. CUCF has outstanding $527,980,000
in bonds and $46,000,000 in notes, which are to be funded by bonds (the issuance of such bonds is sub-
Further, under existing law, collections of the Sales Tax and Stock Transfer Tax which are to be
ject to Control Board approval).
21
20
The State Finance Law provides that the State Comptroller shall from time to time, but in no event
later than the 15th day of October, January and April and the last day of June of each fiscal year, pay
certain funds, including the Municipal Assistance Tax Fund and the Special Tax Account, shall be
to the City all revenues in the Special Aid Account in excess of the amount which the Chairman has certified
deemed executory only to the extent of the moneys available to the State in such Funds from time to time
to the State Comptroller. The Per Capita Aid is more fully described under "Per Capita Aid."
which monies shall have been theretofore appropriated to the Corporation and no liability on account
Pursuant to the Act and under the Second General Bond Resolution, the Chairman is required, not
thereof shall be incurred by the State beyond the moneys in such Funds.
later than February 12 in each year, and from time to time thereafter as may be necessary, to certify to the
The Act provides that the State Comptroller shall make payments from the Special Tax Account
State Comptroller and the Mayor of the City the amount of cash required by the Corporation in order
to the Corporation in the amounts and at the times certified by the Chairman to the State Comptroller
for it to meet its obligations payable from the Bond Service Fund as they become due. Pursuant to the
and the Mayor. In the event that the amounts in the Special Tax Account that have been appropriated
Act, the State Comptroller may not disburse amounts from the Special Aid Account to the City or any
to the Corporation shall at any time be less than the amount certified by the Chairman, the State Finance
other entity so long as a certified amount required to be paid remains unpaid.
Law provides for the transfer from the Stock Transfer Tax Fund to the Special Tax Account of an
amount equal to the deficiency. The Stock Transfer Tax Fund consists of the revenues derived from the
Pursuant to the Act and as provided in the Second General Bond Resolution, the foregoing certifica-
tion procedure provides for payments to the Corporation for deposit in the Bond Service Fund and
Stock Transfer Tax. However, the State Finance Law does not authorize any appropriation of the
the Capital Reserve Aid Fund from the Special Aid Account to be made on or before January 15,
moneys in the Stock Transfer Tax Fund to the Corporation until the fiscal year of the State beginning
April 1, 1976.
April 15, June 25 and October 15 in each year. Consequently, the first interest payment on the 1975
Bonds, due on July 1, 1976, will be paid to the extent of moneys on deposit in the Bond Service Fund
The State Finance Law provides that the State Comptroller shall from time to time, but in no event
received from the payments into the Bond Service Fund in January, April and June, 1976 from
later than the 15th day of October, January and April and the last day of June of each fiscal year, pay
the Special Aid Account. Thereafter, subject to appropriation of Per Capita Aid by the State Legislature,
to the City all revenues in the Special Tax Account in excess of the amount which the Chairman has
the debt service payments due on January 1 and July 1 in each fiscal year of the Corporation will be
certified to the State Comptroller. The Sales Tax and Stock Transfer Tax are more fully described under
paid from moneys on deposit in the Bond Service Fund received from payments into the Bond Service
"Sales Tax" and "Stock Transfer Tax."
Fund, which payments will aggregate the total debt service payments required to be made in such year.
Pursuant to the Act and under the Second General Bond Resolution, the Chairman is required, not
For additional information concerning the certification procedure, see "Summary of Certain Provisions
later than February 12 in each year, and from time to time thereafter as may be necessary, to certify to
of the Second General Bond Resolution-Maintenance of Certain Funds."
the State Comptroller and the Mayor of the City the amount of cash required by the Corporation in order
However, the State is not bound or obligated to continue the apportionment and payment of the Per
for it to meet its obligations payable from the Bond Service Fund as they become due. Pursuant to the
Capita Aid or to maintain the existence of the Special Aid Account. The Second General Bond Resolution,
Act, the State Comptroller may not disburse amounts from the Special Tax Account to the City or any
however, provides that (i) the failure of the State to continue to apportion and pay Per Capita Aid or to
other entity so long as a certified amount required to be paid remains unpaid.
maintain the existence of the Special Aid Fund or the Special Aid Account or if the State reduces the
Pursuant to the Act and as provided in the Second General Bond Resolution, the foregoing certifi-
amount of Per Capita Aid payable during the current fiscal year to an amount less than the amount
cation procedure provides for quarterly payments to the Corporation for deposit in the Bond Service
of principal and interest maturing or otherwise coming due in the current or any future fiscal year,
Fund and the Capital Reserve Aid Fund from the Special Tax Account to be made on or before January 15,
or (ii) the failure of the State Comptroller to pay to the Corporation for deposit in the Bond Service
April 15, June 30 and October 15 in each year. Consequently, the first interest payment on the 1975
Fund and the Capital Reserve Aid Fund the amount or amounts as shall be certified by the Chairman,
Bonds, due on July 1, 1976, will be paid to the extent of moneys on deposit in the Bond Service Fund
shall each constitute an event of default with respect to the Bonds. See "Summary of Certain Provisions
received from the payments into the Bond Service Fund on January 15, April 15 and June 30, 1976 from
of the Second General Bond Resolution-Events of Default."
the Special Tax Account. Thereafter, subject to appropriation by the Legislature, the debt service
The State Comptroller may in his discretion invest revenues in the Special Aid Account in obligations of
payments due on January 1 and July 1 in each fiscal year of the Corporation will be paid from moneys on
the United States or of the State or in obligations the principal of and interest on which are guaranteed
deposit in the Bond Service Fund received from quarterly payments into the Bond Service Fund, which
by the United States or by the State.
quarterly payments will aggregate the total debt service payments required to be made in such year. For
additional information concerning the certification procedure, see "Summary of Certain Provisions of
Municipal Assistance Tax Fund
the Second General Bond Resolution-Maintenance of Certain Funds."
The Municipal Assistance Tax Fund has been established by the State Finance Law and is
The amount of revenues received from the Sales Tax must, upon certification by the State Commis-
in the custody of the State Comptroller. Within the Municipal Assistance Tax Fund, the Special Tax
sioner of Taxation and Finance, be deposited in the Special Tax Account, regardless of the investment
Account is established for the benefit of the Corporation. The Special Tax Account receives the
results of the State Comptroller pending such deposits. The Commissioner of Taxation and Finance may
revenues from the Sales Tax, less such amount as the State Commissioner of Taxation and Finance
invest moneys in the Stock Transfer Tax Fund in accordance with the State Finance Law. However,
determines to be necessary for reasonable costs in administering, collecting and distributing the Sales Tax.
if such amounts are needed for payment into the Special Tax Account, the Commissioner of Taxation and
The operative date of the Sales Tax was July 1, 1975. The State Finance Law provides for the appropria-
Finance must pay the amount of moneys needed from collections forthwith in cash into said Special Tax
tion of the Sales Tax by the Legislature (although the Legislature is not obligated or bound to make
Account. The State Comptroller may in his discretion invest revenues in the Special Tax Account in
such appropriation) (i) to the Corporation in order to enable the Corporation to fulfill the terms of any
obligations of the United States or of the State or in obligations the principal of and interest on which are
guaranteed by the United States or by the State.
agreements made with the holders of the Corporation's bonds and notes issued pursuant to the First General
Bond Resolution, (ii) after payments of the amounts required by (i), to the Corporation to enable the
The Sales Tax and the Stock Transfer Tax do not require annual reenactment by the Legislature.
Corporation to fulfill the terms of any agreements made with the holders of the Corporation's Bonds and
However, the State is not bound or obligated to continue the imposition of either the Sales Tax or the
to carry out its corporate purposes and (iii) to the City, to the extent of any balance. The Act provides
Stock Transfer Tax or to maintain the existence of the Special Tax Account or the Stock Transfer Tax
that any provision therein or in any agreement by the Corporation with the holders of the Corporation's
Fund or to make any appropriations of the revenues received from the Sales Tax credited to the Special
securities which relates to certain taxes, including the Sales Tax and the Stock Transfer Tax, or to
Tax Account or from the Stock Transfer Tax deposited in the Stock Transfer Tax Fund. The Second
General Bond Resolution, however, provides that (i) the failure of the State to continue the imposition, at
22
23
subject to the Sales Tax. The Sales Tax is also imposed at the rate of six percent on receipts from sales
rates not less than those in effect on July 2, 1975, of either the Sales Tax or Stock Transfer Tax or to
of the service of providing in the City parking, garaging or storing for motor vehicles. The imposition of
maintain the existence of the Special Tax Account or the Stock Transfer Tax Fund, or (ii) the failure
the Sales Tax is subject to certain limited exceptions. The level of Sales Tax receipts is necessarily
of the State Comptroller to pay to the Corporation for deposit in the Bond Service Fund and the
dependent upon economic and demographic conditions in the City and there can be no assurance that the
Capital Reserve Aid Fund the amount or amounts as shall be certified by the Chairman, shall each consti-
historical data with respect to collections of such tax are necessarily indicative of future receipts.
tute an event of default with respect to the Bonds. See "Summary of Certain Provisions of the Second
General Bond Resolution-Events of Default."
Generally, a seller of any item subject to the imposition of the Sales Tax is required to file returns
on a quarterly basis. Under existing statutes and regulations, such returns and payments are due on
As required by the Act and the First General Bond Resolution, on October 14, 1975, $51,368,097 was
September 20, December 20, March 20 and June 20 for the quarter ending on the last day of the
deposited in the Debt Service Fund established pursuant to such Resolution from the Special Tax Account
preceding month.
in the Municipal Assistance Tax Fund.
Under the State Finance Law, the Sales Tax revenues payable to the Special Tax Account in the
Per Capita Aid
Municipal Assistance Tax Fund shall be paid in accordance with the following procedure. On or before the
Since 1946 the State of New York has appropriated moneys to local governments, including cities and
twelfth day of each month, the State Commissioner of Taxation and Finance shall certify to the State
counties, pursuant to Section 54 of the State Finance Law.
Comptroller the amount of all Sales Tax revenues received, after deduction of administrative costs,
The determination of the amount of Per Capita Aid payable to the City is based on complex
during the prior month as a result of the Sales Tax and all interest and penalties imposed, and in addition
formulae which take into account the population of the City, the total assessed valuation of real property
on or before the last day of June the Commissioner shall certify the amount of such revenues received
taxable by the City, the City-wide State equalization rate and the total State Personal Income Tax
during the first 25 days of June, which amount shall be deposited by the State Comptroller in the Special
collections. Special census figures have been used by the State from time to time in an effort to keep
Tax Account. Notwithstanding the foregoing, the Commissioner has, pursuant to the Act, prorated
pace with population shifts and fiscal demands of local government, but the basic Per Capita Aid
revenue attributable to the quarter ending August 31, 1975, so as to separate from the revenue collected
formulae have continued since that date.
for that quarter the revenue collected pursuant to local legislation adopted by the City pursuant to the
Payments of Per Capita Aid, upon certification of the State Board of Equalization and Assessment,
Tax Law prior to the operative date of the Sales Tax. The State Commissioner of Taxation and Finance
are apportioned and paid to the chief fiscal officer of the City on audit and warrant of the State Comptroller
has informed the Corporation that such proration of sales and compensating use taxes collected in
out of moneys appropriated by the Legislature for such purpose to the credit of the Local Assistance Fund
September 1975 has reduced payments to the Municipal Assistance Tax Fund by approximately
in the General Fund of the State Treasury. Per Capita Aid payments are scheduled pursuant to Section
$60,900,000.
54 of the State Finance Law to be made to the City in four installments on the 25th day of February, April,
The Sales Tax imposed pursuant to the Tax Law, effective July 1, 1975, is imposed on the same tax
June and October of each year. Section 92-e of the State Finance Law provides that subject to certain
base as the sales and compensating use taxes previously imposed by the City and collected by the State.
prior rights to payment, including that of the Corporation, payments are to be made to the City not later
A tax on sales of certain tangible personal property and services had been imposed by the City since 1934.
than the 30th day of June and the 15th day of April, October and January of each year. The Corporation
Such tax base does not include certain additional taxes which the City is authorized to impose. State
has been informed that all or substantially all of the Per Capita Aid payable to the City on an annual basis
collections of the sales and compensating use taxes imposed by the City for its last ten fiscal years prior
has been disbursed to the City as a part of the June 25th payment. The Corporation has covenanted to
to July 1, 1975, after deductions of the costs of administration, collection and distribution, were as follows:
make such certifications as are necessary to meet its requirements not later than the 25th day of June and
15th day of January, April and October of each year.
State Collections of Sales and Compensating Use Taxes in New York City*
The determination of the amount of Per Capita Aid payable under Section 54 of the State Finance
City Fiscal
Year Ending
Law is a legislative act requiring, prior to its apportionment, appropriation for State aid purposes by the
June 30
Total Collections
State Legislature. The provisions for Per Capita Aid are statutory and the Legislature, having the
(Dollars in Thousands)
right to enact laws to provide State aid, may also amend or repeal such statutes or make no appropriation
1966
$294,941(a)
for Per Capita Aid. The State has appropriated moneys which have been apportioned among local
1967
371,317
governmental entities, including the City, in each year since 1946 and has provided some measure of
1968
412,109
1969
438,772
assistance to local governments since 1800.
1970
461,559
The following tabulation, which was derived from the New York City Bureau of the Budget and the
1971
494,645
State Comptroller's office, indicates the aggregate payments of Per Capita Aid to the City for the six
1972
518,667
fiscal years ended June 30, 1975:
1973
549,184
1974
580,798
1970
$204,800,000
1973
$331,780,000
1975(b)
787,200
1971
323,900,000
1974
360,870,000
1976(b) (three months ended September 30, 1975)
181,368
1972
272,250,000
1975
405,118,000
Figures obtained from the State Department of Taxation and Finance.
Sales Tax
(a) The amounts collected for the fiscal year ended June 30, 1966, do not reflect collections for June
Under the Tax Law, the Sales Tax is imposed within the City at the rate of four percent on (i)
or July, 1965. Prior to August 1965, the City administered the collection of its sales and compensating
receipts from (a) retail sales of tangible personal property, (b) sales of certain services, (c) sales, other
use taxes.
than sales for resale, of gas, electricity, refrigeration and steam, and of telephony and telegraphy, (d) occu-
(b) The amounts of sales and compensating use taxes collected for fiscal 1975 and 1976 reflect the
pancies of hotel rooms, and (e) sales of food or beverages in or by restaurants, taverns, and similar
increases in the sales and compensating use taxes from three percent to four percent, effective July 1, 1974.
establishments and by caterers; (ii) certain admission, entertainment, cover, minimum and club charges
The six percent tax on sales of certain parking services remained the same.
or dues; and (iii) the use within the City of certain tangible personal property and services not otherwise
25
24
Stock Transfer Tax
The Stock Transfer Tax is imposed pursuant to the Tax Law on sales, agreements to sell, memoranda
The Corporation believes that it is not now possible to predict the effect of a City default or
of sale, and deliveries or transfers of (i) shares or certificates of stock, (ii) certificates of rights to stock,
other related economic developments in the City on Sales Tax and Stock Transfer Tax collections. In
(iii) certificates of interest in property or accumulations, (iv) certificates of interest in business conducted
addition, the enactment of the Federal Securities Acts Amendments of 1975, relating to the evolution
by a trustee or trustees and (v) certificates of deposit representing any of the foregoing, made within the
of a centralized nationwide securities market, may affect the volume of taxable securities transactions in
State. The imposition of the Stock Transfer Tax, as described, is subject to certain limited exceptions.
the State. The Securities Acts Amendments of 1975 prohibit the imposition by the State of a tax on
The level of Stock Transfer Tax receipts is related to the rate of tax imposed and the volume of
stock transfers made outside of the State and not otherwise subject to the taxing jurisdiction of the State
transactions on the securities exchanges located in the City. Such volume has fluctuated widely so that
except for the fact such transfer is recorded on the books of a transfer agent located in the State. The
there can be no assurance that the historical data with respect to collections of such tax is necessarily
Corporation has been advised by the Commissioner of Taxation and Finance that he believes that the
indicative of future receipts.
decrease in Stock Transfer Tax collections attributable to the Federal Securities Acts Amendments of
The Stock Transfer Tax is generally based on the number of shares sold or transferred at the follow-
1975 for the twelve consecutive calendar months commencing November 1, 1975 will be substantially offset
ing rates:
by increases from the surcharge upon the Stock Transfer Tax, which surcharge commenced on August
Rate Per
1, 1975 and will end on July 31, 1976, and by increases in collections of sales and compensating use
Selling Price Per Share
Share*
taxes and Sales Tax for the 12-month period commencing November 1, 1975, but this belief is conditioned
Less than $5
11/4c
upon the assumption that no material adverse change will occur in the financial or economic conditions
$ 5 or more but less than $10
2½
of the State or the City during such twelve months.
$10 or more but less than $20
33/4
$20 or more
5
Estimated Amounts Available for Debt Service and Debt Service Coverage
Transactions Other Than Sales
The Corporation has sought to estimate claims on Per Capita Aid prior to that of the Corporation
Per share
2½
and relying on information which the Corporation believes to be accurate and assuming that such claims
* Such rates do not reflect the 25% surcharge imposed thereon pursuant to an amendment to the
do not exceed the limits set by the Emergency Financial Legislation (see "Municipal Assistance State
Tax Law effective for the period commencing August 1, 1975 and ending July 31, 1976. Such
Aid Fund") and assuming that the Sales Tax and the Stock Transfer Tax collections in each fiscal year
surcharge is part of the Stock Transfer Tax.
subsequent to the Corporation's fiscal year ended June 30, 1975, remain at the levels of the State
Non-residents of New York State are taxed on sales made within the State at a rate equal to 50 percent
collections of the sales and compensating use taxes imposed by the City, and the Stock Transfer Tax,
of the rates shown in the table above. Where any sale, including several sales considered to constitute
for the 12-month period ended October 31, 1975 (see "Sales Tax" and "Stock Transfer Tax"), the
a single sale, made within the State and subject to the Stock Transfer Tax, relates to shares or certificates
aggregate annual amount which would be available from Per Capita Aid, based on the appropriation
made for the fiscal year ending June 30, 1975, and the Sales Tax, and from the Stock Transfer Tax
of the same class and issued by the same issuer, the aggregate amount of such tax shall not exceed
if needed, to pay debt service on the Bonds is shown below:
$350. The Stock Transfer Tax accrues on the date of the taxable transaction. The foregoing informa-
tion does not reflect the above noted 25% surcharge.
Estimated amounts available from Per Capita Aid
$296,435,000*
The amounts received by the imposition of the Stock Transfer Tax are paid into the Stock Transfer
Plus, sales and compensating use taxes for the 12 months
Tax Fund, which is in the custody of the State Commissioner of Taxation and Finance.
ended October 31, 1975
802,827,000
Under the State Finance Law, on and after April 1, 1976, moneys in the Stock Transfer Tax Fund
Plus, Stock Transfer Tax for the 12 months ended October
31, 1975
shall, after deduction of the amount the State Commissioner of Taxation and Finance determines to
209,075,000
be necessary for reasonable costs in the administration, collection and distribution of the Stock Transfer
Total amount estimated to be available to the Corporation
$1,308,337,000
Tax, be paid to the extent needed into the Special Tax Account and any balance will be paid to the City.
Less, estimated annual operating expenses of the Corporation
$
4,000,000
Such payments from the Stock Transfer Tax Fund are subject to annual appropriation by the State
Less, maximum annual debt service on bonds and notes of the
Legislature.
Corporation issued pursuant to the First General Bond
The revenues derived from the Stock Transfer Tax, after deduction of the costs of administration,
Resolution and the Promissory Note Resolutions
472,062,000
collection and distribution of such tax, are shown below for the previous six City fiscal years ending
Less, maximum annual amount required to fund the Capital
June 30 based upon the various rates prevailing during the periods shown.
Reserve Fund established pursuant to the First General
Bond Resolution
116,565,000**
State Collections of Stock Transfer Tax*
Total amount of annual payments required to be made by the
City Fiscal
Corporation prior to payment of the 1975 Bonds
$ 592,627,000
Year Ending
June 30
Total Collections
Estimated amount available for debt service on the 1975 Bonds
$ 715,710,000
(Dollars in Thousands)
Estimated maximum annual debt service on $1,600,175,000 in
1970
$239,969
aggregate principal amount of 1975 Bonds assuming approxi-
1971
264,366
mate level debt service
$ 232,390,000
1972
292,822
1973
244,787
1974
189,098
* Legislation now before Congress and possibly legislation to be recommended by the President
1975
185,982
would require the State or City to pledge revenues receivable from the Federal government in order to
1976 (three months ended September 30, 1975)
53,204
secure Federal loans or guarantees. Recourse to such pledge after a default on any such loan or guaranty
could impair the ability of the State to apportion and pay Per Capita Aid in the amount estimated above.
*
Figures obtained from the State Department of Taxation and Finance.
Not expected to be required after January 1, 1980.
26
FORD
27
LIBRARY
ESTIMATED AMOUNTS AVAILABLE FOR DEBT SERVICE
$1,600,175,000 1975 BONDS
(000's)
Net
Sales
and
Stock
Transfer
1975 Bonds
Sales
Debt
Tax
and
Service
Available
Per
Sinking
Fiscal Year
Stock
First
for
Capita
Fund
Commencing
Transfer
Resolution
1975
Aid
Total
Principal
Tax(1)
Bonds
Bonds (2)
Net(3)
Available
Installments
Interest
Total
July 1
1976
$1,011,904
$472,062
$420,027
$296,435
$ 716,462
-0-
$138,682
$138,682
1977
1,011,904
470,563
424,213
297,845
722,058
108,725
123,665
232,390
1978
1,011,904
465,638
435,395
316,255
751,650
117,785
114,605
232,390
1979
1,011,904
455,088
472,979
339,815
812,794
127,600
104,789
232,389
28
1980
1,011,904
411,515
609,975
340,225
950,154
138,230
94,156
232,386
1981
1,011,904
384,435
622,905
345,735
968,640
149,750
82,837
232,387
1982
1,011,904
385,563
612,098
345,735
957,833
162,230
70,158
232,388
1983
1,011,904
406,050
614,295
345,735
960,030
175,750
56,638
232,388
1984
1,011,904
381,168
613,964
345,735
959,699
190,395
41,993
232,388
1985
1,011,904
406,712
646,165
345,735
991,900
206,260
26,126
232,386
1986
1,011,904
316,766
704,356
345,735
1,050,091
223,450
8,938
232,388
1. Amount of collections for the twelve month period ending October 31, 1975 as certified to the Corporation
by the State Commissioner of Taxation and Finance.
2. After provisions being made for the establishment of the Capital Reserve Fund required in accordance with
the First General Bond Resolution and operating expenses of the Corporation which are estimated at $4,000,000
annually.
3. Such amount represents the estimated amount of Per Capita Aid available to the Corporation based on the
appropriations of such Per Capita Aid in the approximate amount of $405,100,000 made for the fiscal year commencing
July 1, 1974, after taking into account the following claims and liabilities:
(a) City University Construction Fund the Corporation has been informed by CUCF and
the State Bureau of the Budget that CUCF has certified its requirements for the period July 1, 1976
through June 30, 1977 to be approximately $79,900,000, fifty per centum (50%) of which
occasions a claim against Per Capita Aid if not otherwise made available to CUCF by the City
$ 39,950,000
(b) New York City Housing Development Corporation the Corporation has been informed
by HDC that the maximum capital reserve fund requirement on all outstanding bonds of HDC
as of this date is approximately $18,915,000. HDC has outstanding $37,703,000 in bond anticipa-
tion notes which HDC expects to fund with bonds. Such funding would have the effect of increas-
ing the maximum capital reserve fund requirement by an amount equivalent to the debt service
on the bonds issued to fund such notes (the issuance of such bonds is subject to Control Board
approval)
18,915,000
(c) New York City Transit Authority
(i) pursuant to Section 1 of Chapter 7 of the 1972 Laws of the State, the New York
City Transit Authority ("NYCTA") was authorized to issue and sell its promissory notes
in the aggregate principal amount of $100,000,000 to certain sinking funds of the City. Upon
the failure of the City to pay to the NYCTA the amounts necessary to pay such notes (in
five equal annual installments), the amount of any such insufficiency is to be deducted from
Per Capita Aid and paid on such notes. The NYCTA has issued $100,000,000 in aggregate
principal amount of such notes and the Corporation has been informed by the office of the
Comptroller of the City, that $43,000,000 in principal amount of such notes, bearing interest
at a maximum rate of five per centum (5%) per annum, are still outstanding and represent a
potential annual claim on such Per Capita Aid in the principal amount of $20,000,000 and the
interest due on any such outstanding notes until such time as the debt is retired
22,150,000
(ii) pursuant to Section 2 of such Chapter, the City was required to pay an aggregate
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$51,000,000 in equal annual installments for the ten years commencing December 31, 1972 to
the NYCTA to enable the NYCTA to pay certain notes issued in anticipation of the receipt of
revenues by the NYCTA. $30,600,000 in aggregate principal amount of such notes, bearing in-
terest at the rate of eight per centum (8%) per annum, are outstanding at present. Any failure of
the City to pay over to the NYCTA the required amount would give rise to an annual claim on
Per Capita Aid in the amount of the insufficiency until such time as the debt is retired
7,150,000
(iii) pursuant to Chapter 3 of the 1974 Laws of the State, the State was authorized to
make a first instance appropriation to the NYCTA, which appropriation was made in the
amount of $100,000,000 subject to the re-payment of such amount to the State by the City in
five equal annual installments commencing March 1, 1975. Failure by the City to make such
re-payment gives rise to an annual claim against Per Capita Aid in the amount of the
insufficiency until such time as the debt is retired. The first such re-payment has been
made and $80,000,000 remains outstanding
20,000,000
(d) New York City Police Pension Fund payments are due annually from Per Capita Aid
to the Trustees of the City Police Pension Fund
500,000
Estimated amount of Per Capita Aid available to the Corporation based on the aforementioned
appropriation (fiscal year commencing July 1, 1974)
$296,435,000
GERALD
LIBRARY
In the opinion of Bond Counsel, such provision of the Act for the appropriation and payment to the
Based on the estimates presented above the total estimated amount available for debt service on all
Corporation for deposit in the Capital Reserve Aid Fund of such sum as shall be so certified by the Chair-
1975 Bonds, would cover the maximum estimated annual debt service on such 1975 Bonds 3.08 times.
man does not constitute an enforceable obligation or debt of the State, the amount of such sum being
Within the $5,000,000,000 statutory authorization, (i) additional Bonds may be issued under the
subject to annual appropriation for such purpose by the State Legislature, which is empowered, but is not
Second General Bond Resolution on a parity with the 1975 Bonds in the manner and subject to the limits
bound or obligated, to appropriate such amount.
described under "Bonds Being Offered" and (ii) additional bonds may be issued under the First General
TRUSTEE
Bond Resolution having priority over the 1975 Bonds in the manner and subject to the limitations
United States Trust Company of New York has been appointed the Trustee under the Second General
described under "Outstanding Debt of The Corporation."
Bond Resolution. Its principal office is located at 45 Wall Street, New York, New York 10005, and its
The Corporation believes that it is not now possible to predict the effect of a City default or other
corporate trust office is located at 130 John Street, New York, New York 10038. The Trustee has
related economic developments in the City on Sales Tax and Stock Transfer Tax collections. See final
accepted the duties and responsibilities imposed upon it by the Resolutions and is vested with all of
paragraph under "Provisions for Payment of The Bonds-Stock Transfer Tax."
the rights, powers and duties of a trustee appointed by Bondholders pursuant to the Act. Upon the
happening of an "event of default" as defined in the Second General Bond Resolution, the Trustee may, and
Restoration of Capital Reserve Aid Fund
in certain circumstances is required to, proceed to protect and enforce its rights and the rights of the Bond-
Additional payments may be made to the Capital Reserve Aid Fund as a result of the following
holders. See "Summary of Certain Provisions of the Second General Bond Resolution-Events of Default"
and "Remedies." In the performance of its duties, the Trustee is entitled to indemnification for any act
provision of the Act:
which would involve it in expense or liability and will not be liable as a result of any action taken in
"In order further to assure the maintenance of the capital reserve fund, there shall be annually
connection with the performance of its duties except for its own negligence or default. The Trustee is
appropriated and paid to the corporation for deposit in the capital reserve fund such sum, if any, as
protected in acting upon any direction or document believed by it to be genuine and to be signed by the
shall be certified by the chairman to the governor and director of the budget as necessary to restore
proper party or parties or upon the opinion or advice of counsel. The Trustee may resign at any time
the capital reserve fund to an amount equal to the capital reserve fund requirement. The chairman
upon 60 days' written notice to the Corporation and publication thereof. Any such resignation shall take
of the board of directors of the corporation shall, annually, on or before December first, make and
effect on the day specified in the notice, but in the event that a successor has been appointed, the
deliver to the governor and director of the budget his certificate stating the sum, if any, required to
resignation shall take effect immediately. United States Trust Company of New York (the "Trust Com-
restore the capital reserve fund to the amount aforesaid; and the sum or sums so certified, if [F]or any,
pany"), which is a New York Clearing House Bank, owns $3,540,000 of short-term obligations of the
shall be appropriated and paid to the corporation during the then current state fiscal year.
City and $5,688,000 of bonds of the Corporation issued under the First General Bond Resolution. The
each of the calendar years set forth below the capital reserve fund requirement, as of any date of
Trust Company also acts as Trustee under the First General Bond Resolution and has performed, and
calculation, shall equal the percentage set forth opposite such calendar year of the amount of principal
may in the future perform, certain banking services for the Corporation.
and interest maturing or otherwise due or becoming due during such calendar year on all bonds of the
corporation secured by the capital reserve fund outstanding on such date:
DESCRIPTION OF THE 1975 BONDS
Percentage
The 1975 Bonds will be dated December 1, 1975, and will bear interest from the date set forth
Calendar Year
therein at the rate of eight per cent (8%) per annum, payable semi-annually on January 1 and July 1
1975
0%
of each year commencing July 1, 1976, and will mature on July 1, 1986. Each Series of 1975 Bonds is
1976
0%
subject to redemption at the election of the Corporation as a whole, but not in part, on any interest pay-
1977
25%
ment date on or after July 1, 1981, at a redemption price of 100% of the principal amount thereof plus
1978
50%
accrued interest to the date of redemption.
1979
75%
1980
100%
The 1975 Bonds are further subject to redemption, in part, by lot, on July 1 of each year com-
mencing July 1, 1977, from mandatory "Sinking Fund Installments" (as defined in the Second General
After 1980, the required amount of the Capital Reserve Aid Fund is the amount of principal and interest
Bond Resolution) at a redemption price of 100% of the principal amount thereof plus accrued interest
maturing or otherwise due or becoming due in the succeeding calendar year on any bonds then to be
to the date of redemption. The Corporation will be unable to determine the amount of such Sinking Fund
issued and on all other bonds of the Corporation then outstanding, including for such purpose any unpaid
Installments until the total amount of each series of the 1975 Bonds is determined pursuant to the
amounts of principal and interest owing in respect of prior calendar years.
Exchange Offer. However, the Corporation expects to schedule such Sinking Fund Installments so that
debt service shall be as nearly level as practical on each Series of the 1975 Bonds.
The Corporation, in accordance with the Act and pursuant to the express provisions of the Second
The 1975 Bonds will be issued on initial delivery thereof as fully registered Bonds in the denomina-
General Bond Resolution, has covenanted to cause its Chairman to certify on or before each December 1 to
tions of $5,000 or in multiples thereof, which are exchangeable beginning 30 days thereafter as provided
the Governor and the State Director of the Budget the sum required to restore the Capital Reserve Aid
in the Resolutions for coupon Bonds in the denominations of $5,000 each, registrable on the books of the
Fund to its required amount and has agreed to certain additional requirements relating to such certification
Corporation at the corporate trust office of the Trustee, as to principal only, or for other fully registered
and maintenance of the Capital Reserve Aid Fund. See "Provisions for Payment of the Bonds-General."
Bonds.
Under the State Constitution, no money may be paid out of the State Treasury or any of its funds or
For every exchange or transfer of the 1975 Bonds (other than the first exchange or transfer
out of any of the funds under its management except pursuant to an appropriation by law specifying the
which shall be without cost to the holder) the Corporation or the Trustee may make a charge
sum appropriated, and payment thereunder shall be made within two years next after passage of such law.
sufficient to reimburse it for any tax, fee or other governmental charge required to be paid with
Accordingly, the provision of the Act quoted above does not constitute an enforceable obligation or debt
respect to such exchange or transfer, which sum or sums shall be paid by the person requesting such
of the State. See "Appropriation by Legislature."
exchange or transfer as a condition precedent to the exercise of the privilege of making such exchange or
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FORD
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LIBRARY
transfer. The cost of preparing each new Bond issued upon such exchange or transfer and any other
FELIX G. ROHATYN, Chairman. Mr. Rohatyn is a general partner of Lazard Frères & Co., investment
expenses of the Corporation or the Trustee incurred in connection therewith (except any applicable tax,
bankers. He is a former Governor of the New York Stock Exchange, Inc., and is a director of Engelhard
fee or other governmental charge) shall be paid by the Corporation as an operating expense.
Minerals & Chemicals Corporation, Howmet Corporation, International Telephone & Telegraph Corpora-
tion, Owens-Illinois, Inc. and Pfizer Inc. He is a member of the Finance Committee of the Rockefeller
The Corporation may, at any time not more than 12 months prior to an interest payment date on
Brothers Fund, Inc. and of the Central Market Advisory Committee of the Securities and Exchange
which a Sinking Fund Installment is scheduled to be due, but in no event less than 45 days prior to
Commission. He is also a trustee of Middlebury College. Mr. Rohatyn, 47, is a resident of New
such date, direct the Trustee to purchase with moneys in the Bond Service Fund, at a price not in
York City.
excess of par, plus unpaid interest accrued to the date of such purchase, any Bonds of the Corporation
payable from such Sinking Fund Installment and apply any Bonds so purchased as a credit against such
FRANCIS J. BARRY. Mr. Barry is President of Circle Line-Sightseeing Yachts, Inc. and President
Sinking Fund Installment.
of Cambell & Gardiner, a brokerage firm. He is the Chairman of the New York City Council on Port
MANAGEMENT
Promotion and Development, of which he has been a member since 1962. From 1967 through 1972,
he served as an arbitrator for the United States Division of the National Maritime Union. He was recently
Under the Act, the Corporation is administered by a Board of Directors (the "Board"), consisting
appointed Chairman of the Advisory Committee to the New York City Convention and Exhibition
of nine directors. One vacancy on the Board exists at present due to the resignation of William M.
Corporation. Mr. Barry, 67, is a resident of New York City.
Ellinghaus as Chairman of the Corporation and his appointment to serve on the Emergency Financial
Control Board established under the Financial Emergency Legislation. All of the directors are
JOHN A. COLEMAN. Mr. Coleman is a senior partner of Adler, Coleman and Company, a member
appointed by the Governor with the advice and consent of the State Senate; four of the directors are
of the New York Stock Exchange, Inc. He is a former Governor and Chairman of the Board of the
appointed upon written recommendation of the Mayor. The Act also provides for the appointment
New York Stock Exchange, Inc. He is a director of American Broadcasting Companies, Inc. and
of representatives to the Board (the "Representatives") by certain State or City officials or bodies
the Alfred E. Smith Memorial Foundation and a trustee of the East River Savings Bank. He is a former
politic. The Representatives are entitled to receive notice of and to attend all meetings of the Board
director of the New York Telephone Company and Manufacturers Hanover Trust Company. He
but are not entitled to vote. In addition, the State Comptroller or his representative is entitled to
was recently appointed by the Mayor to the Temporary Commission on City Finances. Mr. Coleman,
attend and participate in the meetings of the Board but is not entitled to vote.
73, is a resident of New York City.
The Act provides that no director (and no Representative) may be an officer or employee of the
THOMAS D. FLYNN. Mr. Flynn was, until September 1975, a partner in Arthur Young & Company,
Federal government or of the State or any political subdivision thereof.
an international accounting firm, and Vice Chairman of its Management Committee. He served as Presi-
The present members of the Board, the Representatives and the officers of the Corporation, and the
dent of the American Institute of Certified Public Accountants ("AICPA") from 1964 through 1965. In
expiration dates of their respective terms of office are as follows:
1969, he served as Chairman of the AICPA Advisory Committee to the panel which was appointed by the
President of the United States to investigate the Department of Defense. In 1970, he was the recipient of
Directors
Expiration of Term
an AICPA Gold Medal Award for Distinguished Service to the Accounting Profession, the highest honor
Felix G. Rohatyn, Chairman
December 31, 1979
awarded by the AICPA. He has been elected by the Alumni to serve as a Trustee of Columbia University.
Francis J. Barry(1)
December 31, 1979
He has been a director of National Bureau of Economic Research, Inc. since 1968, a member of its
John A. Coleman(1)
December 31, 1976
Executive Committee since 1969 and its Treasurer since 1970. He is also a trustee of American Savings
Thomas D. Flynn
December 31, 1977
Bank and Household Finance Corp., of which he is Chairman of the Audit Committee. Mr. Flynn, 62,
George D. Gould(1)
December 31, 1978
is a resident of Sands Point, Long Island.
Dick Netzer
December 31, 1979
Donna E. Shalala, Treasurer
December 31, 1978
GEORGE D. GOULD. Mr. Gould is Vice Chairman of the Board of Directors of Donaldson, Lufkin
Robert C. Weaver
December 31, 1976
& Jenrette, Inc. and Chairman of the Board of Directors and Chief Executive Officer of Donaldson,
Lufkin & Jenrette Securities Corporation, a member of the New York Stock Exchange, Inc. Mr. Gould,
Representatives(2)
48, is a resident of New York City.
Zane Klein
Appointed by the City Board of Estimate
Edward M. Kresky
Appointed by the President Pro-Tem of the State Senate
DICK NETZER. Mr. Netzer has been Dean of the Graduate School of Public Administration of
Leonard Nadel
Appointed by the Speaker of the State Assembly
New York University since 1969. From 1964 through 1966, he was research director of the Temporary
Nicholas L. Pitaro
Appointed by the Vice-Chairman of the City Council
Commission on City Finances of The City of New York. He is a nationally recognized expert in the areas
Arthur J. Quinn
Appointed by the Minority Leader of the State Assembly
of state and local government finance and urban economics, and he has published extensively in each
Robert W. Seavey
Appointed by the Minority Leader of the State Senate
of those areas. Mr. Netzer, 47, is a resident of New York City.
M. Peter Schweitzer
Designated representative of the State Comptroller
DONNA E. SHALALA. Dr. Shalala is an Associate Professor of Political Science, Teachers College,
In addition, Herbert Elish is the Executive Director of the Corporation, and Daniel B. Goldberg is
Columbia University. She is currently on leave from her teaching position on a Guggenheim Fellowship
Counsel and Secretary to the Corporation.
to write a book on state revenue politics. She has published extensively in the field of the financial
structure of state and local governments and the subjects of her writings include the operations of
(1) Appointed upon the written recommendation of the Mayor.
pension systems, state aid to the City and the politics of state budgeting. She has been active in
(2) Each Representative serves at the pleasure of the appointing official or body, is eligible for
New York civic affairs and serves as Vice Chairwoman of the Citizens Union. Dr. Shalala, 33, is a
reappointment and holds office until his successor has been appointed.
resident of New York City.
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33
ROBERT C. WEAVER. Mr. Weaver has been Distinguished Professor of Urban Affairs at Hunter
College since 1970. From 1966 through 1968 he was Secretary of the United States Department of
Control Board. Prior to his appointment, Mr. Elish was a Vice President of the First National City
Housing and Urban Development and from 1968 through 1970 was President of Bernard M. Baruch
Bank. From 1971 through 1973, he was employed by the City as, successively, Commissioner of Sani-
College. He is a trustee of the Metropolitan Life Insurance Co. and The Bowery Savings Bank, and
tation and Administrator of the Environmental Protection Administration. Mr. Elish, 42, is a resident
is a former Chairman of the National Association for the Advancement of Colored People. Mr. Weaver,
of New York City.
67, is a resident of New York City.
The Act provides that the directors of the Corporation, except as otherwise provided by law,
ZANE KLEIN, Representative. Mr. Klein has been a member of the law firm of Berlack, Israels &
may engage in private employment or in a profession or business and that they shall be deemed to be
Liberman, New York, New York, since 1968. He is a member of the City Comptroller's Technical Debt
state officers for the purposes of Sections 73 and 74 of the State Public Officers Law. Notwith-
Management Committee and a member of the Advisory Committee to the City Office of Telecommunica-
standing the provisions of such law or of any other law, the Corporation or any other instrumentality
tions. He has also served on advisory panels with respect to equity and real estate investments of the
of the State may purchase from, sell to, borrow from, loan to, contract with or otherwise deal with any
employee pension systems of the City and is active in civic and community affairs. Mr. Klein, 38, is a
corporation, trust, association, partnership or other entity in which any director of the Corporation has
a financial interest, direct or indirect, provided that such interest or affiliation is disclosed in the minutes
resident of New York City.
of the Board of Directors of the Corporation and provided further that no director having such a financial
EDWARD M. KRESKY, Representative. Mr. Kresky has been a Vice President of Wertheim & Co.,
interest or affiliation shall participate in any decision of the Board authorizing or affecting such transaction.
Inc., investment bankers, since 1971. From 1965 through 1971 he served as Secretary to the Metropolitan
Transportation Authority of the State. He is a member of the Board of the New York State Council
Directors and Representatives serve without salary. Each director is entitled to reimbursement for
on the Arts and the Council of the National Municipal League. In 1974 he was a member of the Governor's
his actual and necessary expenses incurred in the performance of his official duties as a director and a
Task Force on the New York State Urban Development Corp. and, in 1972 and 1973, was a member of
per diem allowance of $100 when rendering services as a director, subject to a maximum aggregate
the Governor's Task Force on Financing Higher Education in New York State. Mr. Kresky, 50, is a
allowance of $5,000 in any one fiscal year. Each Representative is entitled to reimbursement for his
actual and necessary expenses incurred in the performance of his official duties as a Representative, but
resident of New York City.
is not entitled to a per diem allowance.
LEONARD NADEL, Representative. Mr. Nadel is Senior Vice President of Abraham & Straus, a
division of Federated Department Stores, Inc. He is Chairman of the Board of Trustees of Adelphi
University, an Associate Trustee of Long Island Jewish Medical Center, a director of the Downtown
LITIGATION
Brooklyn Development Association and, in 1971 and 1972, was President of the Brooklyn Chamber
of Commerce. Mr. Nadel, 53, is a resident of New York City.
Establishment and Functions of Corporation
NICHOLAS L. PITARO, Representative. Mr. Pitaro is a member of the law firm of Liggio & Pitaro,
On July 3, 1975, an individual purporting to be a taxpayer of the City brought an action against
New York, New York. He has served as Counsel to the Public Service Committee of the New York
the City, the State, the Corporation and other defendants, seeking, among other things, (i) a declaratory
State Assembly, as Assistant Counsel to the Majority Leader of the New York State Assembly, and as
judgment determining that the establishment of the Corporation, its sale of debt obligations and transfer
a member of the last New York State Constitutional Convention. He is President of the 106th Precinct
of the proceeds to the City are illegal and unconstitutional and (ii) an injunction prohibiting continu-
Community Council, Queens County, and is active in other civic and community affairs. Mr. Pitaro, 55,
ation of such acts. On July 4, 1975, the plaintiff served a notice of discontinuance of the action,
is a resident of New York City.
without prejudice to his right to reinstitute his claim.
ARTHUR J. QUINN, Representative. Mr. Quinn has been the President and a trustee of The New
On July 18, 1975, the same individual reinstituted an action, which, as to the Corporation, is sub-
York Bank for Savings since 1969 and is a director of City Title Insurance Company, New York
stantially identical to his prior action. On July 29, 1975, the Corporation's motion for summary judg-
State Medical Care Facilities Finance Agency, and Community Funding Corporation. He is a trustee
ment, based on the grounds that the cause of action as to the Corporation has no merit, was granted.
of St. John's University and Savings Bank Retirement System. Mr. Quinn, 60, is a resident of New
On September 10, 1975, the plaintiff appealed directly to the Court of Appeals.
York City.
Hawkins, Delafield & Wood, Bond Counsel for the Corporation, have rendered their opinion that,
ROBERT W. SEAVEY, Representative. Mr. Seavey is a member of the law firm of Seavey, Fingerit
as to any relief sought by the plaintiff against the Corporation in the reinstituted action, which in their
& Vogel, New York, New York. He has been the President of Neighborhood Developers Inc.,
opinion is without merit as to the Corporation, the Corporation will prevail in any final adjudication of
a real estate development and construction firm, for the past five years. He was, from 1971 through
the issues in such action, and that no final adjudication will in any way affect the validity of the bonds
1974, Chairman of the Housing and Urban Development Committee of the Association of the Bar of
of the Corporation or the pledge or application of any revenues, monies or securities provided for the
The City of New York. Mr. Seavey, 47, is a resident of New York City.
payment of the bonds of the Corporation, the existence or powers of the Corporation, or the applica-
tion of the proceeds of such bonds as contemplated by this Official Statement. Paul, Weiss, Rifkind,
M. PETER SCHWEITZER. Mr. Schweitzer is Chairman of the Board of Directors and Chief Executive
Wharton & Garrison, General Counsel for the Corporation, have rendered their opinion that the reinstituted
Officer of West Chemical Products, Inc., Long Island City, New York. Prior to assuming that position
complaint is without merit as to the claim therein asserted against the Corporation and that the Cor-
in 1974, he was Vice Chairman of the Board of Directors and a member of the Executive Committee of
poration will prevail in any final adjudication.
Kimberly-Clark, Inc. Mr. Schweitzer, 64, is a resident of New York City.
HERBERT ELISH. Executive Director. Mr. Elish has been appointed by the Corporation as
Diversion of Revenues
its Executive Director. In that position, he will direct the work of the Corporation's management,
financial, accounting and legal staff. Mr. Elish is also the Executive Director of the Emergency Financial
On November 3, 1975, a national bank purporting to represent all holders of the City's bonds
acquired before June 10, 1975 served a summons and complaint addressed to the Corporation, the City,
34
35
the State and certain officers of the City and State. The suit seeks, among other things, a declaratory
State Pension Funds Investment in State Securities
judgment that the sections of the State Tax Law and the State Finance Law enacted as part of the Act
are unconstitutional under Article 8, Section 2 of the State Constitution in depriving such holders of
On October 17, 1975, the State Comptroller, as trustee of certain State pension funds, purchased
amounts to be received by the Corporation from the Sales Tax, which the plaintiff alleges would otherwise
$250,000,000 in State notes. On the same day, the State advanced $250,000,000 to the City to meet the
have constituted revenues of the City pledged for the payment of principal of and interest on such holders'
State's obligation to make an advance to the City as required by the Financial Emergency Legislation.
City bonds. On November 19, 1975, plaintiff served an amended complaint, which added allegations that
Certain plaintiffs in the suits described under "Litigation-State Pension Funds Investment in Securities
the sections of the State Tax Law and State Finance Law enacted as part of the Act are also unconstitu-
of the Corporation" had challenged the purchase of State notes. Such plaintiffs' motion for a preliminary
tional under Article 1, Section 10 of the United States Constitution, the due process and equal protection
injunction barring that purchase was denied. On October 17, 1975, the Court of Appeals affirmed the
clauses of the Fourteenth Amendment of the United States Constitution and the equal protection guaran-
lower court's decision.
tee of Article 1, Section 11 of the State Constitution. Bond counsel has given its opinion to the Cor-
poration that in a suit brought by a holder of any bonds or notes of the City, including the plaintiff in
City Pension Funds Investment in Securities of the Corporation
this lawsuit, asserting a right to the Stock Transfer Tax or the Sales Tax superior or equal
to the rights of holders of bonds of the Corporation, including the Bonds, such holder will not prevail
Relying upon the decision of the Court of Appeals referred to under "Litigation-State Pension
in the court of final jurisdiction.
Funds Investment in Securities of the Corporation," an association purporting to represent retired
City civil service employees had sought to prevent the trustees of certain City pension funds from
The plaintiff bank in this suit also seeks a declaratory judgment that the City's publicly announced
investing assets of those funds in securities of the Corporation pursuant to the mandate contained in
plan, upon any default, "to give priority of payment from the City's revenues to certain selected City
the Financial Emergency Legislation. On October 17, 1975, a motion by those plaintiffs for a preliminary
employees, selected vendors, welfare recipients and certain other selected persons" before paying interest
injunction barring the trustees of the City pension funds from making the proposed investments pur-
and principal on bonds of the City is unconstitutional under Article 8, Section 2 of the State Constitution
suant to the Legislation was denied by the State Supreme Court after the trustees had stated that they
in that the holders of City bonds are to be paid the principal of and interest on such bonds from the first
were purchasing the Corporation's securities on a voluntary basis and not pursuant to the mandate of the
revenues received by the City and is illegal and unconstitutional under the Federal Bankruptcy Act and
Financial Emergency Legislation. The plaintiffs have filed a notice of appeal to the Court of Appeals.
the supremacy clause of the United States Constitution. The suit further asks for a declaratory judg-
ment that the provisions of Title 6-A of the Local Finance Law are illegal and unconstitutional under the
On November 14, 1975, a retired teacher filed suit against the Corporation and others in State
State Constitution, the Federal Bankruptcy Act and the United States Constitution (see "Moratorium
Supreme Court seeking to restrain the trustees of the Teachers' Retirement Board from purchasing obli-
and Stay Legislation-Stay Legislation"). Finally, the suit also seeks a declaratory judgment that the
gations of the State, the City or any instrumentality thereof, including the Corporation. A hearing on
Financial Emergency Act "unconstitutionally diverts and expropriates to the [Emergency Financial Con-
the motion to enjoin such purchases was held on November 24, 1975 and decision was reserved.
trol Board] all of the City revenues mandated for application to payment of plaintiff's City bonds, and
unconstitutionally abrogates the duty of the City Comptroller, as the City's fiscal officer," in violation of
Lawsuit Affecting the UFT Contract
the State Constitution. Certain defendants, including the Corporation, have moved for summary judg-
ment dismissing the complaint and declaring that such legislation is valid and constitutional. Such motion
An action seeking to have the United Federation of Teachers ("UFT") contract with the City
was argued on November 26, 1975 and decision was reserved by the court.
declared null and void was brought by a taxpayer and bondholder of the City on or about October
20, 1975. The Corporation has not been served in this suit, but has been named as a defendant on the
claim that it "honor and "recognize[s]" the contract. Plaintiff has made purported service upon
State Pension Funds Investment in Securities of the Corporation
the UFT. The UFT has filed a motion to dismiss the complaint on the grounds that the court lacks
personal jurisdiction over the defendants and that plaintiff lacks standing to sue.
Several lawsuits have sought to prevent the investment by certain State pension funds (the "Pen-
sion Funds") in the securities of the Corporation. These suits were brought by various not-for-profit
corporations, and certain of their officers and members, and by various individuals, against Arthur Levitt,
State Loan of Credit
as sole trustee of certain of the Pension Funds, and against the board of trustees of certain other Pension
In September, 1975, an individual brought an action against the State, the Governor and
Funds. The plaintiffs in these suits sought, among other things, (i) declaratory judgments that the
the State Comptroller, alleging that (i) pursuant to legislation adopted for such purpose, the
provisions of the Financial Emergency Legislation which direct the investment of the funds of the Pension
State, acting by defendants Governor and Comptroller of the State, had undertaken to borrow $750,000,000
Funds in bonds of the Corporation, are ineffective, void, unreasonable and unconstitutional under both
on the faith and credit of the State in aid of the City, (ii) $250,000,000 of such amount had already been
the New York and the United States Constitutions and (ii) injunctions to prevent the defendants from
borrowed for such purpose, and (iii) the State had given or loaned its credit to or in aid of the City
investing funds of the Pension Funds in securities of the Corporation, unless such investments were
in violation of Article 7, Section 8 of the State Constitution by borrowing money in aid of the City. The
deemed, in good faith, by the defendants in their fiduciary capacities to be in the best interests of
plaintiff sought a declaratory judgment that the procedures established by the Financial Emergency
the Pension Funds.
Legislation "pursuant to which defendants have borrowed money on the credit of the State in aid of the
On September 29, 1975, the Court of Appeals of the State declared unconstitutional under the
City was not lawfully enacted and that any indebtedness incurred for such purpose is void and of no
State Constitution those portions of the Financial Emergency Legislation which mandated the investment
consequence or effect."
by the Pension Funds of a portion of their assets in securities of the Corporation. The Court of Appeals'
The Attorney General, as counsel for the defendants, filed a motion to dismiss the action and that
decision has now become final by virtue of the Court's denial of a motion for reargument by the State
motion was granted on October 15, 1975. On October 21, 1975, plaintiff appealed this ruling to the
Attorney General, counsel for the defendant State Comptroller, and by the Corporation, as amicus curiae.
Court of Appeals.
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LIBRARY
the Corporation has outstanding bonds which are not then redeemable, the City must agree to pay the
Illegal Expenditures
Corporation on demand an amount equal to the amount, if any, by which the amount of interest on such
On November 6, 1975, a State Senator began an action seeking to prevent the City Police
bonds exceeds the Corporation's income from the investment of its funds. In the event of any such pay-
Department from protecting property and personnel of the United Nations and of foreign embassies in the
ment by the City, it shall not thereafter be required to comply with the conditions described herein.
City, on the grounds that these organizations are not "within the territorial limits of the City", and there-
fore any expenditure of funds for such protection is unlawful. The action seeks to direct the Corporation
Subject to the foregoing, the statutory conditions that the City is required to observe and perform
are as follows:
to reject any budget of the City which authorizes such expenditures. The defendants have moved to
dismiss this action. Plaintiff submitted supplemental papers in support of his motion for a preliminary
1. The City is to certify that (a) it is in compliance with such of the conditions, described
injunction. The court has not yet rendered its decision.
below, as the Corporation may specify; (b) it is undertaking to comply with any of such specified
conditions as the Corporation may then require; and (c) all local legislative and executive action
Moratorium
then required to permit such compliance by the City has been taken.
On November 7, 1975, a national bank purporting to represent certain holders of notes maturing
2. The City has informed the Corporation that the City has initiated steps to adopt as its
before June 30, 1976 filed suit in State Supreme Court seeking a declaratory judgment that the Mora-
method of accounting the accounting principles set forth in the State Comptroller's Uniform System
torium Act is unconstitutional under the State Constitution and the United States Constitution and
of Accounts for Municipalities, as that system may be modified by the State Comptroller in con-
directing the City Comptroller to apply the first revenues received by the City to the payment of the
sultation with the City Comptroller. The City is to complete the transition to such accounting
City notes before using any moneys of the City for any other expenditure, except the payment of interest
method as promptly as is reasonably practicable, so that the audited financial statements (required
and principal when due on City bonds. The Corporation is not a defendant in such action.
by condition 3 below) provided to the Corporation for the City's fiscal year ending June 30, 1978
See "Moratorium and Stay Legislation-Moratorium."
and for each subsequent fiscal year can be prepared in accordance with such accounting method.
Because the City's adoption of the foregoing accounting method may result in substantial adjust-
Lawsuits Alleging Fraud in the Sale of City Securities
ments from its present method, the Corporation and the City are to consult, over the course of the
Several separate class-action lawsuits have been commenced against the City, the Mayor, the City
introduction and adoption of the new method, in order to formulate a mutually acceptable method
Comptroller and certain bank and non-bank dealers in City obligations, charging, in general, that, in
of phasing such adjustments into the new method over such reasonable period, not exceeding ten
connection with the sale of the City's bonds and notes, the defendants concealed material facts concerning
years, as the Corporation determines to be appropriate. The financial statements and other informa-
the City's finances and in so doing defrauded plaintiff investors. The suits seek damages for the losses
tion to be furnished to the Corporation by the City during such period are to be prepared in
accordance with such determination.
incurred as a result of the alleged concealment. The Corporation is not a defendant in any of these law-
suits and none of the complaints in such lawsuits contain any allegations, which, if proven, would impair
3. The City is to take such action as may be necessary to enable the State Comptroller, or at
the Corporation's ability to repay its bonds.
his election an independent certified public accounting firm retained by the City but satisfactory
See "Rights of Noteholders."
to the State Comptroller, to perform an annual audit and to furnish to the Corporation an annual
report, beginning with the City's fiscal year ending June 30, 1978, and for each subsequent fiscal
year, as to the financial statements of the City. Each such report is to be prepared in accordance
VARIOUS CONTROL PROGRAMS
with the accounting method described in condition 2 above.
Conditions to Payments by the Corporation
4. Beginning with the City's fiscal year ending June 30, 1977, the City is to deliver a proposed
At the time of any purchase from the City of obligations of the City, any exchange of the Corpora-
expense budget to the Corporation. Such delivery is to be made concurrently with the initial sub-
tion's bonds or notes for short-term obligations of the City or any other payment to the City of the
mission of a proposed expense budget to the Board of Estimate and the City Council but in no event
Corporation's funds, the City is required to agree to observe and perform a number of statutory condi-
later than 45 days prior to the beginning of such fiscal year. The proposed expense budget deliv-
tions, as they may be modified from time to time by the Corporation in accordance with the Act. No
ered to the Corporation is to be accompanied by (a) a statement setting forth the assumptions of
such modification, however, may be so substantial as effectively to constitute a waiver of the statutory
income and expense used in its preparation, (b) a reconciliation of the differences, if any, between
conditions. The statutory conditions, as modified by the Corporation and agreed to by the City, are to
such proposed expense budget and the proposed expense budget submitted to the Board of Estimate
remain in effect until all bonds and notes of the Corporation have been repaid or until the Corporation
and the City Council, and (c) a certificate of the Mayor stating that such assumptions are reasonable
has accumulated in the capital reserve funds provided for in the Act or otherwise an amount equal to the
and that operation within the proposed budget is feasible (and explaining the reasons for any
principal of all its outstanding bonds and notes plus accrued interest thereon. However, the State
differences from the proposed expense budget submitted to the Board of Estimate and City Council).
Legislature may from time to time modify the provisions of the Act which establish the conditions
The City is in each of its fiscal years to adopt and maintain an expense budget in which the total of
with which the City must comply. Failure of the City to comply with any of the statutory conditions
all income items equals or exceeds the total of all expenditure items. In addition, for the City's
outlined below is not a default under the Bonds pursuant to the Second General Bond Resolution. An
fiscal year ending June 30, 1978, and for each of its subsequent fiscal years, the total of all income
event of default may, however, occur under the Second General Bond Resolution if the Corporation fails
items is to equal or exceed the total of all expenditure items in each expense budget adopted by the
to notify designated officials and to disclose publicly the failure of the City so to comply. See "Summary
City, after any adjustments necessary to conform to the accounting method which will be required
of Certain Provisions of the Second General Bond Resolution-Events of Default."
by the Corporation as described in condition 2 above. The City is also to maintain a balanced
The City is entitled, at any time, to pay the Corporation an amount which, when added to the
budget in accordance with such accounting method.
Capital Reserve Aid Fund, equals the principal of all the Corporation's outstanding bonds and
5. The City is, over a period of ten fiscal years beginning with its fiscal year ending June 30,
accrued interest and redemption premiums, if any. If the City makes any such payment at a time when
1977, to eliminate from its capital budget those expenses that are properly includable only in its
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expense budget, as determined in accordance with the State Comptroller's Uniform System of
Accounts for Municipalities, as that system may be modified by the State Comptroller in consultation
proposed to be issued, together with the certificate of the City Budget Director specifying the proposed
with the City Comptroller. The determination of which items are properly includable only in
source of the funds for the redemption thereof. If, within ten days of such notice, the Corporation
the City's expense budget is to be made in accordance with the aforesaid accounting principles
determines, after consultation with the City Comptroller and the City Budget Director, that the issuance
regardless of any prior or subsequent act of the State Legislature otherwise classifying such items.
of such obligations would violate the limitations specified above, the Corporation is to deliver to the City
6. If after an expense budget has been adopted by the City an increase in that budget is pro-
Comptroller a certified copy of such determination and the City Comptroller is not thereafter to issue
such obligations.
posed, the Mayor is to submit such proposed increase to the Corporation concurrently with its
submission to the Board of Estimate and the City Council. The City is to include in such submission
to the Corporation a statement of the source of current income or other identifiable and currently
Powers of the Corporation
available funds required for the payment of such increase.
7. Beginning as soon as the Corporation may specify but not later than December 1, 1975, the
The Act authorizes the Corporation to pay to the City part or all of such amounts as the Mayor from
City Budget Director is to deliver to the Corporation, for each fiscal quarter of the City, an
time to time certifies to the Corporation as the amounts required by the City to enable it to pay either the
expenditure plan to implement the City's expense budget for such fiscal quarter. The City
principal of and interest on, at maturity, any short-term obligations of the City or certain operating
Budget Director is to deliver to the Corporation, within 30 days after the end of each such fiscal
expenses of the City. In lieu of making direct payments to the City, the Corporation may purchase City
quarter, an operations report reflecting results of the City's operations for such fiscal quarter
obligations from the City having a maturity date not later than 15 years from the original date of issue. All
and stating whether the City has operated within the related expenditure plan.
amounts received by the City pursuant to any payment or purchase described in this paragraph must, in
the case of amounts to be used for the payment of short-term City obligations, be held in trust for such
8. The City is to comply in all material respects with the expenditure limitations in its budgets,
purpose by the City and, in the case of amounts to be used for the payment of operating expenses by the
except insofar as any noncompliance is the result of (i) such unanticipated circumstance occurring
City, be used to pay such operating expenses.
during such fiscal year that would permit the issuance of budget notes under the State Local
Finance Law or (ii) a mandatory increase in expenditures by reason of State or Federal legis-
The Act provides that the outstanding amounts paid to the City for operating expenses in the
lation enacted after the adoption of the City's budget for such fiscal year.
manner described in the previous paragraph shall not exceed $1,925,000,000 and shall be evidenced by
obligations issued by the City. Not more than an aggregate of $900,000,000 of such obligations shall
9. The City is not to permit the aggregate principal amount of its outstanding short-term
mature in a fiscal year succeeding the fiscal year in which issued; the balance of $1,025,000,000 shall
obligations plus the aggregate principal amount of all the bonds and notes issued by the Corporation
be payable in the fiscal year in which issued. The City is obligated to apply to welfare or public education
(less any bonds or notes of the Corporation which have been refunded or renewed and less any
purposes as to which State assistance advances have been or will be advanced to the City, not less than
short-term obligations of the City then held by the Corporation) to exceed (i) $6,100,000,000
$750,000,000 of the amount received for operating expenses that are evidenced by obligations of the City
(hereinafter the "Base Debt Limit") plus (ii) an additional amount, not exceeding 10% of the
maturing in a fiscal year succeeding the fiscal year in which issued. The Corporation's advances to the City
Base Debt Limit. Notwithstanding the foregoing, during the fiscal years of the City ending
for operating expenses to the date of this Exchange Offer aggregate approximately $1,725,000,000.
June 30, 1976 and 1977, such additional amount may not exceed 30% of the Base Debt Limit;
during the fiscal year ending June 30, 1978, the additional amount may not exceed 25% of the
In addition to granting the Corporation the power to make the payments and purchases described in the
Base Debt Limit; during the fiscal year ending June 30, 1979, the additional amount may not
two immediately preceding paragraphs, the Act authorizes the Corporation to issue its bonds or notes
exceed 20% of the Base Debt Limit; and during the fiscal year ending June 30, 1980, the additional
in exchange for short-term obligations of the City as provided therein, provided that the principal
amount may not exceed 15% of the Base Debt Limit. In addition to the foregoing limitation,
amount of the Corporation's bonds or notes issued in any such exchange shall not exceed the principal
the City is not, at any date, to permit the aggregate principal amount of its outstanding short-term
amount of such short-term obligations of the City and accrued interest thereon at the stated rate to
obligations (excluding bond anticipation notes) plus the aggregate principal amount of all bonds
the date of such exchange. Upon receipt of the short-term obligations of the City in any such exchange,
and notes issued by the Corporation (less any notes or bonds refunded or renewed and less
the Corporation is permitted by the Act to deliver such short-term obligations to the City, which will
any short-term obligations of the City then held by the Corporation and less any short-term
thereupon cancel such obligations without making any payment of principal amount or accrued interest
obligations of the City issued and payable within the same fiscal year) to exceed $4,500,000,000 plus,
thereon, and the City shall have no further liability with respect to the obligations so cancelled. The
in the discretion of the Board of Directors, an additional amount not exceeding $500,000,000, plus
Act, however, prohibits the Corporation from delivering to the City for cancellation bond anticipation
in the further discretion of the Board of Directors until June 30, 1976, a further additional amount
notes of the City received in any such exchange unless the City pays the principal amount and accrued
of $100,000,000. At the date of this Exchange Offer the Board had authorized and the City had
interest thereon or pays accrued interest and exchanges such bond anticipation notes for other bond
utilized slightly more than $500,000,000 of such additional amounts.
anticipation notes of the City in equal principal amounts and at not less than the same interest rate,
in refunding or renewal thereof.
Notwithstanding any other provision of the Act, the Corporation is not authorized to modify or
waive the limitations specified in condition 9 above as to the maximum aggregate amount of short-term
The Act further prohibits the Corporation from making the payments to or purchases from or
obligations of the City permitted to be outstanding.
exchanging any of its bonds or notes for short-term obligations of, the City, as described above, unless
the City shall have agreed to observe and perform the conditions described above under the caption
Not less than 20 days prior to the issuance of any short-term obligations by the City, other than
"Conditions to Payments by the Corporation", subject to such modifications as are described therein
issuance to the Corporation, the City Comptroller is to notify the Corporation of the proposed issuance,
and as the Corporation may then approve. In addition, no such exchange of obligations may be made
specifying the amount and proposed terms thereof and the authority under which such obligations are
unless the board of directors of the Corporation shall have determined that the terms of such exchange
will not prejudice the rights of holders of other bonds and notes of the City.
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by the State Comptroller in consultation with the City Comptroller, and (2) the State-imposed limita-
Review by the Corporation
tions contained in the Act on outstanding short-term obligations of the City will be observed at all times.
In order to determine whether the City has taken or is taking action to comply with the conditions
As discussed above under the caption "Three-Year Financial Plan", on October 20, 1975 the Control
specified above, the Corporation is authorized to conduct a review of the records, accounts, budgets, review fore-
Board approved the City Financial Plan, but the City Financial Plan is based upon the assumption that,
casts, projections and other relevant materials of the City. The City is to make available for such
over the life of such Plan, there will be available to the City approximately $6,800,000,000 from sources
all of its books and records and is to furnish copies of all financial statements, budgets, forecasts, pro-
not yet committed at the time of the adoption of the Plan.
jections, information or corrective action taken by the City in response to any notices from the Corporation.
The Control Board may, upon the request of the City, allow (a) an increase in the expense budget
The City is to make its officers and employees available to and is otherwise to cooperate with the persons
(other than for the required amounts) of the City or of a covered organization for any fiscal year (which
conducting any such review for the Corporation.
increase may be cumulative) equal to two percent of the current expense budgets (other than the required
amounts), or (b) such further increases as the Control Board may approve as required to meet the impact
Action by the Corporation
of substantial inflation after the effective date of the Emergency Act, but in either case only if the Control
The proposed expense budgets (including related revenue estimates) and the proposed modifications
Board determines that increased revenues are available in an amount equal to the requested increase
thereof, the reports on expense items in the capital budget, and the expenditure plans and operations to
in expenditures.
reports, all of which are to be submitted to the Corporation as set forth under the caption "Conditions
Payments by the Corporation", are to be reviewed by the Corporation's staff or designee promptly upon
As announced by the Control Board, the City Financial Plan contemplates that the City will furnish
on a regular and timely basis sufficient underlying detail to enable the Control Board to monitor and
receipt.
implement the City Financial Plan. Although the details of the monitoring program by the Board have
If within 45 days after the receipt of the above information, the Board of Directors of the Cor-
not yet been completely worked out, the Control Board announced that its monitoring plan will include:
poration determines (a) that, in its judgment, the City's expense budget will not be balanced, either by
its terms or because income is overestimated or expenditures are underestimated therein, or that a report
(1) monthly reports on operating programs and quarterly reports on capital programs by
of proposed modifications indicates that as a result thereof the expense budget would not be balanced, has not or
agency;
(b) that one or more of the other conditions described above under the caption "Conditions" determination
(2) monthly reports on revenues by category; and
been met or will not be met, then the Corporation shall promptly notify the Mayor of such the
and shall review with him the manner in which corrective action may be taken in order to balance
(3) a system of early warning safeguards, which will direct early attention to areas of potential
non-compliance.
expense budget or comply with such other conditions.
In the event that the Board of Directors of the Corporation (a) determines, following such review
Pursuant to the Emergency Act, commencing on October 20, 1975, the effective date of the City
with the Mayor, that the corrective action necessary to balance the budget or cause compliance with such
Financial Plan, and continuing for the duration of the emergency period, all revenues received by the
other conditions will not be taken, (b) determines, as a result of a review made pursuant to the authority with
City or any covered organization became revenues of the Emergency Financial Control Board Fund (the
discussed above under the caption "Review by the Corporation", that the City is not in compliance
"Fund") and are for the account of the City and the appropriate covered organizations, and all funds, and
of the conditions specified above under the caption "Conditions to Payments by the Corporation" or
accounts as thereafter established by the City or the covered organizations became funds and accounts
any that any representation or undertaking contained in any certificate delivered pursuant to the requirements
of the Fund,* except to the extent expressly prohibited by federal law or where such revenues or
discussed above is materially incorrect or has not been complied with in all material respects or (c) agrees
to limitation of the implementation of the requirements discussed above under the caption "Conditions
funds and accounts are pledged to the payment of, or prohibited by covenants or agreements relating
to, any outstanding bonds, notes or other obligations of covered organizations. Disbursements from the
to any Payments by the Corporation", then the Corporation is to certify promptly a copy of such determination of
Fund are made by the Control Board in accordance with the approved City Financial Plan. In
or modification to the Governor, the State Legislature, the State Comptroller, the Mayor, the Board
Estimate, the City Council and the City Comptroller and is to disclose such determination or modification
addition, the Emergency Act provides that the Control Board shall establish and adopt procedures with
respect to the deposit of revenues in the Fund, the investment of moneys therein and the disbursement of
to the public.
moneys from the Fund.
The foregoing actions are not to be exclusive and the Corporation is to have and may exercise all
The Control Board, at its meeting on October 20, 1975, adopted certain resolutions implementing
other rights and remedies provided by law.
the above requirements. The Control Board resolved that it was its intention to promulgate regulatory
procedures in detail in the near future and that, until such procedures were promulgated, it elected to
Control Board
continue in effect the existing agreements between the City and the banks in which the accounts of the
The members of the Control Board created pursuant to the Financial Emergency Legislation (see
City are maintained (the "Banks"), subject, however, to certain modifications, effective October 20, 1975,
"Three-Year Financial Plan") are the Governor and Comptroller of the State, the Mayor and Comptroller
including (i) continuing the validity of the present signatories for the accounts of the City until the Control
of the City, and William M. Ellinghaus (formerly Chairman of the Corporation), Albert V. Casey and
Board notifies the Banks to terminate such validity, (ii) designating the signature of any member of the
David I. Margolis, the latter three being appointees of the Governor.
Control Board plus the signature of the State's Special Deputy Comptroller for the City of New York (the
Pursuant to the Financial Emergency Legislation, the Control Board is required to develop in con-
"Special Deputy Comptroller") as alternative signatories for such accounts, and (iii) empowering the
junction with the City, the City Financial Plan for the fiscal years ending June 30, 1976, 1977 and 1978
Special Deputy Comptroller to prohibit, restrict, direct or otherwise control the deposit of moneys into,
or the disbursement of moneys from, any such accounts.
for the City.
The City Financial Plan is to constitute a program by which (1) the City will achieve a budget for in
its fiscal year ending June 30, 1978 balanced in accordance with the accounting principles set modified forth
The Control Board has the power to exempt revenues, funds or accounts from these requirements
but has not done so to date.
the State Comptroller's Uniform System of Accounts for Municipalities, as the same may be
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In addition to its responsibilities with respect to the City Financial Plan, the Control Board is also
charged with responsibility for the review and approval of proposed City contracts or obligations and, in
limiting the generality of the foregoing: administrative expenses, legal, accounting and consultants'
coordination with the Corporation, the approval of long-term and short-term borrowing by the City or
services and expenses, payments to pension, retirement, health and hospitalization funds, and any other
any covered organization. In carrying out these responsibilities the Control Board is empowered to receive
expenses required or permitted to be paid by the Corporation under the provisions of the Act, as then
from the City and the covered organizations such financial and management information as it deems
in effect, or this Resolution or the First General Bond Resolution or otherwise.
necessary or desirable and to carry out independent audits of the records of the City and the covered
"Operating Fund" shall mean the Fund by that name established by Section 602 of the First General
organizations.
Bond Resolution.
The Financial Emergency Legislation also provides for the appointment of a Special Deputy
"Outstanding", when used with reference to Bonds, other than Bonds referred to in Section 1105
Comptroller for the City. Sidney Schwartz, formerly with the State Comptroller's office, has been
of the Resolution, shall mean, as of any date, Bonds theretofore or then being delivered under the provisions
named to that position. The Special Deputy Comptroller is to assist the Control Board in carrying out
of the Resolution, except (i) any Bonds cancelled by the Trustee at or prior to such date, (ii) any
its functions.
Bonds for the payment or redemption of which moneys equal to the principal amount or Redemption
See "Various Control Programs-Powers of the Corporation" as to the Corporation's continuing
Price thereof, as the case may be, with interest to the date of maturity or redemption date, shall
obligations under the Act.
be held by the Trustee or the Paying Agents in trust (whether at or prior to the maturity or redemp-
tion date), provided that if such Bonds are to be redeemed, notice of such redemption shall have been
given as in Article IV of the Resolution provided or provision satisfactory to the Trustee shall have been
Other Developments
made for the giving of such notice, (iii) any Bonds in lieu of or in substitution for which other Bonds
In September, 1975, the Mayor appointed Kenneth Axelson as Deputy Mayor of the City of New
shall have been delivered pursuant to Article III or Section 406 or Section 1106 of the Resolution, and
York for Finance. Mr. Axelson has taken a leave from his position as an Executive Vice President of
(iv) Bonds deemed to have been paid as provided in subsection 2 of Section 1401 of the Resolution.
J. C. Penney Co. while he serves as Deputy Mayor. On November 16, 1975, James A. Cavanagh,
"Outstanding Note Resolutions" shall mean the Note Resolutions adopted by the Corporation on
First Deputy Mayor of the City, announced his resignation effective December 31, 1975. The mayor
September 15, 1975 and November 17, 1975.
has named John E. Zuccotti, Chairman of the City Planning Commission, to replace Mr. Cavanagh.
Resolutions. "Outstanding Notes" means the Notes issued by the Corporation pursuant to the Outstanding Note
SUMMARY OF CERTAIN PROVISIONS OF THE SECOND GENERAL BOND RESOLUTION
"Paying Agent" for the Bonds of any Series shall mean the bank or trust company and its successor
or successors, appointed pursuant to the provisions of the Resolution and a Series Resolution or any
Following is a summary of certain provisions of the Second General Bond Resolution. The Summary
other resolution of the Corporation adopted prior to authentication and delivery of the Series of Bonds
does not purport to be comprehensive or definitive and is subject to all of the terms and provisions of the
for which such Paying Agent or Paying Agents shall be so appointed.
Second General Bond Resolution, to which reference is hereby made and copies of which are available from
"Per Capita Aid" shall mean the amounts of per capita aid payable to the City pursuant to Section 54
the Corporation.
of the State Finance Law.
"Redemption Price" shall mean, with respect to any Bond, the principal amount thereof, plus the
Certain Defined Terms
applicable premium, if any, payable upon redemption thereof pursuant to the Resolution and the Series
Resolution pursuant to which the same was issued.
"Bond Service Fund" shall mean the Fund by that name established by Section 602 of the
Resolution.
"Resolution" shall mean the Second General Bond Resolution as from time to time amended or
supplemented by Supplemental Resolutions or Series Resolutions in accordance with the terms and
"Capital Reserve Fund" shall mean the Fund by that name established by Section 602 of the
provisions thereof.
Resolution.
"Revenues" shall mean all payments to the Corporation pursuant to Sections 3036 and 3036-a of
"Capital Reserve Fund Requirement" shall mean, as of any date of calculation, the amount referred
the Act except any payments to the Corporation for credit to the Operating Fund.
to as the capital reserve fund requirement in subdivision 4 of Section 3036-a of the Act, including, as
provided in Section 901 of the Second General Bond Resolution for such purposes, any unpaid and matured
"Serial Bonds" shall mean the bonds SO designated in a Series Resolution.
amounts of principal and interest on the Bonds or such larger amounts as may hereafter be authorized
"Series of Bonds" or "Bonds of a Series" or words of similar meaning shall mean the Series of
pursuant to the Act as amended from time to time.
Bonds authorized by a Series Resolution.
"First General Bond Resolution" shall mean the General Bond Resolution adopted by the Corporation
"Series Resolution" shall mean a resolution of the Corporation authorizing the issuance of a Series of
on July 2, 1975 as heretofore and hereafter supplemented in accordance with the terms thereof.
Bonds in accordance with the terms and provisions thereof adopted by the Corporation in accordance
"Fiscal Year" shall mean any twelve (12) consecutive calendar months commencing with the
with Article X of the Resolution.
first day of July and ending on the last day of the following June.
"Sinking Fund Installment" shall mean as of any date of calculation and with respect to any
"Operating Expenses" shall mean the Corporation's expenses of carrying out and administering
Series of Bonds, SO long as any Bonds thereof are Outstanding, the amount of money required by a
its powers, duties and functions, as authorized by the Act, as then in effect, and shall include, without
Series Resolution, pursuant to which such Bonds were issued, to be paid at all events by the Corporation
on a single future July 1 for the retirement of any Outstanding Bonds of said Series which mature
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after said future July 1, but does not include any amount payable by the Corporation by reason
only of the maturity of a Bond, and said future July 1 is deemed to be the date when a Sinking
(2) A certificate of the State Comptroller setting forth the amount of Per Capita Aid to be
Fund Installment is payable and the date of such Sinking Fund Installment and said Outstanding Bonds
apportioned and paid into the Special Aid Account for the fiscal year of the State during which such
are deemed to be the Bonds entitled to such Sinking Fund Installment.
series of Bonds are issued.
"Special Aid Account" shall mean the special account created for the Corporation in the State
Aid Fund.
(3) A certificate by an authorized officer of the Corporation setting forth (a) the maximum
"State" shall mean the State of New York.
amount of principal and interest maturing or otherwise coming due in the current or any succeeding
fiscal year or any outstanding obligation issued, pursuant to the First General Bond Resolution and
"State Aid Fund" shall mean the Municipal Assistance State Aid Fund established pursuant to
the outstanding Note Resolutions, (b) the aggregate amount of the principal on Serial Bonds, the
Section 92-e of the State Finance Law.
Sinking Fund Installments, maturities of Term Bonds not required to be paid from Sinking Fund
"Stock Transfer Tax" shall mean the tax on the sale or transfer of stock or other certificates imposed
Installments and interest on all Outstanding Bonds, including such Series, for each Fiscal Year and
by Article 12 of the Tax Law of the State.
(c) the aggregate amount of Operating Expenses as estimated by an authorized officer for the current
"Supplemental Resolution" shall mean a resolution supplemental to or amendatory of the Resolution,
Fiscal Year; and
adopted by the Corporation in accordance with Article X of the Resolution.
(4) A certificate by an authorized officer of the Corporation stating that the aggregate of the
"Term Bonds" shall mean the bonds so designated in a Series Resolution and payable from Sinking
amounts set forth pursuant to paragraphs (1) and (2) above after deducting the amount set forth
Fund Installments.
pursuant to paragraph 3(a) above and the Operating Expenses set forth pursuant to paragraph (3)
"Trustee" shall mean United States Trust Company of New York and its successor or successors
(c) above, will be at least 1.2 times such aggregate amount set forth in 3(b) above for each Fiscal
and any other bank or trust company at any time substituted in its place pursuant to the Resolution.
Year set forth pursuant to paragraph 3(b) above.
(Resolution, Section 202)
Authorization of Bonds
The Resolution creates an issue of Bonds which are general obligations of the Corporation and are
The Pledge Effected by the Resolution
secured by the pledge of the revenues of the Corporation and the moneys and securities in the Bond
The proceeds of sale of the Bonds, the Revenues, and all Funds established by the Resolution, and
Service Fund and Capital Reserve Fund as described in the caption "Provisions for Payment of the
other moneys and securities referred to therein are pledged for the payment of the principal of and
Bonds." The Bonds shall not be a debt of the State or the City.
interest on the Bonds in accordance with their terms and the provisions of the Resolution, subject only to
(Resolution, Section 201)
the provisions of the Resolution permitting the application thereof for the purposes and on the terms
and conditions set forth in the Resolution. The pledge created by the Resolution insofar as it relates
Additional Bonds and Notes
to revenues, moneys and securities and funds pledged either under the First General Bond Resolution
No Series of Bonds, other than any Series of Bonds authorized by one or more Series Resolutions
or the Outstanding Note Resolutions is and is expressly declared to be, subordinate in all respects to the
pledge of such revenues, moneys and securities and funds created by the First General Bond Resolution or
adopted prior to November 30, 1975, issued under the Resolution shall be authenticated and delivered
the Outstanding Note Resolutions.
by the Trustee nor shall Bonds be issued by the Corporation except upon receipt by the trustee of
(Resolution, Section 601)
(1) A certificate by the New York State Commissioner of Taxation and Finance setting forth
the most recent collections for the 12 consecutive calendar months ended not more than two months
Establishment of Funds
prior to the date of such certificate, of the Sales Tax and Stock Transfer Tax, and such other taxes,
The Resolution establishes the following Funds:
which as of the date of issuance of any such Series of Bonds, are levied and collected by the State
and are payable into the Special Account in the Municipal Assistance Tax Fund established for
(1) Bond Service Fund, which is held by the Trustee; and
the Corporation.
(2) Capital Reserve Fund, which is held by the Trustee.
Where the amount for such 12 consecutive calendar months is greater than the revenue expected
(Resolution, Section 602)
by said Commissioner for the next succeeding 12 months from such Sales Tax, Stock Transfer Tax
and such other taxes, the certificate shall set forth the estimated amount which is expected to be levied
Application of Payments
and collected in such next succeeding 12 months and paid into such Special Account. Any distortion
Any payment received by the Corporation in accordance with subdivision 1 of Section 3036-a of
for any such prior 12 consecutive month period occasioned by a change in payment dates, prepayments
the Act shall be applied to the Operating Fund, the Bond Service Fund, and the Capital Reserve Fund
and late payments of such Sales Tax, Stock Transfer Tax or certain other taxes shall be taken into
in accordance with the certification of the Chairman of the Corporation pursuant to which such payment
account in such certification by increasing or decreasing the estimated amount of Sales Tax, Stock
is made. If the amount of any payment received is less than the amount so certified, such amount shall
Transfer Tax or such other taxes to be levied and collected. In the event the Sales Tax or such
be applied pro rata to the respective Funds on the basis of the amounts as certified.
other taxes have not been in effect for 12 calendar months said Commissioner shall use, respectively,
(Resolution, Section 603)
collections of the sales and compensating use taxes previously imposed by the City or collections
of the tax similarly based to the other taxes referred to above if such tax was previously imposed by the
Operating Fund
City, as the amount to be certified in lieu of actual collections of the Sales Tax or other taxes, for
those months the Sales Tax or other taxes were not in effect;
The Corporation shall pay out of the Operating Fund the amounts required for the payment of
Operating Expenses.
46
(Resolution, Section 604)
47
Bond Service Fund
make and deliver to the Governor and Director of the Budget of the State said Chairman's certificate
1. The Trustee shall on or before the business day preceding each interest payment date for any
stating the sum, if any, required to restore the Capital Reserve Fund to an amount equal to the Capital
Bonds pay, out of the amounts then held in the Bond Service Fund, to itself and the Paying Agents, the
Reserve Fund Requirement. All moneys received by the Corporation from the State pursuant to
amounts respectively required for the payment of principal, Sinking Fund Installments, if any, and
any such certification, in accordance with the provisions of subdivision 3 of Section 3036-a of the Act,
Redemption Price of, if any, and interest on any Bonds due and payable on such date, and such amounts
as amended, shall be deposited in the Capital Reserve Fund, as required by paragraph 1 of Section 606
so paid out shall be irrevocably pledged to and applied to such payments.
of the Resolution.
2. In the event that on the business day preceding any interest payment date, the amount in the
4. Moneys and securities held for the credit of the Capital Reserve Fund may, and at the direction
Bond Service Fund shall be less than the amounts respectively required for payment of interest on the
of the Corporation shall, be withdrawn from the Capital Reserve Fund by the Trustee and deposited
Outstanding Bonds and the payment of the principal and Sinking Fund Installments of the Out-
in the Bond Service Fund for the purchase or redemption of Bonds at any time provided that subsequent
standing Bonds of any Series due and payable on such interest payment date, the Trustee shall with-
to such purchase or redemption the amount in the Capital Reserve Fund will not be less than the Capital
draw from the Capital Reserve Fund and deposit into the Bond Service Fund such amounts as will
Reserve Fund Requirement.
increase the amount in the Bond Service Fund to an amount sufficient to make such payment or payments.
(Resolution, Section 606)
3. As soon as practicable after the 45th day preceding the due date of any such Sinking Fund Install-
Maintenance of Certain Funds
ment, the Trustee shall proceed to call for redemption, pursuant to Section 403 of the Resolution, on such
due date, Term Bonds of the Series and maturity for which such Sinking Fund Installment was established
In order to assure the maintenance of the Operating Fund, the Bond Service Fund and the Capital
in such amount as shall be necessary to complete the retirement of the principal amount specified for such
Reserve Fund, not less than 120 days before the beginning of each Fiscal Year (but prior to February
Sinking Fund Installment of the Term Bonds of such Series and maturity. The Trustee shall so call
12 in each calendar year) (but not later than March 1, 1976 for the Fiscal Year ending June 30, 1976),
such Term Bonds for redemption whether or not it then has moneys in the Bond Service Fund sufficient
the Chairman of the Corporation shall certify to the State Comptroller and to the Mayor and a copy to the
to pay the applicable principal amount thereof, together with interest thereon to the redemption date.
Trustee a schedule setting for the cash requirements of the Corporation for such Fiscal Year and the time
The Trustee shall pay out of the Bond Service Fund to the appropriate Paying Agents, on the day
or times when such cash is required, which certification shall be revised from time to time as required. The
preceding each such redemption date, the amount required for the redemption of the Term Bonds SO called
total amount so certified by such Chairman for such Fiscal Year shall be equal to: (i) the amounts which
for redemption, and such amount shall be applied by such Paying Agents to such redemption.
are required to be deposited in the Capital Reserve Fund during such Fiscal Year in order to maintain the
Capital Reserve Fund at the Capital Reserve Fund Requirement; (ii) the amounts required to be deposited
4. The Corporation may, at any time subsequent to the second day of July of any year but
in the Bond Service Fund to pay all interest on, and all payments of principal, Sinking Fund Install-
in no event less than 45 days prior to the succeeding first day of July on which a Sinking Fund
ments, if any, and Redemption Price, if any, of Bonds maturing or otherwise coming due during such
Installment is scheduled to be due, direct the Trustee to purchase, with moneys in the Bond Service
Fiscal Year; and (iii) the amounts required to be deposited in the Operating Fund as determined by
Fund, at a price not in excess of par, plus unpaid interest accrued to the date of such purchase, Term
the Corporation, to meet the Operating Expenses of the Corporation during such Fiscal Year. In order
Bonds payable from such Sinking Fund Installment and any Term Bonds so purchased prior to the first
further to secure the obligations of the Corporation, including the Bonds, each payment (to be made on
day of July shall be cancelled by the Trustee and evidence of such cancellation shall be given to the
or before April 12, June 25, October 12 and January 12) by the State Comptroller to the Corporation
Corporation and the aggregate principal amount of the Term Bonds so purchased shall be credited against
in accordance with such certification shall be an amount, after taking into account moneys then in the
the Sinking Fund Installment due on such first day of July.
Bond Service Fund and available for purposes of the Bond Service Fund during such Fiscal Year, not
(Resolution, Section 605)
less than the sum of (A) 50% of the interest on all outstanding Bonds, the interest on which is payable
from the Bond Service Fund of the Corporation payable within six months after the end of the period
Capital Reserve Fund
for which such payment is made plus (B) 25% of the principal and premium, if any, on all Bonds and
Sinking Fund Installments of the Corporation payable within one year after the end of the period for
1. The Corporation shall deposit into the Capital Reserve Fund: (i) all moneys paid to the
Corporation pursuant to subdivisions 1, 2 and 3 of Section 3036-a of the Act for the purpose of maintaining
which such payment is made and of such amount, if any, as may be required to be paid into the Capital
or restoring the amount in such Fund to the Capital Reserve Fund Requirement; (ii) such portion of the
Reserve Fund during the Fiscal Year of the Corporation of which such period is a part. If any
increase shall occur in the cash requirements specified above, or if payments are required at a time
proceeds of sale of Bonds, if any, as shall be prescribed by a Series Resolution authorizing the issuance
or times earlier than previously certified or if the City shall for any reason fail to make timely payment
thereof; and (iii) any other monies which may be made available to the Corporation for the purposes of
of the principal and accrued interest due on any obligation issued by the City to the Corporation and
the Capital Reserve Fund from any other source or sources.
maturing within the same Fiscal Year, such Chairman shall certify a revised schedule of cash requirements
2. Moneys and securities held for the credit of the Capital Reserve Fund shall be withdrawn by
for such Fiscal Year to the State Comptroller and to the Mayor. The schedule accompanying each
the Trustee and deposited to the credit of the Bond Service Fund at the times and in the amounts
certification (or revision thereof) shall provide for such payment dates as the Corporation deems appro-
required to comply with the provisions of paragraph 2 of Section 605 of the Resolution. At any time
priate to assure that sufficient funds will be available to meet the obligations of the Corporation as they
after December 31, 1980, moneys and securities in the Capital Reserve Fund in excess of its Requirement,
become due. The Chairman shall exclude from consideration in making any such certification
upon direction of the Corporation, may be deposited to the credit of the Bond Service Fund.
with respect to the funds required by the Corporation for payment of principal of or interest on
the Bonds, any amounts due to be received as payment of principal of or interest on obligations of
3. In order further to assure the maintenance of the Capital Reserve Fund in an amount equal to the
the City held by the Corporation. (See "Provisions for Payment of the Bonds-Municipal Assistance
Capital Reserve Fund Requirement and in compliance with the requirements of subdivision 3 of
Tax Fund".)
Section 3036-a of the Act, the Chairman of the Corporation shall annually, on or before December 1,
(Resolution, Section 607)
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49
Further Assurances
that nothing contained in the Resolution shall prevent the Corporation from issuing (i) bonds, notes,
The Corporation has covenanted that it shall cause the Chairman to make and deliver the certificates
or any other obligations under another and separate resolution so long as the charge or lien created
referred to in Sections 606 and 607 of the Resolution.
by such resolution is not prior or equal to the charge or lien created by the Resolution, (ii) obligations
(Resolution, Section 904)
issued in accordance with Article II of the First General Bond Resolution and (iii) obligations issued
in lieu of or in substitution for other obligations pursuant to Sections 304 and 307 and Sections 307
Payment of Bonds
through 310 or Sections 406 or Section 1106 of the First General Bond Resolution.
The Corporation shall duly and punctually pay or cause to be paid the principal or Redemption
(Resolution, Section 907)
Price, if any, of every Bond and the interest thereon, at the dates and places and in the manner pro-
vided in the Bonds and in the coupons thereto appertaining, according to the true intent and meaning
General
thereof, and shall duly and punctually pay or cause to be paid all Sinking Fund Installments, if any,
becoming payable with respect to any Series of Bonds.
Subject to the rights of holders of obligations issued pursuant to the First General Bond Resolution,
the Corporation shall not modify or amend the First General Bond Resolution in any manner which
(Resolution, Section 901)
would have a material adverse effect on the Bondholders, provided, however, that nothing herein shall
Office for Servicing Bonds
prevent the Corporation from amending or supplementing the First General Bond Resolution to provide
The Corporation shall at all times maintain an office or agency in the Borough of Manhattan, City
for the issuance of Bonds, Notes or Other Obligations (as such terms are defined in the First General
and State of New York, where Bonds and coupons may be presented for payment, registration, transfer
Bond Resolution) as provided in the First General Bond Resolution. No such Bonds, Notes or Other
Obligations shall be issued in accordance with Article II of the First General Bond Resolution if such
or exchange. The Corporation has appointed the Trustee as its agent to maintain such office or agency
for the registration, transfer or exchange of Bonds.
issuance would cause the amounts stated in paragraphs (1) and (2) of subsection 3 of Section 203 after
making the deductions provided to be less than 1.2 times such aggregate amount set forth in paragraph
(Resolution, Section 903)
3(b) of subsection 3 of Section 203 for each Fiscal Year set forth pursuant to said paragraph 3(b) if
such certifications required to be made pursuant to such subsection 3 had been made at the time of the
Power to Issue Bonds and Make Pledges
issuance of such Bonds, Notes or Other Obligations.
The Corporation is duly authorized pursuant to law to create and issue the Bonds and to adopt
The Corporation hereby covenants and agrees with all who may be holders of the Bonds that it
the Resolution and to pledge the Revenues, and other moneys, securities and funds purported to be
shall not issue and the Corporation represents hereby that there are presently not outstanding any Bonds,
pledged by the Resolution in the manner and to the extent provided in the Resolution. The Revenues
Notes, or Other Obligations (as such terms are defined in the First General Bond Resolution), or any
and other moneys, securities and funds so pledged are and will be free and clear of any pledge, lien,
bonds, notes or other obligations pursuant to any resolution, including the Outstanding Note Resolutions,
charge or encumbrance thereon or with respect thereto prior to, or of equal rank with, the pledge
of the Corporation, the holders of which would have a right to payment from the State Aid Fund prior
created by the Resolution and all corporate action on the part of the Corporation to that end has been
or equal to the right of the holders of the Bonds to payment from such Fund.
duly and validly taken. The Bonds and the provisions of the Resolution are and will be the valid
and legally enforceable obligations of the Corporation in accordance with their terms and the terms
(Resolution, Section 909)
of the Resolution. The Corporation shall at all times, to the extent permitted by law, defend, preserve
Additional Obligations
and protect the pledge of the Revenues and other moneys, securities and funds pledged under the
Resolution and all the rights of the Bondholders under the Resolution against all claims and demands
The Corporation reserves the right to issue bonds, notes or any other obligations, under another
of all persons whomsoever.
and separate resolution so long as the same are not entitled to a charge or lien or right prior or equal
to the charge or lien created by, or prior or equal to the rights of the Corporation and Holders of the
(Resolution, Section 905)
Bonds provided by, the Resolution and the Act, or with respect to the moneys pledged under the Reso-
lution or with respect to proceeds from the Per Capita Aid, the Sales Tax or the Stock Transfer Tax
Agreement of the State
or the sources set forth in the Act. The foregoing shall not limit any right which the corporation has
In accordance with the provisions of Section 3015 of the Act, the Corporation has included in
on the date of this resolution under the First General Bond Resolution.
the Resolution a pledge and agreement with the Holders of the Bonds that the State will not
limit or alter the rights vested pursuant to the Act in the Corporation to fulfill the terms of any
(Resolution, Section 204)
agreements made with Bondholders, or in any way impair the rights and remedies of such Holders
Events of Default
until the Bonds, together with the interest thereon, with interest on any unpaid installments of interest,
and all costs and expenses in connection with any action or proceeding by or on behalf of such Holders,
The Resolution provides that it shall constitute an "event of default" if:
are fully paid and discharged. See "Agreement of the State of New York."
(a) the Corporation shall default in the payment of the principal or Sinking Fund Installments,
(Resolution, Section 906)
if any, or Redemption Price of any Bond when and as the same shall become due, whether at
maturity or upon call for redemption or otherwise; or
Creation of Liens
(b) the Corporation shall default in the payment of interest on any of the Bonds and such
The Corporation shall not issue any bonds or other evidences of indebtedness, other than the Bonds,
default shall continue for a period of thirty (30) days; or
secured by a pledge of the revenues, moneys and securities in the Capital Reserve Fund and shall
not create or cause to be created any lien or charge prior to the Bonds on the revenues, monies and
(c) the Corporation shall fail or refuse to comply with the provisions of subdivision 1 of
securities in the Bond Service Fund except to the extent provided in Section 601 provided, however,
Section 3036-a of the Act, or the State Comptroller shall fail to pay to the Corporation, as and
when required by such Section, for deposit in the Capital Reserve Fund, the Bond Service Fund
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51
or the Operating Fund any amount or amounts as shall be certified by the Chairman of the
(c) by action or suit in equity, to require the Corporation to account as if it were the
Corporation pursuant to such provisions of the Act or the Corporation shall fail or refuse to deposit
trustee of an express trust for the Holders of the Bonds;
in the Capital Reserve Fund or the Bond Service Fund the amount or amounts received by the
Corporation for deposit in such Funds; or
(d) by action or suit in equity, to enjoin any acts or things which may be unlawful or in
violation of the rights of the Holders of the Bonds; or
(d) the Corporation shall fail or refuse to comply with the provisions of subdivisions 2 and 3
of Section 3036 of the Act, or the State shall fail to appropriate and pay to the Corporation, as and
(e) in accordance with the provisions of the Act (including the requirement for 30 days
when required by such Section, for deposit in the Capital Reserve Fund any amount or amounts as
notice to the Governor, the Corporation and the Attorney General of the State) to declare all
shall be certified by the Chairman pursuant to such provisions of the Act or the Corporation shall
Bonds due and payable, and if all defaults shall be made good, then, with the written consent
fail or refuse to deposit in the Capital Reserve Fund the amount or amounts received by the Cor-
of the Holders of not less than twenty-five per centum (25%) in principal amount of the Out-
poration for deposit in such Fund; or
standing Bonds, to annul such declaration and its consequences.
(e) the Corporation shall fail or refuse to comply with the provisions of the Act, other than
In the enforcement of any remedy under the Resolution, the Trustee shall be entitled to
as provided in (c) or (d) above, or shall default in the performance or observance of any other
sue for, enforce payment on and receive any and all amounts then or during any default becoming,
of the covenants, agreements or conditions on its part contained in the Resolution, any Series Res-
and at any time remaining, due from the Corporation for principal, Redemption Price, interest or
olution, any Supplemental Resolution, or in the Bonds, and such failure, refusal or default shall con-
otherwise, under any provision of the Resolution or a Series Resolution or of the Bonds, with
tinue for a period of forty-five (45) days after written notice thereof by the Holders of not less
interest on overdue payments at the rate or rates of interest specified in such Bonds, together with
than five per centum (5%) in principal amount of the Outstanding Bonds; or
any and all costs and expenses of collection and of all proceedings thereunder, without prejudice to
(f) the State shall for any reason fail or refuse to continue the imposition of either the Sales
any other right or remedy of the Trustee or of the Bondholders, and to recover and enforce a judg-
Tax imposed by Section 1107 of Article 28 of the Tax Law as the same may be from time
ment or decree against the Corporation for any portion of such amounts remaining unpaid, with
to time amended or the Stock Transfer Tax imposed by Sections 270 and 270-a of Article 12 of such
interest, costs and expenses, and to collect from any monies available for such purpose, in any
Law as the same may be from time to time amended or if the rates of such taxes shall be reduced to
manner provided by law, the monies adjudged or decreed to be payable.
rates less than those in effect on July 2, 1975; or
(Resolution, Section 1203)
(g) the State shall fail to maintain the existence of either the Special Account or the Stock
Transfer Fund; or
Priority of Payments After Default
(h) the State shall for any reason fail or refuse to apportion and pay Per Capita Aid or shall fail
In the event that the funds held by the Trustee and Paying Agents shall be insufficient for the
to maintain the State Aid Fund and the Special Aid Account therein or shall reduce the amount of
payment of interest and principal, Sinking Fund Installments or Redemption Price then due on the Bonds,
Per Capita Aid payable during the current Fiscal Year to an amount less than the maximum amount
such funds (other than funds held for the payment or redemption of particular Bonds or coupons which
of principal of and interest on the Outstanding Bonds maturing or otherwise coming due in the
have theretofore become due at maturity or by call for redemption) and any other monies received or
current or any future Fiscal Year.
collected by the Trustee acting pursuant to the Act after making provision for the payment of any expenses
(Resolution, Section 1202)
necessary in the opinion of the Trustee to protect the interests of the Holders of the Bonds, and for the pay-
ment of the charges and expenses and liabilities incurred and advances made by the Trustee or any Paying
Remedies
Agents in the performance of their respective duties under the Resolution, shall be applied as follows:
The Resolution vests the Trustee with all rights, powers and duties of a trustee appointed by Bond-
(a) Unless the principal of all of the Bonds shall have become or have been declared due and
holders pursuant to Section 3017 of the Act and the right of Bondholders to appoint a trustee pursuant
payable,
to such Section of the Act is thereby abrogated in accordance with the provision of subdivision 2(g) of
Section 3012 of the Act.
First: to the payment to the persons entitled thereto of all installments of interest then
due in the order of the maturity of such installments, and if the amount available shall not be
(Resolution, Section 1201)
sufficient to pay in full any installment, then to the payment thereof ratably, according to the
Upon the happening and continuance of any event of default specified in paragraph (a) or
amounts due on such installment, to the persons entitled thereto, without any discrimination or
(b) of Section 1202 of the Resolution, the Trustee shall proceed, or upon the happening and con-
preference; and
tinuance of any event of default specified in paragraph (c), (d), (e), (f), (g) or (h) of said Section,
Second to the payment to the persons entitled thereto of the unpaid principal, Sinking Fund
the Trustee may proceed, and upon the written request of the Holders of not less than twenty-five per
Installments or Redemption Price of any Bonds which shall have become due, whether at maturity
centum (25%) in principal amount of the Outstanding Bonds shall proceed, in its own name, to
or by call for redemption, in the order of their due dates and, if the amounts available shall not be
protect and enforce its rights and the rights of the Bondholders by such one or more of the following
sufficient to pay in full all the Bonds due on any date, then to the payment thereof ratably,
remedies, as the Trustee, being advised by counsel, shall deem most effectual to protect and enforce
according to the amounts of principal or Redemption Price due on such date, to the persons
such rights:
entitled thereto, without any discrimination or preference.
(a) by mandamus or other suit, action or proceeding at law or in equity, to enforce all rights
of the Bondholders and to require the Corporation to carry out any other covenant or agreement
(b) If the principal of all of the Bonds shall have become or have been declared due and payable,
with Bondholders and to perform its duties under the Act;
to the payment of the principal and interest then due and unpaid upon the Bonds without preference
or priority of principal over interest or of interest over principal, or of any installment of interest
(b) by bringing suit upon the Bonds;
over any other installment of interest, or of any Bond over any other Bond, ratably, according
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53
to the amounts due respectively for principal and interest, to the persons entitled thereto without
Any term or provision of the Resolution and the rights and obligations of the Corporation and of
any discrimination or preference except as to any difference in the respective rates of interest
the Holders of the Bonds and coupons thereunder may be modified or amended with the consent of the
specified in the Bonds and coupons.
Holders of all of the Bonds then Outstanding.
(Resolution, Section 1204)
(Resolution, Section 1103)
Series Resolutions and Supplemental Resolutions
Investment of Funds
A Series Resolution or Supplemental Resolution of the Corporation may be adopted at any time
1. Monies in the Bond Service Fund and the Capital Reserve Fund shall, as nearly as may be
or from time to time, for any one or more of the following purposes: to provide for the issuance of a
practicable, be invested by the Trustee upon direction of the Corporation in (a) direct obligations of the
Series of Bonds pursuant to the provisions of the Resolution and to prescribe the terms and conditions
United States of America, direct obligations of the State or obligations the principal and interest of which
pursuant to which such Bonds may be issued, paid or redeemed; to add additional covenants and agree-
are guaranteed by the United States of America or the State, (b) any bond, debenture, note, participation
ments of the Corporation for the purpose of further securing the payment of the Bonds, provided such
or other similar obligation issued by any of the following Federal agencies: Government National Mortgage
additional covenants and agreements are not contrary to or inconsistent with the covenants and agree-
Association, Federal Land Banks, Federal Home Loan Banks, Federal Intermediate Credit Banks, Banks
ments of the Corporation contained in the Resolution; to prescribe further limitations and restrictions upon
for Cooperatives, Tennessee Valley Authority, Farmers' Home Administration and Export-Import Bank,
the issuance of Bonds and the incurring of indebtedness by the Corporation which are not contrary to or
(c) if permitted by law, any bond, debenture, note, participation or other similar obligation issued by the
inconsistent with the limitations and restrictions thereon theretofore in effect; to surrender any right,
Federal National Mortgage Association to the extent such obligations are guaranteed by the Government
power or privilege reserved to or conferred upon the Corporation by the terms of the Resolution, pro-
National Mortgage Association, and (d) any other obligation of the United States of America or any
vided that the surrender of such right, power or privilege is not contrary to or inconsistent with the
Federal agencies which may then be purchased with funds belonging to the State of New York or held
covenants and agreements of the Corporation contained in the Resolution; to confirm as further assur-
in the State treasury.
ance any pledge under and the subjection to any lien, claim or pledge created or to be created by the
provisions of the Resolution of the Revenues, or of any other monies, securities or funds; to modify any
2. In lieu of the investments of moneys in obligations authorized in paragraph (1) above, the
of the provisions of the Resolution or any previously adopted Series Resolution in any other respects,
Trustee shall, to the extent permitted by the Act then in effect, upon direction of the Corporation in writing,
provided that such modifications shall not be effective until after all Bonds of any Series of Bonds
signed by an authorized officer, deposit moneys from any fund or account held by the Trustee under the
Outstanding as of the date of adoption of such Series Resolution or Supplemental Resolution shall cease
terms of the Resolution, in interest-bearing time deposits, or shall make other similar investment arrange-
to be Outstanding, and all Bonds issued under such resolutions shall contain a specific reference to the
ments, including, but not limited to, repurchase agreements covering obligation of issuers enumerated as
modifications contained in such subsequent resolutions; or, with the consent of the Trustee, to cure any
authorized for investments pursuant to the provisions of paragraph (1) above, with itself or a member
ambiguity or defect or inconsistent provision in the Resolution or to insert such provisions clarifying
bank or banks of the Federal Reserve System or banks the deposits of which are insured by the Federal
matters or questions arising under the Resolution as are necessary or desirable in the event any such
Deposit Insurance Corporation or securities dealers approved by an authorized officer provided, that
modifications are not contrary to or inconsistent with the Resolution as theretofore in effect.
each such interest-bearing time deposit or other similar investment arrangement shall permit the moneys
so placed to be available for use at the times provided with respect to the investment or reinvestment of
(Resolution, Section 1001)
such monies; and provided further, that all monies in each such interest-bearing time deposit or other
similar investment arrangement shall be continuously and fully secured by obligations of the issuers
Any of the provisions of the Resolution hereinbefore stated may be amended by a Supplemental
enumerated as authorized for investments pursuant to the provision of paragraph (1) above, of a market
Resolution, with the written consent (a) of the Holders of at least two-thirds in principal amount of the
value equal at all times to the amount of the deposit or of the other similar investment arrangement.
Bonds Outstanding at the time such consent is given, or (b) in case less than all of the several Series
of Bonds then Outstanding are affected by the modification or amendment, of the Holders of at least
3. Obligations purchased as an investment of monies in any fund or account held by the Trustee
two-thirds in principal amount of the Bonds of each Series so affected and Outstanding at the time
under the provisions of the Resolution shall be deemed at all times to be a part of such fund or account
such consent is given, or (c) in case the modification or amendment changes the amount or date of any
and the income or interest earned, profits realized or losses suffered by a fund or account due to the
Sinking Fund Installment, of the Holders of at least two-thirds in principal amount of the Bonds of the
investment thereof shall be retained in, credited or charged, as the case may be, to such fund or account.
particular Series, maturity and interest rate entitled to such Sinking Fund Installment Outstanding at
the time such consent is given provided, however, that if such modification or amendment will, by its terms,
4. The Resolutions provide that the Trustee shall not be liable or responsible for the making of
not take effect so long as any Bonds of any specified like series and maturity remain Outstanding, the
any investment authorized pursuant thereto, in the manner provided therein, or for any loss resulting
consent of the Holders of such Bonds shall not be required and such Bonds shall not be deemed to be
from any such investment SO made.
Outstanding for the purpose of any calculation of Outstanding Bonds under Section 1101 of the Resolu-
(Resolution, Sections 702 and 703)
tion. No such modification or amendment shall permit a change in the terms of redemption or maturity
of the principal of any Outstanding Bond or of any installment of interest thereon or a reduction in the
Defeasance
principal amount or the Redemption Price thereof or in the rate of interest thereon without the consent
of the Holder of such Bond, or shall reduce the percentages or otherwise affect the classes of Bonds the
1. If the Corporation shall pay or cause to be paid to the Holders of all Bonds and coupons then
consent of the Holders of which is required to effect any such modification or amendment.
Outstanding, the principal and interest and Redemption Price, if any, to become due thereon, at the
times and in the manner stipulated therein and in the Resolution, then the covenants, agreements and
(Resolution, Section 1101)
other obligations of the Corporation to the Bondholders shall be discharged and satisfied.
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55
2. Bonds or coupons or interest installments for the payment or redemption of which monies shall
have been set aside and shall be held in trust by the Trustee or any Paying Agent (through deposit by the
LEGAL INVESTMENT
Corporation of funds for such payment or redemption or otherwise) at the maturity or redemption date
thereof shall be deemed to have been paid within the meaning and with the effect expressed in paragraph 1
The Bonds are legal investments, under present provisions of New York law, for all public officers and
above. All Outstanding Bonds of any Series and all coupons appertaining to such Bonds shall, prior to the
bodies of the State and political subdivisions of the State and other persons carrying on an insurance
maturity or redemption date thereof, be deemed to have been paid within the meaning and with the effect
business, all banks, bankers, trust companies, savings banks and savings associations, including savings
expressed in such paragraph 1 above if (a) in case any of said Bonds are to be redeemed on any date
and loan associations, building and loan associations, investment companies and other persons carrying
prior to their maturity, the Corporation shall have given to the Trustee in form satisfactory to it irrevocable
on a banking business, all administrators, guardians, executors, trustees and other fiduciaries, and all
instructions to publish as provided in Article IV of the Resolution notice of redemption on said date of such
other persons whatsoever who are now or may hereafter be authorized to invest in bonds or other obliga-
Bonds, (b) there shall have been deposited with the Trustee either monies in an amount which shall be suf-
tions of the State. Pursuant to the Act the Bonds may be deposited with, and may be received by, all
ficient, or direct obligations of the United States of America the principal of and the interest on which, when
public officers and bodies of the State and all political subdivisions thereof and public corporations for
due, will provide monies which, together with the monies, if any, deposited with the Trustee at the same
any purpose for which the deposit of bonds or other obligations of the State is now or may hereafter be
authorized.
time, shall be sufficient to pay, when due, the principal or Redemption Price, if applicable, and interest
due and to become due on said Bonds on and prior to the redemption date or maturity date thereof, as
the case may be, and (c) in the event said Bonds are not by their terms subject to redemption within the
APPROVAL OF LEGALITY
next succeeding 60 days, the Corporation shall have given the Trustee in form satisfactory to it irrevocable
instructions to publish, as soon as practicable, at least twice, at an interval of not less than seven days
Hawkins, Delafield & Wood, New York, New York, Bond Counsel to the Corporation expects to
between publications, in an Authorized Newspaper a notice to the Holders of such Bonds and coupons
render an approving opinion in the form attached to this Official Statement as Exhibit A. Certain legal
that the deposit required by (b) above has been made with the Trustee and that said Bonds and coupons
matters will be passed on for the Corporation by its General Counsel, Paul, Weiss, Rifkind, Wharton &
are deemed to have been paid in accordance with Section 1401 of the Resolution and stating such maturity
Garrison, New York, New York. Carter, Ledyard & Milburn, New York, New York, have acted as
counsel for the Trustee.
or redemption date upon which monies are to be available for the payment of the principal or Redemption
Price, if applicable, on said Bonds. Neither direct obligations of the United States of America or monies
deposited with the Trustee pursuant to Section 1401 of the Resolution nor principal or interest payments
TAX EXEMPTION
on any such securities shall be withdrawn or used for any purpose other than, and shall be held in trust for,
the payment of the principal or Redemption Price, if applicable, and interest on said Bonds; provided
In the opinion of Bond Counsel, under existing statutes and court decisions, interest on the Bonds
that any cash received from such principal or interest payments on such direct obligations of the United
is exempt from Federal income taxes, and at all times shall be free from State and City personal
States of America deposited with the Trustee, if not then needed for such purpose, shall, to the extent
income taxes.
practicable, be reinvested in direct obligations of the United States of America maturing at times and in
amounts sufficient to pay when due the principal or Redemption Price, if applicable, and interest to become
due on said Bonds on and prior to such redemption date or maturity date thereof, as the case may be,
and interest earned from such reinvestment as received by the Trustee, shall be paid over to the
Lazard Frères & Co., New York, New York, is acting without compensation as financial advisor to the
Corporation free and clear of any trust, lien or pledge.
Corporation. Felix G. Rohatyn, Chairman of the Corporation, is a general partner of such firm.
(Resolution, Section 1401)
The references herein to the Act, the Tax Law, the State Finance Law, the Financial Emergency
Legislation and the Resolutions are summaries of certain provisions thereof. Such summaries do not
purport to be complete and reference is made to the Act, such Laws and the Resolutions for full and
complete statements of such provisions. Copies of such Act, such Laws and such Resolutions are available
at the office of the Corporation.
AGREEMENT OF THE STATE OF NEW YORK
The delivery of this Official Statement has been duly authorized by the Corporation.
The State has pledged to and agreed with the holders of the Bonds that the State will not limit or
alter the rights vested by the Act in the Corporation to fulfill the terms of any agreements made with
MUNICIPAL ASSISTANCE CORPORATION FOR THE CITY OF NEW YORK
holders of Bonds, or in any way impair the rights and remedies of such holders, until the Bonds, together
with the interest thereon, with interest on any unpaid installments of interest, and all costs and expenses
in connection with any action or proceedings by or on behalf of such holders, are fully met and discharged
and in accordance with the authority granted to the Corporation pursuant to Section 3015 of the Act,
the Corporation has included such pledge in the Second General Bond Resolution.
Such pledge and agreement does not, among other things, bind or obligate the State to appropriate
funds for the payment of principal of or premium, if any, or interest on the Bonds. See "Provisions for
Payment of the Bonds-Restoration of Capital Reserve Aid Fund."
56
57
Exhibit A
before the maturity of coupon 1975 Series
Bonds according to the tenor and upon presentation
and surrender of the attached coupons as they respectively become due and payable, at the rate of
eight per centum (8%) per annum.
[LETTERHEAD OF HAWKINS, DELAFIELD & WOOD]
The 1975 Series
Bonds are issued initially in fully registered form without coupons in the
denomination of $5,000 or an integral multiple of $5,000 and thereafter either in such fully registered
form or coupon form in the denomination of $5,000, registrable as to principal only. Coupon and fully
registered 1975 Series
Series
Bonds are interchangeable as provided in the Resolutions. Coupon 1975
Bonds
are
lettered
and fully registered 1975 Series
Bonds are lettered
Coupon 1975 Series
Bonds and fully registered 1975 Series
Bonds are numbered consecu-
December
1975
tively from one upward.
The 1975 Series
MUNICIPAL ASSISTANCE CORPORATION
Bonds are subject to redemption at the election of the Corporation as a whole
FOR THE CITY OF NEW YORK
on any interest payment date on or after July 1, 1981 as provided in the Resolutions at 100% of the
New York, New York
principal amount thereof, plus accrued interest to the date of redemption.
The 1975 Series
DEAR SIRS:
Bonds are subject to redemption, in part, by lot as provided in the Resolu-
tions, on July 1 in each of the years and in the respective principal amounts set forth below, at 100%
We have examined a record of proceedings relating to the issuance of $
aggregate
of the principal amount thereof, plus accrued interest to the date of redemption, from mandatory Sinking
principal
amount
of
1975
Series
Bonds
(the
"1975
Series
Bonds")
of
the
Municipal
Assistance
Fund Installments which are required to be made in amounts sufficient to redeem on July 1 of each of
Corporation For The City of New York (the "Corporation"), a corporate governmental agency and
the years shown below the principal amount of such 1975 Series
Bonds specified therefor:
instrumentality of the State of New York (the "State") constituting a public benefit corporation, created
Year
and existing under and pursuant to the Constitution and statutes of the State, including the New York
Amount
1977
State Municipal Assistance Corporation Act, as amended by the Municipal Assistance Corporation for
$
1978
the city of New York Act, being Titles I, II and III of Article 10 of the Public Authorities Law,
1979
Chapter 43-A of the Consolidated Laws of the State, as amended to the date hereof (the "Act").
1980
The 1975 Series Bonds are authorized and issued under and pursuant to the Act and the Second
1981
General Bond Resolution of the Corporation (the "Second General Bond Resolution") and the 1975
1982
Series
Resolution (the "Series Resolution"), adopted November 1975. Said resolutions
are
herein
1983
collectively called the "Resolutions".
1984
The 1975 Series Bonds are part of an issue of bonds of the Corporation (the "Bonds") which the
1985
Corporation has established and created under the terms of the Second General Bond Resolution and is
1986
authorized to issue from time to time for the corporate purposes of the Corporation authorized by the Act,
as then in effect and without limitation as to amount except as provided in the General Bond Resolution
Chapters 168, 169, 868 and 870 of the Laws of 1975, as amended to the date hereof, each enacted
or as may be limited by law. The 1975 Series Bonds are being issued for the purpose of effecting an
by the People of the State, represented in Senate and Assembly of the State and signed into law by the
exchange of such 1975 Series
Bonds for an equal aggregate principal amount of certain short-term
Governor of the State (the "Enabling Legislation") provide for, among other things, inserting of the
obligations of The City of New York, New York ("The City") scheduled to mature on
Act in the Public Authorities Law, creating the Corporation as aforesaid, adding a new section 92-e to
(the "City Maturity Date").
Article 6 of the State Finance Law, constituting Chapter 56 of such Consolidated Laws, establishing a
The Corporation is authorized to issue Bonds, in addition to the 1975 Series
Bonds, only
municipal assistance aid fund (the "Aid Assistance Fund") and a special account for the Corporation
upon the terms and conditions set forth in the Second General Bond Resolution and such Bonds, when
within the Aid Assistance Fund (the "Special Aid Account"), amending section 54 of the State Finance
issued, shall with the 1975 Series
Bonds and with all other such Bonds theretofore issued, be entitled
Law to provide for the apportionment and payment into the Special Aid Account of amounts of
to the equal benefit, protection and security of the provisions, covenants and agreements of the Second
capita aid appropriated by the Legislature of the State and otherwise payable out of the general fund per
General Bond Resolution. The Corporation has issued other bonds under a first general bond resolu-
of the State to The City thereunder subject to payments being made as follows: (i) any amounts
tion and other obligations subordinate thereto. The Bonds are not on a parity with such bonds and other
required to be paid to the City University Construction Fund pursuant to the City University Con-
obligations.
struction Fund Act, Article 125-B of the Education Law, constituting Chapter 16 of such Consolidated
Laws; (ii) any amounts required to be paid to the New York City Housing Development Corporation
The 1975 Series
Bonds are dated
1975 except as otherwise provided in the
pursuant to the New York City Housing Development Corporation Act, Article XII of the Private
Resolutions with respect to fully registered 1975 Series
Bonds and will mature on July 1, 1986
Housing Finance Law, constituting Chapter 41 of such Consolidated Laws; (iii) any amounts required
and will bear interest from the date thereof or the City Maturity Date, whichever is later, payable July 1,
to be paid by The City to the New York City Transit Authority pursuant to the provisions of
1976 and semi-annually thereafter on January 1 and July 1 in each year until the Corporation's obligation
chapter seven of the laws of the State of nineteen hundred seventy-two; (iv) any amounts required
with respect to the principal thereof shall be discharged, but only with respect to interest due on or
to be paid by The City to the State to repay an advance made in nineteen hundred seventy-four
to subsidize the fare of the New York City Transit Authority; and (v) five hundred thousand
2
dollars to the chief fiscal officer of The City for payment to the trustees of the police pension fund of such
Capital Reserve Fund requirement under the Second General Bond Resolution. Subdivision 3 of Section
City pursuant to the provisions of paragraph e of subdivision 7 of such section 54 of the State Finance
3036-a of the Act providing for the appropriation and payment to the Corporation for deposit in the
Law, suspending the power of The City to adopt local laws for the imposition of certain sales and com-
Capital Reserve Fund of such sum as shall be so certified by the Chairman, does not constitute an enforce-
pensating use taxes pursuant to sections 1210 and 1212-A of Article 29 of the Tax Law, constituting
able obligation or debt of the State, the amount of such sum being subject to annual appropriation for
Chapter 60 of such Consolidated Laws, and the taxes imposed pursuant to said sections, until all notes
such purpose by the Legislature of the State, which is empowered, but is not bound or obligated, to
and bonds of the Corporation, including the 1975 Series
Bonds, and interest thereon have been
appropriate such amount.
fully paid and discharged, adding a new section 92-d to Article 6 of the State Finance Law establishing
a municipal assistance tax fund (the "Tax Assistance Fund") and a special account for the Corporation
5. Pursuant to the Act and the Second General Bond Resolution, the Corporation has validly
within the Tax Assistance Fund (the "Special Tax Account"), adding a new section 1107 to Article 28
covenanted that the Chairman of the Corporation shall certify to the State Comptroller and the Mayor of
of said Tax Law imposing sales and compensating use taxes in The City at a rate of four percent (4%)
The City, the amounts required, pursuant to subdivision 1 of Section 3036 and of Section 3036-a of the Act,
on certain items therein described and at a rate of six percent (6%) on the sale of certain parking
for deposit in the funds established by the Second General Bond Resolution at the time or times and in the
services (the "Sales Tax"), the revenues derived from which, less such amounts as the Commissioner of
manner provided therein, including the amounts required for deposit in the Bond Service Fund to pay all
Taxation and Finance determines to be necessary for reasonable costs in administering, collecting and
interest and all principal and redemption premium, if any, on bonds maturing or otherwise coming
distributing such taxes, are required to be paid into the Special Tax Account, together with, after deducting
due and for deposit in the Capital Reserve Fund to maintain such Fund at such Capital Reserve
such costs, such amounts, beginning with the fiscal year of the State commencing April 1, 1976, as may
Fund requirement. Said subdivisions provide for the State Comptroller to pay such amounts to the
be required under the Enabling Legislation to be transferred from the Stock Transfer Tax Fund established
Corporation for deposit as aforesaid, the source of such payments being the Aid Assistance Fund into which
by section 92-b of Article 6 of said State Finance Law, into which the revenues derived from a tax imposed
is paid such per capita aid, subject to certain prior claims as described above, and, to the extent required,
by Article 12 of the Tax Law (the "Stock Transfer Tax") are deposited.
available and subject to the prior claim of the holders of obligations of the Corporation issued or to be
issued pursuant to the First General Bond Resolution and the Outstanding Note Resolutions (both
We are of the opinion that:
such terms as defined in the Second General Bond Resolution), the Tax Assistance Fund into which is
1. The Corporation is duly created and validly exists as a corporate governmental agency and
paid the Sales Tax, and to the extent required, out of the Stock Transfer Tax Fund, the Stock Transfer
instrumentality of the State constituting a public benefit corporation under the laws of the State, including
Tax. The amount of per capita aid payable to The City and available for apportionment and payment
the Constitution of the State and the Act, with the good right and lawful authority and power to adopt
from the general fund of the State treasury and of such payments out of the Aid and Tax Assistance
the Resolutions, to issue the Bonds including the 1975 Series
Bonds
thereunder,
and
to
perform
the
Funds to the Corporation are subject to annual appropriation for such purposes by the Legislature of
obligations and covenants contained in the Resolutions and the 1975 Series
Bonds. Under the laws
the State which is empowered, but is not bound or obligated, to appropriate any such amounts so certified
by the Chairman, as aforesaid.
of the State, including the Constitution of the State, the Enabling Legislation, including the Act, is valid
with respect to all provisions thereof material to the subject matters of this opinion letter.
6. The 1975 Series Bonds do not constitute a debt either of the State or The City, and neither the
2. The Series Resolution has been duly and lawfully adopted in accordance with the provisions of
State nor The City shall be liable thereon, nor shall the 1975 Series Bonds be payable out of any funds
other than those of the Corporation.
the Second General Bond Resolution and is authorized and permitted by the Second General Bond
Resolution. The Resolutions have been duly and lawfully adopted by the Corporation and both are
7. The State has the good right and lawful authority under and pursuant to the present provisions
in full force and effect and are valid and binding upon the Corporation and enforceable in accordance
of the Constitution of the State:
with their terms, and no other authorization for the Resolutions is required. The Resolutions create the
(a) to at least annually appropriate out of the general fund of the State amounts for the purpose
valid pledge and lien which they purport to create of the revenues, moneys, securities and funds held or
of per capita aid and to provide, with respect to certain amounts of such per capita aid payable to The
set aside under the Resolutions, subject only to the application thereof to the purposes and on the con-
City in accordance with the provisions of section 54 of the State Finance Law, for the apportionment
ditions permitted by the Resolutions. The lien created by the Resolutions on such revenues, moneys,
and payment into the Special Aid Account, of amounts sufficient to enable the Corporation to fulfill
securities and funds in the Bond Service Fund and the Capital Reserve Fund is and will be prior to all
the terms of the Resolutions and to carry out its corporate purposes, but the State is not bound or
other liens thereon. All revenues, moneys and securities, as and when received, in the Bond Service Fund
obligated to make any, or maintain any level of, such appropriation of per capita aid or to continue
and the Capital Reserve Fund in accordance with the Resolutions, will be validly subjected to the pledge
such procedure for apportionment and payment of such aid;
and lien created by the Resolutions.
(b) to the extent amounts referred to in 7(a) hereof are insufficient and subject to such prior
3. The 1975 Series
Bonds have been duly and validly authorized and issued by the Corporation
claims referred to in 5 hereof, to provide for the appropriation of, and at least annually to appropriate
in accordance with the laws of the State, including the Constitution of the State and the Act, and in
to, the Corporation, from the Special Tax Account, and commencing with the fiscal year of the
accordance with the Resolutions. The 1975 Series
Bonds are valid and binding general obligations
State commencing April 1, 1976 from the Stock Transfer Tax Fund, amounts sufficient to enable
of the Corporation payable as provided in the Resolutions, are enforceable in accordance with their
the Corporation to fulfill the terms of the Resolutions and to carry out its corporate purposes, but
terms, respectively, and the terms of the Resolutions, and are entitled, together with additional Bonds
the State is not bound or obligated to make such appropriations;
issued under the Second General Bond Resolution, to the equal benefit, protection and security of the
(c) to suspend the power of The City to adopt local laws for the imposition of certain sales
provisions, covenants and obligations of the Second General Bond Resolution and of the Act.
Legislation; and compensating use taxes and the taxes levied thereunder, in accordance with the Enabling
4. Pursuant to the Act and the Second General Bond Resolution, the Corporation has validly
(d) to impose and to increase or decrease the Sales Tax and the Stock Transfer Tax but the
covenanted that the Chairman of the Corporation shall annually, on or before December 1, make and
State is not bound or obligated to continue the imposition of said taxes;
deliver to the Governor and Director of the Budget of the State his certificate stating such sum, if any,
as shall be necessary to restore the amount in such Capital Reserve Fund to an amount equal to the
(e) to establish the Aid Assistance Fund and the Special Aid Account within the Aid Assist-
ance Fund, the Stock Transfer Tax Fund, the Tax Assistance Fund and the Special Tax Account
3
within the Tax Assistance Fund but the State is not bound or obligated to maintain the existence
of said funds or accounts.
4
8. The Corporation, the holders of the Bonds, holders of any evidence of indebtedness of the Cor-
poration or the holders of bonds or notes of The City do not have nor will they have a lien on the per
jurisdiction (a) upon any such short-term obligation, or the indebtedness or liability evidenced thereby,
capita aid referred to hereinbefore or Stock Transfer Tax or the Stock Transfer Tax Fund, the Sales Tax,
or (b) seeking the levy of taxes or application of any funds, property, receivables or revenues of The City
or the Special Accounts for the Corporation in the Aid and Tax Assistance Funds. We are further of the
on account of any such short-term obligation or the indebtedness evidenced thereby.
opinion that, in any suit, action or other proceeding brought by the holder of any bonds or notes of
In the event that the constitutionality of said Moratorium Act is sustained by a court of final
The City of New York (whether under Chapter 9 of the Federal Bankruptcy Act or otherwise) asserting
a right to any such Taxes, such Stock Transfer Tax Fund or such Special Accounts superior or equal
jurisdiction, such judicial determination could support the constitutionality of similar legislative enact-
to the rights of holders of bonds issued under the Second General Bond Resolution, such holder will
ments which may adversely affect certain terms and conditions of the Bonds and the Resolutions, in-
cluding the payment of principal and interest thereon, and the enforceability thereof.
not prevail in the court of final jurisdiction.
We have examined the form of the 1975 Series
Bond numbered
and, in our opinion,
9. Upon a failure of the Legislature of the State to make a timely appropriation for the payment of
the form of said Bond is regular and proper.
principal of or interest on bonds and notes of the State, including sinking fund payments, Article 7, Section
16 of the Constitution of the State, provides that the Comptroller of the State shall set apart from the first
Very truly yours,
revenues thereafter received, applicable to the general fund of the State a sum sufficient to pay such State
obligations and shall so set aside and apply the moneys thus set apart. Moneys on deposit in the Stock
Transfer Tax Fund and the Municipal Assistance Tax Fund, including the Special Tax Account therein
(each such account or fund as presently constituted being a special fund of the State) and collections of the
Sales Tax and Stock Transfer Tax, which, under existing law, are to be deposited into the Special Tax
Account and the Stock Transfer Tax Fund, do not constitute revenues, under existing law, applicable to
the general fund of the State, within the meaning of said Article 7, Section 16 and hence, in the event
of a failure of the Legislature of the State to make a timely appropriation for such payment of the
State obligations moneys on deposit in, and collections on account of, such special funds are not authorized
or mandated to be set apart, set aside or applied by the Comptroller of the State for the payment of
such State obligations. Per Capita aid is, under existing law derived from the general fund and hence,
in the event of a failure to appropriate as above described, revenues of the State, otherwise payable
into the general fund and therefor available for appropriation as per capita aid will be subject to being
set apart, set aside, and so applied as aforesaid.
10. Under existing statutes and court decisions, interest on the 1975 Series
Bonds is exempt
from Federal income taxes and shall at all times be free from New York State and New York City
personal income taxes.
11. No registration with, consent of, or approval by any governmental agency or commission is
necessary for the execution and delivery and the issuance of the 1975 Series
Bonds.
12. The adoption and performance of, and compliance with, all of the terms and conditions of the
Resolutions and the 1975 Series Bonds, and the execution and delivery of the 1975 Series
Bonds, will not result in a violation of or be in conflict with any term or provision of any existing law.
13. Your attention should be called to a suit entitled Flushing National Bank, on behalf of itself
and all other holders of notes of The City of New York maturing on or before June 30, 1976, plaintiff,
against The City of New York; State of New York; and Harrison J. Goldin, Comptroller of the City of
New York, defendants, filed on November 17, 1975 in the Supreme Court of the State of New York,
County of New York, wherein the plaintiff, demands, among other things, judgment declaring and adjudi-
cating that the New York State Emergency Moratorium Act of the City of New York, enacted by the
Legislature and signed by the Governor of the State on November 15, 1975, is unconstitutional, alleging,
among other things, violations of the New York State Constitution and United States Constitution.
Said Moratorium Act, among other things, and subject to two conditions, provides that during the
moratorium period therein defined, and notwithstanding any inconsistent provisions of any law, general,
special or local or of any agreement or short-term obligation of The City that although the payment of such
short-term obligation may be due by the terms thereof or the terms of any general or special or local
law or agreement, no action or special proceeding shall be commenced or continued in any court in any
5
6
EMBARGOED FOR RELEASE UNTIL 7:31 P.M. EST November 26, 1975
Office of the White House Press Secretary
THE WHITE HOUSE
NEW YORK CITY'S FISCAL SITUATION
BACKGROUND
Yesterday the New York State legislature put into place the
final piece of a financial package designed to restore New
York City's fiscal integrity. This action is the culmination
of a series of efforts, the most important of which have OC-
curred during the last three weeks, by the elected officials
of New York State and New York City, labor unions, financial
institutions and others. These efforts have set the stage for
accomplishing three fundamental objectives:
-- Financing the past deficits of New York City without
resort to Federal aid.
-- Financing the anticipated deficits of New York City
during the next two years without resort to Federal
aid.
--- Accelerating the period within which New York City's
budget will be brought into balance.
The accomplishment of these objectives will insure that over
the course of any New York City fiscal year, the City will have
adequate funds to meet all of its financial obligations, a re-
sult many thought impossible a few weeks ago. Within any fiscal
year, however, New York City will have deficits in some months
and surpluses in others. According to information furnished by
New York City, for the balance of the current fiscal year, the
City will run a deficit of $141 million in December; $324 mil-
lion in January; $310 million in February; and $500 million in
March. In April, May and June, however, it will run
monthly surpluses of $334 million, $345 million and $596 million,
Arespectively, leaving receipts and expenditures in balance for
the fiscal year.
Historically, the seasonal imbalance between a city is receipts and
expenditures is usually financed by borrowing in private
markets. Under current conditions, including the substantial
existing commitments of the private financial sector in respect
of New York City and State and the uncertainties which have
prevailed over the recent past, private market financing for
New York City's seasonal imbalance is not available at this time.
Because seasonal financing is necessary to provide essential
services to the people of New York City, the President will
fulfill his pledge to insure the continuation of such services
by transmitting to Congress the New York City Seasonal Financing
Act of 1975.
more
GERALD
2
SUMMARY OF THE NEW YORK CITY SEASONAL FINANCING ACT OF 1975
The Act provides for Federal short term loans to the City or
any agency authorized by the State to act for the City, in an
aggregate outstanding amount not to exceed $2.3 billion.
Such loans will have a maturity date not later than the last
day of the fiscal year of the City in which the loan was
issued.
According to New York City, the anticipated amount of such
Federal seasonal assistance required is $1.3 billion in fiscal
1976 and $2.1 billion in each of the following two fiscal years.
Loans by the Federal Government will bear interest at a rate
1% higher than the Treasury borrowing rate. No loan will be
provided unless all matured loans have been repaid in accor-
dance with their terms and there is compliance with the terms
of any such outstanding loans.
A loan may be made only if the Secretary determines that there
is a reasonable prospect of repayment. Loans will bear such
terms and conditions as may be established by the Secretary
of the Treasury to insure repayment of such obligations in
accordance with their terms. The Secretary may require such
security as he deems appropriate. To offset any claim that
the United States may have against New York City under the
Act, the Secretary will be authorized to withhold any payments
from the United States to the City, either directly or through
the State, which may be due under any law.
The authority of the Secretary to make new loans will terminate
on June 30, 1978.
ACTIONS BY NEW YORK CITY AND NEW YORK STATE
Governor Carey and Mayor Beame have informed Administration
officials that the actions listed below are being implemented.
New York State and City officials are delivering documenta-
tion verifying such actions for the Administration to review.
The following actions are designed to insure a balanced city
budget by June 30, 1978:
a.
The three-year Emergency Financial Control Board (EFCB)
plan will produce a modest surplus in the City's expense
budget by fiscal year 1977-78.
b.
The State Legislature has voted over $200 million of
additional City taxes which will be imposed by the EFCB.
3
C.
A portion of annual City contributions to the pension
systems has been shifted to the employees by legislation.
On an annual basis, the savings to the City would be
$85 million and the impact on the employees would be
$107 million per annum.
d.
The City has laid off about 22.000 employees since
January 1 and increased taxes over $300 million this
past summer. Additional personnel reductions of over
40,000 employees are contemplated in fiscal years 1977-1978.
e.
A partial wage deferral was imposed this fall.
f.
The City has reduced its subsidy to the City University
by $32 million.
g.
The New York City transit fare has been increased from
35c to 50¢.
The following actions are designed to enable New York City to
meet its financing requirements:
a.
Moratorium legislation has been enacted with respect to
$2.6 billion of City short-term notes.
b.
An exchange offer has been approved by the MAC Board
for an exchange of 10-year 8% MAC bonds for the $1.6
billion of City notes held by the public.
C.
The New York banks and pension systems have agreed to
take 10-year 6% City securities as part of the moratorium
in exchange for $1 billion of City notes.
d.
The New York banks and pension systems have agreed to
take 10-year 6% MAC bonds in exchange for $1.7 billion
of MAC bonds bearing higher interest rates and/or
shorter maturities.
e.
New York City pension systems have agreed to purchase
$2.5 billion of new MAC and/or City securities over the
next three years. This commitment is subject to
appropriate trustee indemnification.
f.
MAC has provided about $3.5 billion of financing to the
City, of which $1.5 billion is refinancing of short.
term debt.
The City and State have implemented the following management
changes:
a.
Creation of MAC and EFCB control mechanisms.
b.
Extensive management changes are being made in the City,
including a new Deputy Mayor for Finance and a new Chief
of Planning.
more
GERALO
4
The following proposals have been made to reform the
New York City pension program:
a.
The EFCB has passed a resolution directing the City to
terminate the practice of using, for budgetary purposes,
all income of the pension systems in excess of 4% per
annum. In the year beginning July 1, 1976, this will -
result in approximately $136 million per annum of addi-
tional income to the pension systems and a commensurate
increase in the City's expenses. The EFCB has also
directed the City management to take action and report
back within 30 days with respect to termination of the
practices resulting in the abuse of overtime in the
last year of employment, thereby creating excessive
pension burdens on the City.
b.
Governor Carey has directed Mr. Richard Shinn, President
of the Metropolitan Life Insurance Company, to report to
the EFCB by December 31 on the actuarial soundness of the
City pension funds. The EFCB has directed the City to
prepare and submit to the Control Board such legislative
requests and other amendments as may be necessary as a
result of the Shinn study to put the funds on a sound
actuarial basis and to have those recommendations to the
Control Board no later than January 31, 1976.
SUMMARY OF STATE FINANCIAL PLAN TO ELIMINATE CASH DEFICIT FOR
PERIOD DECEMBER 1, 1975 THROUGH JUNE 30, 1976
Estimated cash deficit as of 10/29/75*/
$ 3.95 Billion
Less effect of Carey plan to reduce deficit
-- New city taxes
$ 100
Million
-
State advance
$ 800
Million
-- Debt moratorium, exchange offer,
& restructuring
$2450
Million
-- Employee contribution to pension funds
$
50
Million
-- Pension fund loans to New York City
$ 550
Million
Current estimate of cash deficit
0
*Estimate of New York City, New York State, and congressional
committees.
NEW YORK CITY SEASONAL CASH FLOW NEEDS
New York City has estimated its seasonal cash flow needs
has follows:
Cumulative Needs
--
(
(dollars in millions)
FY 1975-76
FY 1976-77
FY 1977-78
July
--
$1100
$1041
August
--
1462
1413
September
1197
1237
October
--
1585
1293
November
1614
1325
December
$141
2063
1670
January
465
2062
1697
February
775
2017
1645
March
1275 peak
2120 peak
1994 peak
April
941
1528
1369
May
596
1103
996
June
0
0
0
GERALD
opy
n.y City file
November 23, 1975
Dear Jims
Several significant developments in the New York
City financial situation have occurred during the
past month. As you know, I have steadfastly opposed
Federal help for New York which would permit the
City to avoid taking responsibility for managing
its own affairs.
It is by judgment that New York State and City
officials, union and financial leaders have now
initiated a plan which, if effectively implemented,
will restore the City to a position of financial
solvency. I am convinced that the significant
steps taken in recent days resulted from an aware-
nass that responsibility for putting the City's
financial affairs in order rested in New York
and would not be assumed elsewhere.
Accordingly, I have asked the Congress for authority
to provide a temporary line of credit to the State
of New York to enable it to supply seasonal financing
of essential services to the people of New York City.
The funds will be loaned on a seasonal basis to be
repaid in full, with interest, at the end of each
fiscal year.
I an anxious that you understand the facts which
I considered in making this decision. The text
of my statement on Mednesday and a fact sheet on
the New York situation are attached.
FORD is LIBRARY
2
The process of restoring financial solvency to
the City of New York will be a difficult one,
but it has begun. I trust that we will all
learn the lessons that are here for us and will
renew our individual efforts in assuring fiscal
responsibility.
Sincerely,
The Honorable James B. Longley
Covernor of Maine
Augusta, Maine 04330
Enclosures
GRF:JF:PAT:bmr
FORD & LIBRARY GERALD
November 28, 1975
Dear Governor
Several significant developments in the New York City financial
situation have occurred during the past month. As you know, I
have steadfastly opposed Federal help for New York City which
would permit them to avoid taking responsibility for managing
their own affairs.
It is my judgment that New York State and City officials, union
and financial leaders have now initiated a plan which, if effectively
implemented, will restore the City to a position of financial sol-
vency. I am convinced that the significant steps taken in recent
days in New York resulted from an awareness that responsibility
for putting the City's financial affairs in order rested in New York,
and would not be assumed elsewhere. Accordingly, I decided to
ask the Congress for authority to provide a temporary line of credit
to the State of New York to enable it to supply seasonal financing of
essential services to the people of New York City. The funds will
be loaned on a seasonal basis to be repaid in full, with interest, at
the end of each fiscal year. I am anxious that you understand the
facts which I considered in making this decision. The text of my
statement on Wednesday and a fact sheet on the New York situation
are attached.
The process of restoring financial solvency to the City of New York
will be a difficult one, but it has begun. I trust that we will all
learn the lessons that are here for us and will renew our individual
efforts in assuring fiscal responsibility.
LINRARY