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The original documents are located in Box 5, folder "New York City, October 1975" of the
White House Special Files Unit 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 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States of America his copyrights in all of his unpublished writings in National Archives collections.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.
Jim -
As terry suggests -
I will hold here for the
time being.
from
Trudy
FORD LIBRARY & GERALD
Digitized from Box 5 of the White House Special Files
Unit Files at the Gerald R. Ford Presidential Library
THE WHITE HOUSE
WASHINGTON
New Vork
Plo bup these maturals together
The President may wish to
review them again
erry ODamell
MEETING WITH
SENATOR MANSFIELD ET AL.
Monday, November 10, 1975
8:30 A.M.
THE
PRESIDENT HAS SEET
GERALD FORD (IBRARY
THE PRESIDENT HAS SEEL
THE WHITE HOUSE
WASHINGTON
October 9, 1975
MEMORANDUM FOR: DONALD RUMSFELD
FROM:
JIM CONNOR
Dick Dunham was unable to compile the
information requested in your memo of
October 7th; however, OMB has provided
the attached information on Federal
assistance to New York City.
Encl.
MEMORANDUM
THE WHITE HOUSE
WASHINGTON
October 7, 1975
MEMORANDUM FOR:
JIM CONNOR
FROM:
DON RUMSFELD
Please get from Dick Dunham the exact percentage of
dollars that go into the New York City federal budget
with some explanation of what else goest to New York
city like transfer payments for Social Security, etc.
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
OCT 9 1975
MEMORANDUM FOR JIM CONNOR
abo
FROM:
Dale R. McOmber
SUBJECT: Federal assistance to New York City
Yesterday, you asked for information on Federal assistance
to New York City. Attached is a copy of a memorandum to
the President that we did a couple of weeks ago on this
subject at Pat Delaney's request. Note well the caveats in
it; they apply at least as much to what follows here.
According to New York City's 1975-6 budget (which we
understand is being revised), Federal aid (including
general revenue sharing) is financing 21% of NYC's
total expense budget. A New York Times article of
February 1, 1975 contained figures indicating that
the Federal government also is financing 16% of
NYC's capital budget.
According to the Census Bureau's figures for 1973,
49% of the spending of governmental units (including
the authorities) in the NYC area was financed by
intergovernmental revenues. We do not know how much
of this 49% was Federal. (Probably, an estimate for
1976 would show a higher percentage.)
The attached table shows estimated direct Federal
transfer payments to persons in the five boroughs of
NYC in fiscal year 1974. These figures are taken
from the Community Services Administration's compila-
tion (called Federal Outlays) of Federal outlays by
State and county. Don't be misled by the apparent
precision of the estimates, but the orders of magni-
tude are probably reasonable.
There is a figure for Food Stamps in the table--$116
million. If Food Stamps payments in New York have
grown like those elsewhere, the 1976 figure will be
about twice that of 1974.
2
We were not able to get a figure on student loans
to persons living in NYC. We did get a guess that
Basic Opportunity Grants (i.e., income-related higher
education grants) will be about $30 million in 1976.
Attachments
SEP 24 1975
INFORMATION
MEMORANDUM FOR:
THE PRESIDENT
FROM:
JAMES 2 LYNN
SUBJECT:
Federal Assistance to New York City
About a month ago OMB did a fast survey of Federal grant
programs that will provide assistance to New York City
in fiscal year 1976. The results of the study are
summarized below.
Before using the figures -- if you do -- you should know
the caveats that go with them.
The survey was done hastily to meet a short
deadline. Consequently,
-- only major programs were included, and
-- the figures are rough estimates.
The figures do not reflect the fact that Federal
assistance is provided in many different ways.
For example, some require matching funds while
some do not, and some go through States while
some go directly to the City. Knowing the effect
of changes in the amount of Federal assistance
requires knowing how the assistance is provided
in any particular case.
Obtaining solid, reliable figures on aid to
specific cities, even large ones, would require
a massive, costly study.
The survey indicated that Federal assistance payments to
New York City in fiscal year 1976 will be in the vicinity
of $3-1/2 billion. The distribution of these funds among
programs is expected to be roughly as is shown on the
attached table.
Attachment
retyped for Director's signature/sv 9/24/75
Rough Estimate of Direct and Indirect
Federal Grants to New York City
in Fiscal Year 1976
(in millions of dollars)
Amount
Payments to individuals:
Medicaid
1,115
Public assistance (cash)
657
Food and nutrition
135
All other
137
Subtotal
2,044
Education and manpower
408
General Revenue Sharing
263
Transportation (mostly mass transit)
203
All other (community development, waste
treatment facilities, debt service
contribution to housing authority,
etc.)
582
Total
3,500
Transfer Programs - 1974 Federal Outlays for New York City
(millions of dollars)
Total
Bronx
Kings
New York
Queens
Richmond
Social Security:
Disability insurance
210.9
36.5
77.2
35.6
51.7
9.9
Retirement insurance
1642.9
275.0
511.4
379.1
426.9
50.5
Survivors insurance
453.7
81.0
157.8
73.6
121.8
19.5
Medicare
470.8
84.1
150.7
113.0
110.2
12.8
Medicare:supplemental medical
insurance
164.9
29.5
53.0
38.7
39.1
4.6
Supplemental security income
136.2
30.1
46.2
45.2
13.1
1.6
Coal miners benefits
2.1
0.3
0.8
0.3
0.7
*
Unemployment benefits:
Placement services-admin
28.1
2.0
6.0
17.6
2.0
0.5
Unemployment insurance
17.6
3.2
5.7
4.6
3.7
0.4
Military retired pay
42.4
4.3
3.2
20.2
12.7
2.0
VA compensation & pensions
147.1
24.0
44.5
29.8
42.1
6.7
VA readjustment training
64.2
10.5
19.4
13.0
18.4
2.9
Food stamps
116.6
33.9
44.8
23.8
11.9
2.2
Civil service retirement & disability
148.6
26.9
51.1
28.3
36.8
5.5
VA insurance and indemnities
29.0
4.7
8.8
5.9
8.3
1.3
Total
3675.1
Total Federal Outlays
16289.6
1798.2
3200.4
8566.0
2371.0
354.0
October 7, 1975
EMBARGOED FOR RELEASE:
UNTIL 6:00 p.m, OCTOBER 11, 1975
OCTOBER 11, 1975
Office of the Vice President
New York, New York
REMARKS OF THE VICE PRESIDENT
AT THE
ANNUAL COLUMBUS DAY DINNER
THE WALDORF-ASTORIA HOTEL
NEW YORK, NEW YORK
October 11, 1975
Columbus Day in New York is always a high point in the year. Coming
in mid-October, it heralds the onset of the magnificant fall season
in our area with its brisk, invigorating weather and the marvelous
color throughout the countryside.
More importantly, Columbus Day is a special day -- special because
it commemorates not only the birth of the Great Discoverer but
celebrates the generations of Italo-Americans who have contributed
so much to this America.
In business, in finance, in labor, in science, in education and
the arts, government and politics, Italo-Americans have added to the
strength, the vitality and the ennoblement of our way of life.
Columbus Day marks not only these achievements, but recognizes the
warmth, the enthusiasm, the generosity and great humanity of those
of Italian origin. It pays tribute, too, to their spiritual
dedication and their intense patriotism.
It was the spirit of Columbus -- seeking of a new world -- the seeking
of opportunity, that brought Italian immigrants here and that
motivates their descendents today.
As we celebrate this Columbus Day, it is well to remember also that
Christopher Columbus challenged the popular thrust of his day --
the belief that the world was flat.
At a time when opinion was overwhelmingly against his insight and
view, Columbus took the unpopular course. He did so because it was
what the best informed minds and most knowledgeable observers
counseled. He did so because it was the sound way -- and his
courage was more than vindicated.
This is a time, too, when leadership again faces unpopular action if
we are to pursue a sound course for the future.
Pesident Ford faces it continually in the difficult role of
combating inflation and the politically unpopular actions required
to hold down the persistent pressures for more federal spending --
with a $60 to $70 billion federal deficit this year.
more -
- 2 -
Governor Carey, Mayor Beame and the Emergency Financial Control
Board face it in the difficult and also politically unpopular
decisions involved in restoring fiscal soundness to New York City.
Yet, such steps have to be taken to restore confidence and engender
outside support.
\
A central fact, not fully appreciated in this connection, is that
the President of the United States does not have authority under
existing statutes to meet the situation.
As we know, under the State law adopted by the Legislature on
September 10, and signed by the Governor, New York City must come
up by next Thursday, October 15, with a budget and financial plan
which will produce a balanced budget by June 30, 1978.
This plan must be based on the realistic estimate of revenues
provided to the City by the State Emergency Financial Control Board.
The Control Board must either approve, disapprove or modify the City's
plan by October 20 to accomplish these objectives.
The City must take the action required to implement this plan.
When the necessary actions are taken and a solid base is established
for restoration of budgetary and fiscal integrity for the City, it
is my belief that at this point a basis will have been established
for help to bridge that difficult period -- between the adoption
of the necessary measures required by the State Emergency Financial
Control Board this October and the restoration of investor
confidence in the City's full financial viability by June 30, 1978. In
other words, when the Control Board and the City have enacted
these difficult measures, the essential preconditions will have been
met and the stage set for appropriate Congressional action.
It is, therefore, essential that the Congress as a whole focus on
the problemnow and enact appropriate legislation.
Helping to bridge this gap -- to give opportunity for these economies
and improved management measures to take root and produce results
-- is certainly in the interest of all of us.
While there is general agreement that management deficiencies
contributed to New York City's difficulties, it is important that
we not lose sight of the burden carried by New York and the other
cities of the nation as they have sought to respond to human needs
pressed upon them.
It is equally important that these past responses be viewed in the
context of their times -- times when we were being told we were an
affluent society with unlimited resources that could abolish
poverty by statutory fiat.
The stark facts of today show that we have been promising more than
we can deliver -- that we have been raising expectations beyond our
capacities to meet them.
As a result, we are now compelled at all levels of government to
take stock of our commitments and our resources, in order to project
a more realistic course to meet the people's needs.
In this appraisal, the plight of our cities requires special attention
and emphasis. This nation has too long ignored the basics for urban
living -- the need for an infrastructure that provides a climate
for real jobs, for business, for the economic health and the social
well being of the urban areas of America where most of our people
now live.
FORD
(MORE)
- 3 -
Time is of the essence and the resolution of this immediate New
York City situation is crucial. After the Control Board and New
York City have acted to restore fiscal integrity, it will be a true
test of the responsiveness of our Congressional system as to whether
the Congress can act in time to avoid catastrophe.
These are difficult times, demanding hard decisions and effective
actions.
But out of them can come a new urban vitality -- built upon sound
fiscal and social policies and a recognition and appreciation of the
dynamic economic and cultural role of urban America.
#
#
In the absence of documentation, it is puzzling and
indeed troubling that this unqualified statement
would appear in a nationally syndicated column.
Ms. McGrory's imprudent statement follows editor-
ial comment from respected newspapers in the East
chiding the President's hometown for failing to meet
FORD CIBRARY
its debt obligations during the Great Depression.
Without dwelling on the City of Grand Rapids'
experience in the fiscal year ending March 31, 1934,
it should be noted that the default occurred at the
time of the national bank holidays in early 1933 and
the amount of the principle involved was less than
$1.8 million.
The proximate causes were decreased revenues
The Grand Rapids Press
resulting from unpaid property taxes and the old
EDITORIAL PAGE
Grand Rapids National Bank which went into
receivership at a time when it held $2½ million in
city funds. Significantly, the city's financial embar-
WEDNESDAY, OCTOBER 22, 1975
rassment- not only was modest in amount, but it also
was short-lived. With the help of a $1,150,000-
Reconstruction Finance Corp. loan which became a
14-A
grant, the following year's audit reflected that
payments were current.
At issue, however, should not be what happened to
Grand Rapids 40 years ago. Rather, it is New York's
We Don't Hate N.Y.
current problems which must be addressed. This is
why The Press on Sunday urged President Ford to
use his office to assist the nation's largest and most
It is too bad that the controversy over New York's
important city.
unfortunate financial problems is provoking from
The fact is that several of this country's largest
normally responsible people such heated and even
cities face serious fiscal problems. Sobered by New
irrational remarks.
York's situation, many municipal leaders are acting
Press Secretary Ronald Nessen- berates New
at last to head off the inevitable consequences of
York's governmental leaders for spending beyond
permitting spending to exceed revenues year after
the city's means and running large deficits. He
year.
compares the situation to a heroin addict who can't
kick his "self-inflicted" habit.
There is, of course, the question of precedent
which Mr. Ford has raised but our inclination is that
As the key spokesman for the Ford Administra-
other troubled cities will react by belt-tightening,
tion, it hardly behooves Mr. Nessen to be expounding
rather than spending irresponsibly in order to
on the merits of balanced budgets. The federal
attract the kind of federal loans and/or loan
deficit for the current year will exceed $60 billion.
guarantees which New York City now seeks.
Uneasy creditors won't be lining up in Washington,
however, because the central government simply
Whatever happens, however, let us be sure that
has more money printed and then goes out and
New York's financial crisis is not treated on the
"borrows" it. No other governmental unit enjoys
basis of politics as usual. Like a war, the outcome is
this option.
much too important to let partisan considerations
dictate how the problem is attacked.
On the other side, Pulitzer prize winning colum-
nist Mary McGrory has taken aim at President Ford
and let go with a barrage of intemperate comments.
It was 1664 when Peter Stuyvesant, the Dutch
Among them was a description of Mr. Ford's
director general, was forced to yield the province of
"rather small-bore presidency." In that same
New Netherland to the British and the city of New
column about New York's money predicament, Ms.
Amsterdam became New York City. Considering
McGrory York. asserts: "In Grand Rapids they hate New
what has transpired since the, the people of Grand
Rapids would seem to have ample reason to be
disappointed about the stewardship exercised by
Fun City's elected and appointive officials.
But a feeling of disappointment is far different
than one of hate. Very little of a productive nature is
built on hate for, as poet Robert Graves expressed SO
well: "Hate is fear, and fear is rot that cankers root
and fruit alike."
The people of Grand Rapids know this. How
unfortunate that Ms. McGrory does not know the
people of Grand Rapids.
THE PRESIDENT HAS SEEN
THE WHITE HOUSE
WASHINGTON
October 23, 1975
MEMORANDUM TO:
MAX FRIEDERSDORF
FROM:
RUSS ROURKE
Max, Doug Bennett and I met with Senator Jim Buckley this morning
for approximately 30 minutes. Our basic purpose was to discuss cer-
tain factors relating to the appointment of a new U. S. Attorney for the
Western District of New York.
Having settled our original business, a discussion ensued concerning
the plight of New York City. Buckley, who plans a press conference
this morning concerning certain aspects of the New York City problem,
suggested, in a most constructive and friendly fashion, that the President
"minimize his rhetoric relative to New York City and talk more about
the need to assist the millions of innocent citizens in the City who are
the real victims of years of mismanagement and corrupt political
leadership". Buckley thought the President would do well to assure those
"millions of innocent citizens that they would be assured of continued
essential services, viz., police, fire, etc. during this critical period".
In other words, Buckley thought the President could drive home the prin-
ciple he has thought to establish and place the blame where it belongs,
i. on the fiscally irresponsible and corrupt political leadership in
New York City, without, at the same time, totally alienating the innocent
citizens of New York City. Buckley is simply concerned that the Presi-
dent is coming across as one who has "written New York City off". He
is convinced that that is not the case, but feels that only the President
can clarify this issue.
Specifically, Buckley earnestly requested a 30-minute meeting with the
President prior to the time he meets with the various union representa-
tives (fire, police, etc.) from New York City. After checking with
Scheduling this morning, I am advised that an as yet unapproved pro-
posal has Buckley scheduled for a 2:15 p.m. meeting on Tuesday, Octo-
ber 28, followed by a 2:30 meeting with the union heads.
I might note that Buckley expressed his deep appreciation to Doug Bennett
and me for spending so much time "in his behalf" on this very ticklish
-2-
U. S. Attorney appointment position. Both Doug and I got the
very distinct impression that Buckley, given certain considerations,
would like to support President Ford against any Republican primary
opposition. He was extremely pleased, for example, over the
President's public references to his Food Stamp proposal. By joining
forces with Buckley on this New York City issue, I believe the two can
be drawn even closer together.
CC: JMarsh
BKendall
DBennett
DCheney
hAS SEEN
THE
THE WHITE HOUSE
WASHINGTON
October 22, 1975
MEMORANDUM FOR THE PRESIDENT
FROM:
L. WILLIAM SEIDMAN
fus
SUBJECT:
New York City Financial Situation
The near default of New York City last Friday has spurred re-
newed efforts by New York State and City officials to secure
Federal financial assistance. Governor Carey and Mayor Beame
have testified before committees in both the Senate and the
House and have generated some congressional support for fed-
eral guarantees and other forms of federal assistance for New
York City.
The Economic Policy Board Executive Committee in reviewing
the New York City financial situation remains convinced that
federal financial assistance for New York City is inappropri-
ate. There is also agreement that, if a way can be found to
avert a New York City default without endangering the good
credit of New York State and without federal guarantees, that
this is preferable to a default.
New York City and the Emergency Financial Control Board are
releasing a three-year financial plan this week which outlines
reductions in City personnel and services designed to bring
the City budget into balance for the fiscal year commencing
July 1, 1977. We have obtained a preliminary draft of the
document which contemplates revenues and expenditures as
follows:
SUMMARY OF FINANCIAL PLAN
(in Millions of $)
City Fiscal Year
1975-76 (a)
1976-77
1977-78
Total Revenues
8392
11992
12294
Expense Budget
7479
10634
10697
Reductions
-92
-462
-724
Total Expenses
7387
10272
10073
2
City Fiscal Year
1975-76 (a)
1976-77
1977-78
Debt Service
1669
2190
2071
Surplus or (Deficit)
(664)
(470)
150
(a) October-June only.
Expense Budget figures do not include $100 million reserve for overruns
for fiscal years 1976-77 and 1977-78.
A copy of the draft financial plan is attached at TAB A.
October 20, 1975
NEW YORK CITY
Events are now rushing to an apparent climax in the
financial affairs of New York City. Five days ago the city
tottered on the brink of a default and was saved from that
fate by an eleventh hour decision of the teachers union.
The next day, Mayor Beame testified here in Washington
that the financial resources of the city and of the State of
New York were exhausted. Governor Carey agreed. It's now
up to Washington, they say. Unless the Federal Government
intervenes, New York City will no longer be able to pay its
bills as of December 1.
Responsibility for New York City's financial problems
has thus been abandoned on the front doorstep of the Federal
Government like a poor, unwanted child.
As your President, I believe the time has come to make
- 2 -
my position clear to the citizens of New York and to those
across the land:
-- To sort out fact from fiction in this terribly
complex situation;
-- To say what solution will work and what should be
cast aside;
-- And to tell all Americans how the problems of New
York City may relate to their lives.
This is what I would like to do tonight.
Many explanations have been offered about what led New
York City into this quagmire.
Some have said it was the recession, the flight to the
suburbs of the city's more affluent citizens, the migration
to the city of poorer people, and the departure of industry.
Others have said that the city has become obsolescent,
- 3 -
that decay and pollution have brought a deterioration in the
quality of life, and that a downfall could not be prevented.
Let's face the facts: many other cities in America
have faced these same challenges, and they are still financially
healthy today. They have not been luckier than New York;
they have simply been better managed.
No city can expect to remain solvent if it allows its
expenses to increase by % every year, while its revenues
are increasing by only % a year. Yet the politicians of
New York City have done precisely that for the past
years.
Consider what this has meant in specific terms:
-- Over the last decade and a half, the number of
residents in New York City has actually declined, but the
number of people on the city's payroll has increased by 50
percent.
- 4 -
-- One-third of the employees now on the city's public
education staff teach not a single student. They have
either clerical or administrative jobs.
-- New York's municipal employees are generally the
highest paid in the United States. A sanitation worker with
three years experience now receives a base salary of $15,000
a year; fringe benefits and retirement add 50 percent a year
to the base. At the same time, a New York City subway coin
changer receives a higher salary than a private bank clerk.
-- In most cities, city employees are required to pay
50 percent of the cost of their pension. New York City is
the only major city in the country that doesn't charge its
employees a penny.
-- Retirement for municipal employees in New York often
comes at an early age, and in many cases at incomes far
above normal salaries.
-- The city has built a surplus of hospitals, so
- 5 -
many in fact that 25% of the hospital beds are regularly
empty.
-- The city also operates one of the largest universities
in the world, and it's tuition-free for any high school
graduate who wants to attend.
-- And for those on welfare, the city now pays out 10
times as much per capita for benefits and assistance as any
other major city in the country.
I do not mean to chastise New York for its behavior or
even for its generosity of spirit. That was its decision,
as it should have been. But when we look back over what the
New York power brokers have allowed to happen over the last
10 years:
-- A steady stream of unbalanced budgets;
-- - A tripling of the city's debt;
- 6 -
--
-- Extraordinary increases in union contracts;
-- And a defiance of the experts who said again and
again that the city was courting disaster,
then we should have no doubt where true responsibility lies.
And when the city now asks the rest of the country to pay
its bills, it should come as no surprise that many Americans
ask why. Why should they pay for luxuries) in New York that
they have not been able to afford in their own communities?
Why should the working people of this country be forced to
rescue those who bankrolled the city's policies for so
long -- the big banks and other creditors? So far, in my
opinion, no one has given them a satisfactory answer.
What they have been told instead is that unless the
rest of the country bails out New York, there will be a
catastrophe for the United States and perhaps for the world.
There is no objective evidence to support that conclusion.
- 7 -
It would be more accurate to say that no one really knows
precisely what would happen in our financial markets if New
York defaults. It's a matter of judgment. Our own analysis
within the Government leads us to conclude that the financial
markets have already made a substantial adjustment in anticipation
of a possible default and that further disruptions would be
temporary The economic recovery would not be affected. I
can understand why some might disagree with our conclusion
and would speak out about their reservations. What I cannot
understand -- and what none of us should condone -- is the
blatant attempt in some quarters to frighten the American
people into submission. This nation will not be stampeded;
it will not panic when a few desperate politicians and
bankers try to hold a gun to its head. What we need now is
a calm, rational decision about what the right solution
is --- the solution that is best for New York and for all
Americans.
- 8 -
To be effective, the solution must meet three basic
objectives:
-- It must maintain essential services for the residents
of New York City. They have become innocent pawns in this
struggle. I promise those citizens that the Federal Government
will not let them suffer terrible hardships in the months
ahead.
-- Second, the solution must ensure that New York City
achieve
will have a balanced budget as rapidly as possible.
-- And third, it must ensure that neither New York City
nor any other city ever becomes a
permanent
ward
of
the
Federal Government. I will not be a party to any arrangement
which destroys our delicate separation of powers between the
Federal, state and local governments.
There is already too
much power in Washington.
There are at this moment eight different proposals
-
under consideration in the Congress to prevent default. All
are variations of basically one solution: that the Federal
Government would guarantee the future bonds of the city SO
that it could borrow additional money in the financial
markets. The sponsors say that the guarantee would be
short-term because the city could be forced by Federal law
to balance its books within three years.
I am fundamentally opposed to this solution, and I want
to tell you why.
Basically, I think it is a mirage. Once a Federal
guarantee is in place, there is no realistic way to expect
that the budget will be balanced within a short period of
time. The city's politicians have proved in the past that
massure
they are no match for the network of pressure groups facing
them.
An indication of what is likely to happen as soon as
the pressure is off was provided by Mayor Beame last week
- 10 -
when he vowed he will fight to restore the very jobs he has
just been forced to cut.
In the same way, the New York
Times reported indications last week that in exchange for
help from the teachers union, the political leadership of
Example:
the State made concessions which could threaten their own
efforts to balance the budget.
So long as "politics as
usual" continues in New York -- so long as the coalition of
power brokers remains undisturbed -- there can be little
serious hope that hard, tough decisions will be taken. A
guarantee would change nothing in New York's power structure.
Instead, it would inevitably lead to long-term Federal
control over the affairs of the city.
Such a step would not only violate the principles of
Federalism but would set a very undesirable precedent for
the Nation. How can we deny other cities the same benefits
extended to New York? And what discipline would be left on
the spending habits of other city and state governments once
- 11 -
the discipline of the marketplace is removed? This is not a
precedent that any of us can welcome.
Finally, I think we ought to recognize who the prime
beneficiaries of this guarantee program will be. Not the
people of New York City: as I promised earlier, essential
services will continue for them regardless of what happens.
Not the people in other cities and states across the nation:
a guarantee will not help them at all. No, those who will
benefit the most are the politicians and the investors who
have put their money in New York City securities -- the big
banks and other investors, many of whom are wealthy
I am a strong believer in the financial marketplace, a
system in which institutions and people with money can
freely invest their funds. They willingly take risks, and
the higher the risk, the more profits they get for their
investment. But everyone knows that sometimes risks turn
sour. And when the risks do turn out to be bad, as in New
- 12 -
York City, I do not believe that the Federal Government
should then make them good. To me, it is clear that those
who made the choice to invest their money should now bear
the risk, not the 200,000,000 Americans who never made such
a choice.
Does this mean there is no solution? Not at all.
There is a sound and sensible way to resolve this issue, and
I want to set it forth tonight.
First, I propose that the leaders of New York face
up to reality. Either they must take firm steps to avoid
default, or they should prepare to accept the inevitable.
They argue that they have run out of resources to help
the city. I disagree. What they have run out of are
alternatives that are politically easy. They can still
take the tough but decisive step of raising their taxes.
And if they do, they can save themselves from default.
- 13 -
There is no reason why citizens in the rest of the country
should raise the money when it can still be done by the
citizens of New York.
Second, I propose that the Federal Government act
now so that if the leaders of New York permit a default,
it will be orderly and limited in impact. A chaotic struggle
among the city's creditors and even among its employees
would seriously complicate the city's problems. Unfortunately,
present Federal law is inadequate to deal with this problem.
Therefore, I will tomorrow submit to the Congress special
legislation providing the Federal Courts with sufficient
authority to carry out an orderly reorganization of the
city's financial affairs.
Under this legislation, a Federal judge would be able
to appoint a trustee of the court who could temporarily
delay payments to the city's creditors and, of critical
- 14 -
importance, could force the city to gradually balance its
budget. The power to bring necessary reforms in the city's
budget-making process is essential; by placing it in the
hands of a trustee, who will be supervised by the court, we
will not only ensure that it is properly exercised but that
it is also temporary in nature.
Let us recognize, however, that even by postponing
payments to creditors and by curtailing some of its expenses,
the city will still lack sufficient funds to pay its bills
for as much as three years. Therefore, I am proposing that
the court trustee be allowed to issue certificates to cover
these shortages. These certificates would be like short-
term loans and would be issued to the public. They would be
guaranteed not by the Federal Government but by special
revenues collected by the State of New York. Specifically,
I am recommending that the State of New York introduce a
temporary tax which creates enough cash to stand behind the
- 15 -
trustee certificates. The tax would be temporary, and the
7
money collected might even be held in escrow so that it
could be returned to taxpayers after the city's financial
affairs are put in order. State officials argue that the
taxes in both the City and the State are already too high;
further taxes would only darken their economic hopes for the
future. That is true. But because it is true, then the tax
should serve another very good purpose: it will give New
York's leaders a strong incentive to clean up their financial
affairs quickly so that the tax can be removed.
To summarize, the plan I am recommending tonight is
this: if New York fails to act in its own behalf, there
should be an orderly default supervised by a Federal Court
and financed by a temporary New York tax. This plan will
work. It will work because it is sound. It will work
because it is fair.
- 16 -
The only ones who will be hurt by this plan will be
those who are fighting so hard to protect their power and
their profits: the city's politicians and the city's creditors.
And the creditors will not be hurt much because eventually
their investments will be rewarded. For the people of New
York, this plan will mean that essential services will
continue. There may be some temporary inconveniences, but
that will be true of any solution that is adopted. Moreover,
New Yorkers have shown over the years that when it comes to
coping with temporary inconveniences, they are better at it
than anyone else in the world. For the financial community,
the default may bring some temporary disorder but the reper-
cussions will not be massive. In fact, there is solid
reason to believe that once the uncertainty of New York is
ended, investors will begin returning to the markets and
those markets will be sturdier. Finally, for the people of
the United States, this plan means that they will not be
- 17 -
asked to assume a burden that is not of their own making and
should not become their responsibility. This is a fair and
honorable way to proceed.
In conclusion, let us pause for a moment to consider
what the New York City experience means for the United
States.
Two weeks ago, I spoke to you about the choice I believe
we face as a nation: the choice between continuing down a
path of higher government spending, higher government deficits,
and more inflation or taking a new direction by cutting our
taxes and cutting the growth in government spending. Down
one fork, I said, lies the wreckage of many great nations of
the past. Down the other lies the opportunity for greater
prosperity and greater freedom.
Tonight I think it is clear what path New York City
chose. None of us can take any pleasure from this moment,
- 18 -
because the leaders of New York were in a very basic sense
following the same practices they saw in Washington. The
difference is that Washington owns printing presses and can
always print more money to pay its bills. But ultimately
the practice of living beyond your means catches up with a
nation just as it catches up with a family or city. And for
the citizens of that nation, the bill comes due either in
the form of higher taxes or the harshest and most regressive
tax of all, inflation.
All of us tonight care especially about the people of
New York City: they have worked hard over the years to
create one of the greatest centers of civilization. But as
we work with them now to overcome their difficulties, let us
never forget what led that city to the brink. And let us
resolve that these United States will never reach the same
crisis,
Thank you and good evening.
THE PRESIDENT HAS SEEN
THE WHITE HOUSE
WASHINGTON
October 23, 1975
TO:
DONALD RUMSFELD
FROM:
JERRY J
SUBJECT: Forums for Presidential Message on New York City
Dick asked for a layout of the possible forums on Monday,
Tuesday and Wednesday of next week for the President to
deliver a message as to his position on New York City's
financial crisis. Unfortunately, the options are rather limited;
the following is the entire range that Bill, Red, Terry and I
have been able to develop:
1. A forum in New York City on Wednesday morning on the way
to Los Angeles. The standing forums are as follows: the Investment
Association of New York -- 650 members under the age of 41; the
National Alliance of Businessmen in New York City; Columbia
Business School Club; New York Society of Security Analysts which
the President appeared before in February of this year.
The benefits of a New York forum are that the President takes on
the problem in the lion's den; the down side is a travel issue, a
potential demonstrator problem and the lack of a truly appropriate
forum to address the humanitarian side of this problem. In addition,
Mayor Beame would probably want to greet the President and this
could not help but be an embarrassing situation.
2. Reschedule the luncheon speech in Albuquerque in front of the
Western Governors. There will be ten Democratic governors
at this conference, the subject of which is energy. The governors
would probably support the President's position on New York.
However, the down side problems are: (a) Rescheduling a canceled
event adds to the disorganization charge; (b) addressing the New
York City problem in front of Western governors may not be
appropriate; (c) the conference topic is energy.
2
3. Deliver the message in a speech at the Los Angeles fund
raising dinner. While this gets the President's position in
front of the public it is bad form because it is a partisan
function, it is in Los Angeles, it is in front of fat cats, we
lose the news cycle because of the late hour on the East coast.
4. Deliver the message at the San Francisco fund raising function.
Same as above except you do make the East coast news cycle on
Thursday.
5. A function in Washington, D.C. This would be the best
exceptthere are no appropriate forums the first three days
of next week. The following groups are in town: (a) the
beauticians (b) American Institute of Aeronautics (c) National
Council of Jewish Women (d) Girl Scouts of America (e) Air
Traffic Control Association (f) Railway Progress Institute and
several others of like quality. In addition, Baroody currently
does not have a large group coming in next week. If we create
an event by inviting mayors or governors or some other appropriate
group the down side is the charge of media manipulation and at
this late date it would be difficult to avoid that problem.
6. Ask for network television time to deliver a speech to the
nation. While this would be the best possible option in terms of
getting the President's position well stated to the country, we believe
that the networks would not grant the time request and that the
topic in reality is not of sufficient importance to risk the second
consecutive turndown on a time request.
7. Address a joint session of Congress on Wednesday morning.
We believe that such an address should be limited to major
national issues of over-riding importance. This is not one and
we feel such a request would be an over-reaction to the problem
and thus be a political minus.
8. Send a written statement to the Congress and make a brief
statement for film on the New York City problem on Tuesday
morning or Wednesday morning. Because of the lack of an
appropriate forum in Washington this is our recommended option.
The brief four or five minute statement can be made either from
the Oval Office or in the press room and if it is properly worded
it will generate the same television exposure of any of the above
options with the exception of the nationwide television address.
We also feel that this type of response is the most "Presidential."
It does not involve travel, it does not involve theatrics, it is not
an over-reaction to what is not actually a national problem and
it gets maximum exposure with minimum inconvenience.
3
Therefore, we recommend Option8.
Approve
Disapprove
INTRODUCTION
This document presents a summary of the joint City-EFCB
three-year financial plan developed pursuant to the requirements
of Chapter 868 of the Laws of 1975, as amended. The plan demonstrates
a feasible path from the City's present state of fiscal imbalance
to a balanced budget for the fiscal year commencing on July 1, 1977.
The financing plan presented here relies heavily, but not
solely, on the materials submitted by the City on October 15, 1975.
It deviates from that submission in certain ways, including a
significent cash reduction in the City's capital budget by approx-
imately $450 million over the period of the plan.
As with any three-year planning effort, the present plan rests
on several key assumptions. The assumptions concerning revenues,
expenditures and borrowings are detailed below, but it is important to
emphasize the extreme sensitivity of the financing plan to the terms
and conditions of borrowings. Considerations common to any enterprise,
such as interest rates and maturities on borrowings, are important
sources of this sensitivity, as are considerations unique to a
governmental enterprise, such as the response of the real property
tax rate to borrowings of the City itself. The assumptions about
borrowings which underly the financing plan appear to be a conser-
vative reflection of likely market conditions over the life of the
plan. In particular, it is assumed that there will be available a
Federal guarantee for taxable, one year notes at an interest rate of
eight and one-half percent.
An additional key feature of the financial plan is that it
prescribes a system of milestones to assist the City, the EFCB,
and other interested parties to monitor the execution of the plan.
It is important to point out also that no enterprise can adhere
inflexibly to a rigid three-year plan. Thus, it is contemplated that
specific details of the plan will have to be modified in light of
experience with the yields of individual tax instruments, credit
market conditions, and specific expenditure program priorities over
the three-year life of this paln. Nonetheless, the broad thrust of
this plan appears reasonable and feasible at this time, and the
monitoring system will provide guidance regarding possible modifi-
cations which may be required.
-2-
ASSUMPTIONS
1. Revenues: 2. City revenues are estimated in accordance with
those delivered by the EFCB as of September 30, 1975,
with some modifications concerning real property tax
changes required by alternative debt service
assumptions.
b. On a cash basis, it is assumed that the State will
repeat its advances of various State aid funds in
the final quarter of the City fiscal year.
2. Expenses: a. It is assumed that there will be no wage increases
for municipal employees for the duration of the
plan other than 1975-76 increments and cost of
living allowances.
b. Inflationary increases in the dollar costs of supplies
and purchased services for the duration of the plan
are assumed to be absorbed within present agency
dollar limits. In calculating agency spending levels
for the City fiscal years 1976-77 and 1977-78 no
further attrition in staffing levels is assumed.
C. It is assumed that the City's cost for welfare and
medicaid programs will remain constant throughout
the plan period.
d. Pension surplus reversion to the City is assumed at
$104.6 million for City fiscal year 1975-76, and
approximately $130 million for fiscal year 1976-77
and $160 million for 1977-78. The plan does not
address the questions concerning full funding of
the City's pension plans, pending recommendations
from the Shinn Management Review Committee.
3. Reductions:
a. Some of the cost reductions proposed by the City will
in practice not be implemented in the exact manner
contemplated in the City paln. In some cases the
City will have to be prepared to implement these
reductions to the same dollar amount through alter-
native means.
b. Reductions in covered agencies will be required as
contained in the City submission, and the City will
-3-
be asked to bear primary responsibilities for
monitoring compliance with the plan on behalf of
the Board.
C. It is assumed that operating items in the capital
budget will be reduced by $30 million on a cash
basis in the current City fiscal year and by
$80 million in 1976-77 and $130 million in 1977-78.
4. Financing:
a. It is assumed that over the life of the plan there
will be available approximately $6 billion in
principal amount of Federally guaranteed, taxable,
one year notes, bearing 8 1/2% annual interest.
FORD
SECTION II
SUMMARY OF FINANCIAL PLAN
(in Millions of Dollars)
City Fiscal Year
1975-76 (a)
1976-77
1977-78
1.
REVENUES
2.
Real Estate Taxes
2081
3265
3234
(See Table A)
3471
4197
4422
3.
General Fund
4.
State and Federal Aid
2606
4258
4369
5.
Other Revenues
234
272
269
6.
Total Revenues
8392
11992
12294
7. EXPENSES (excluding debt
service)
8.
Expense Budget
7479
10697
10634
9..
Reserve for Overrun
i
-
100
100
7479
10734
10797
10.
MINUS Reductions
- 92
- 462
-724
11.
Total Expenses
7387
10272
10073
C
12.
NET SURPLUS BEFORE DEBT
SERVICE
1005
1720
2221
(line 6 minus line 11)
D
13.
NEEDED FOR DEBT SERVICE
(See Table B)
1669
2190
2071
E
14.
SURPLUS OR (DEFICIT)
(line 12 minus line 13)
(664)
(470)
0150
<-
(a) October - June only.
additional
sorrang
TABLE B
1. Debt Service Required and New Debt Incurred by Year
City Fiscal Year
1975-76
1976-77
1977-78
Amount (a) Debt (b)
Amount (a) Debt (b)
Amount (a) Debt
Borrowed Service
Borrowed Service
Borrowed Service
PURPOSE
(c)
(c
1.
City Debt
0
1154
0
0 1908
884
Existing Prior
to 10/1/75
0
628
0
632
2.
MAC through
0 654
11/30/75
3.
Capital Budget
867
(d)
1100
74
930
167
0
2000
50
4.
Seasonal
(d)
2000
50
1300
Financing
35
97
0
5. Budget Deficit
664
0
470
57
-6.
Financing Short-
1569
σ(ᵈ)
(d)
250
133
0
155
term debt rolling
7. City Short-term
0
debt rolled
72
0
90
0
90
3736
1669
4014
2190
3400
2071
8.
Total, All
Purposes
9. MINUS Seasonal: 1300
2000
2000
10.
Net New
(e)
(f)
(g)
Amounts
2436
2014
1400
Borrowed
(a) In year of borrowing
(b) In year of payment
(c) City Long-Term less amount paid from Special funds
(d) December June only
(e) Line 3 (75-76) Plus Line 6 (75-76)
(f) Line 3 (76-77) Plus Line 5 (75-76) Plus Line 6 (76-77)
(g) Line 3 (77-78) Plus Line 5 (76-77) Plus 5 (77-73
B 2. TOTAL INDEBTEDNESS
Total Debt Outstanding at End of Fiscal
Year, Exclusive of Seasonal Borrowing
June 1975 June 76 June 77 June 7
A 1. CITY LONG Issued prior
& 7,767 $6,698 $5,689 $4,97
to July 1975
B 2. MAC
Long Issued through Nov. 30
3,194 3,020 2,69
3. Short Issued through Nov. 30
250
C 4. CITY SHORT
1,051
1,051
1,051
1,0
to be rolled by
Banks, P.F. & S.F.
5. Outstanding
3,664
-
-
-
D
NEW DEBT TO BE ISSUED:
6. Capital
1
867
1,967
2;
7. Financing Short Debt
-
8. Deficit
1,569
1,569
=
-
664
1,134
9. Other
-
-
250
E 10. TOTAL
12,482
14,293
14,680
14
B 2. TOTAL INDEBTEDNESS
Total Debt Outstanding at End of Fiscal
Year, Exclusive of Seasonal Borrowing
June 1975 June 76 June 77 June 78
1. CITY LONG Issued prior
& 7,767 $6,698 $5,689 $4,971
to July 1975
2. MAC
Long Issued through Nov. 30
3,194 3,020 2,692
3. Short Issued through Nov. 30
250
4. CITY SHORT
1,051
1,051
1,051
1,051
to be rolled by
Banks, P.F. & S.F.
5. Outstanding
3,664
-
-
-
NEW DEBT TO BE ISSUED:
5. Capital
I
867
1,967
2,897
7. Financing Short Debt
-
1,569
1,569
1,569
B. Deficit
-
664
1,134
9. Other
-
-
250 - ? .7500 934
0. TOTAL
12,482
14,293
14,680
14,614
7
7
2.2 increased.
TABLE C
Cash Flow Statement
1975-76 (a) 1976-77 1977-78
A. 1. REVENUES:
$ 8,392
$ 11,992
$ 12,294
B. 2. OPERATING EXPENDITURES:
7,387
10,272
10,073
3. Capital Expenditures:
11,147
4. Long-Term Debt Service
908
1,154
1,100
930
884
654
632
628
5. MAC Debt Service
6. Short-term debt, maturing
3,542
4,401
5,171
interest on debt to be
-0-
264
419
issued:
7. Short-term Debt Service
107
140
140
8. TOTAL:
13,745
17,963
18,245
C. 9. NET CASH NEEDS
5,353
5,971
6,951
D. 10. CASH SOURCE:
3,100
-4,120
5,100
11.
New Debt
12. New City Short Debt
250
-0-
-0-
13. Roll by Banks, P.F.,
799
1,051
1,051
S.F.
14. MAC (October and November) 426
-
-
15. Aid Advance
800
800
800
16. TOTAL
E.
CLOSING BALANCE
(carried through)
85,375
$5,971
06,951
22
-0-
/
-0-
(a) October - June only.
EFCB
E2.
CAPITAL BUDGET -
PLAN
(Cash Outlay in Millions of Dollars)
City Fiscal Year
1975-76
1976-77
1977-78
A 1. Expense Budget
reduce by 7%
$ -20
$ -41.8
$ -41.8
B Mitchell-Lama Housing
2. Stretch Out
-36
+28
3. Halt Projects
-47
4. Total
-83
+28
C Construction
5. Transit Authority
-15
-15
-15
6. Environmental Protection
-22.6
-42.6
-37.4
7. Municipal Services
-13.3
-25.4
-14.2
8. Education
-39.6
-40.2
-15.3
9. Other
-13.1
-11.8
- 6.6
10. Total
-103.6
-135
-88.5
D Reserve
+46.3
+13.6
+34.5
E Total Potential Cuts
160.3
135.2
1
95.8
F Capital Budget Total
$1,600.0
$1,100.0
$930.0
TABLE E
1. CAPITAL BUDGET
(Cash Outlay in Millions of Dollars)
City Fiscal Year
1975-76
1976-77
1977-78
A
Expense Items
1. Personal Service
$ 237.1
$ 217.5
$ 197.9
2. Other than Personal Service
111.1
101.9
92.7
3. Fringe Benefits
42.6
39.1
35.6
4. Lease of Facilities
92.7
92.7
92.7
5. Vocational Education
174.9
160.4
145.9
6. Manpower Training
38.6
35.4
32.2
Total
$ 697.0
$ 647.0
$ 597.0
B Mitchell-Lama Housing
$ 209.9
-0-
-0-
C Construction
1. Transit Authority
181.1
169.2
138.1
2. Environmental Protection
152.9
151.9
126.4
3. Municipal Services
86.2
35.7
18.8
4. Education
165.4
75.1
37.9
5. Other
267.8
156.3
106.6
Total
$ 853.4
$ 588.2
$ 427.8
D CAPITAL BUDGET TOTAL
$1,760.3
$1,235.2
$1,024.8
E Effects of Reduction
1. Expense Items
677.0
605.2
555.2
2. Mitchell-Lama
126.0
28.0
-0-
3. Transit Authority
166.1
154.2
123.1
4. Environmental Protection
130.3
109.3
89.0
5. Municipal Services
72.9
10.3
4.6
6. Education
125.8
34.9
22.6
7. Other
254.7
144.5
100.0
Total
$1,552.8
$1,086.4
$ 894.5
Plus Reserve
46.3
13.6
34.5
F REVISED CAPITAL BUDGET TOTAL
$1,600
$1,100.0
$ 930.0
INTRODUCTION
This document presents a summary of the joint City-EFCE
three-year financial plan developed pursuant to the requirements
of Chapter 868 of the Laws of 1975, as amended. The plan demonstrates
a feasible path from the City's present state of fiscal imbalance
to a balanced budget for the fiscal year commencing on July 1, 1977.
The financing plan presented here relies heavily, but not
solely, on the materials submitted by the City on October 15, 1975.
It deviates from that submission in certain ways, including a
significent cash reduction in the City's capital budget by approx-
imately $450 million over the period of the plan.
As with any three-year planning effort, the present plan rests
on several key assumptions. The assumptions concerning revenues,
expenditures and borrowings are detailed below, but it is important to
emphasize the extreme sensitivity of the financing plan to the terms
and conditions of borrowings. Considerations common to any enterprise,
such as interest rates and maturities on borrowings, are important
sources of this sensitivity, as are considerations unique to a
governmental enterprise, such as the response of the real property
tax rate to borrowings of the City itself. The assumptions about
borrowings which underly the financing plan appear to be a conser-
vative reflection of likely market conditions over the life of the
plan. In particular, it is assumed that there will be available a
Federal guarantee for taxable, one year notes at an interest rate of
eight and one-half percent.
An additional key feature of the financial plan is that it
prescribes a system of milestones to assist the City, the EFCB,
and other interested parties to monitor the execution of the plan.
It is important to point out also that no enterprise can adhere
inflexibly to a rigid three-year plan. Thus, it is contemplated that
specific details of the plan will have to be modified in light of
experience with the yields of individual tax instruments, credit
market conditions, and specific expenditure program priorities over
the three-year life of this paln. Nonetheless, the broad thrust of
this plan appears reasonable and feasible at this time, and the
monitoring system will provide guidance regarding possible modifi-
cations which may be required.
ASSUMPTIONS
1. Revenues: 2. City revenues are estimated in accordance with
those delivered by the EFCB as of September 30, 1975,
with some modifications concerning real property tax
changes required by alternative debt service
assumptions.
b. On a cash basis, it is assumed that the State will
repeat its advances of various State aid funds in
the final quarter of the City fiscal year.
2. Expenses: a. It is assumed that there will be no wage increases
for municipal employees for the duration of the
plan other than 1975-76 increments and cost of
living allowances.
b. Inflationary increases in the dollar costs of supplies
and purchased services for the duration of the plan
are assumed to be absorbed within present agency
dollar limits. In calculating agency spending levels
for the City fiscal years 1976-77 and 1977-78 no
further attrition in staffing levels is assumed.
C. It is assumed that the City's cost for welfare and
medicaid programs will remain constant throughout
the plan period.
d. Pension surplus reversion to the City is assumed at
$104.6 million for City fiscal year 1975-76, and
approximately $130 million for fiscal year 1976-77
and $160 million for 1977-78. The plan does not
address the questions concerning full funding of
the City's pension plans, pending recommendations
from the Shinn Management Review Committee.
3. Reductions:
a. Some of the cost reductions proposed by the City will
in practice not be implemented in the exact manner
contemplated in the City paln. In some cases the
City will have to be prepared to implement these
reductions to the same dollar amount through alter-
native means.
b. Reductions in covered agencies will be required as
contained in the City submission, and the City will
-3-
be asked to bear primary responsibilítics for
monitoring compliance with the plan on behalf of
the Board.
C. It is assumed that operating items in the capital
budget will be reduced by $30 million on a cash
basis in the current City fiscal year and by
$80 million in 1976-77 and $130 million in 1977-78.
4. Financing:
a. It is assumed that over the life of the plan there
will be available approximately $6 billion in
principal amount of Federally guaranteed, taxable,
one year notes, bearing 8 1/2% annual interest.
SECTION II
SUMMARY OF FINANCIAL PLAN
(in Millions of Dollars)
City Fiscal Year
1975-76(a) 1976-77
1977-78
A 1. REVENUES
2.
Real Estate Taxes
2081
3265
3234
(See Table A)
3471
4197
4422
3.
General Fund
State and Federal Aid
2606
4.
4258
4369
5.
Other Revenues
234
272
269
6.
Total Revenues
8392
11992
12294
B 7. EXPENSES (excluding debt
service)
8.
Expense Budget
7479
10634
10697
9.
Reserve for Overrun
100
100
7479
10734
10797
10.
MINUS Reductions
- 92
- 462
-724
11.
Total Expenses
7387
10272
10073
C 12. NET SURPLUS BEFORE DEBT
SERVICE
1005
1720
2221
(line 6 minus line 11)
D 13. NEEDED FOR DEBT SERVICE
(See Table B)
1669
2190
2071
E 14. SURPLUS OR (DEFICIT)
(line 12 minus line 13)
(664)
(470)
0150
ORO
(a) October June only.
LIBRARY
1. Debt Service Required and New Debt Incurred by Year
City Fiscal Year
1975-76
1976-77
1977-78
Amount (a) Debt (b) Amount (a) Debt (b) Amount (a) Debt
Borrowed Service
Borrowed Service
Borrowed Service
PURPOSE
(c)
(c
1.
City Debt
0 1-908
0
1154
0
884
Existing Prior
to 10/1/75
0
628
0
632
2.
MAC through
0 654
11/30/75
867
(d)
3.
Capital Budget
0
1100
74
930
167
2000
50
4.
Seasonal
(d)
1300
2000
50
Financing
35
97
5.. Budget Deficit
664
0
470
57
0
σ(ᵈ)
250
-6. Financing Short- 1569
133
0
155
term debt rolling
7. City Short-term
0
debt rolled
72
0
90
0
90
3736
1669
4014
2190
3400
2071
8. Total, All
Purposes
9. MINUS Seasonal: 1300
2000
2000
10. Net New
(e)
(f)
(g)
Amounts
2436
2014
1400
Borrowed
(a) In year of borrowing
(b) In year of payment
(c) City Long-Term less amount paid from Special funds
(d) December - June only
(e) Line 3 (75-76) Plus Line 6 (75-76)
(f) Line 3 (76-77) Plus Line 5 (75-76) Plus Line 6 (76-77)
(g) Line 3 (77-78) Plus Line 5. (76-77) Plus 5 (77-78
B 2. TOTAL INDEBTEDNESS
Total Debt Outstanding at End of Fiscal
Year, Exclusive of Seasonal Borrowing
June 1975 June 76 June 77 June 78
L.
CITY LONG Issued prior
& 7,767 $6,698 $5,689 $4,971
to July 1975
2. MAC
Long Issued through Nov. 30
3,194 3,020 2,692
3. Short Issued through Nov. 30
250
1. CITY SHORT
1,051
1,051
1,051
1,051
to be rolled by
Banks, P.F. & S.F.
5. Outstanding
3,664
-
-
I
NEW DEBT TO BE ISSUED:
5. Capital
I
867
1,967
2,897
7. Financing Short Debt
1
1,569
1,569
1,569
3. Deficit
I
664
1,134
934
3. Other
-
-
250
500
0. TOTAL
12,482
14,293
14,680
14,614
TABLE C
Cash Flow Statement
1975-76 (a)
1976-77
1977-78
A. 1. REVENUES:
$ 8,392
$ 11,992
$ 12,294
B. 2. OPERATING EXPENDITURES:
7,387
10,272
10,073
3. Capital Expenditures:
11,147
1,100
930
4. Long-Term Debt Service
908
1,154
884
5. MAC Debt Service
654
632
628
6. Short-term debt, maturing
3,542
4,401
5,171
interest on debt to be
-0-
264
419
issued:
7. Short-term Debt Service
107
140
140
8. TOTAL:
13,745
17,963
18,245
C. 9. NET CASH NEEDS
5,353
5,971
6,951
D. 10. CASH SOURCE:
3,100
. 4,120
5,100
11.
New Debt
12.
New City Short Debt
250
-0-
-0-
13. Roll by Banks, P.F.,
799
1,051
1,051
S.F.
14. MAC (October and November)
426
-
-
15. Aid Advance
800
800
800
16. TOTAL
E.
CLOSING BALANCE
(carried through)
85,375
$5,971
06,951
22
-0-
-0-
(a) October - June only.
EFCB
E2.
CAPITAL BUDGET -
PLAN
(Cash Outlay in Millions of Dollars)
City Fiscal Year
1975-76
1976-77
1977-78
A 1. Expense Budget
reduce by 7%
$ -20
$ -41.8
$ -41.8
B Mitchell-Lama Housing
2. Stretch Out
-36
+28
3. Halt Projects
-47
4. Total
-83
+28
C Construction
5. Transit Authority
-15
-15
-15
6. Environmental Protection
-22.6
-42.6
-37.4
7. Municipal Services
-13.3
-25.4
-14.2
8. Education
-39.6
-40.2
-15.3
9. Other
-13.1
-11.8
- 6.6
10. Total
-103.6
-135
-88.5
D Reserve
+46.3
+13.6
+34.5
E Total Potential Cuts
160.3
135.2 ,
95.8
F Capital Budget Total
$1,600.0
$1,100.0
$930.0
1. CAPITAL BUDGET
(Cash Outlay in Millions of Dollars)
City Fiscal Year
1975-76
1976-77
1977-78
A Expense Items
1. Personal Service
$ 237.1
$ 217.5
$ 197.9
2. Other than Personal Service
111.1
101.9
92.7
3. Fringe Benefits
42.6
39.1
35.6
4. Lease of Facilities
92.7
92.7
92.7
5. Vocational Education
174.9
160.4
145.9
6. Manpower Training
38.6
35.4
32.2
Total
$ 697.0
$ 647.0
$ 597.0
B Mitchell-Lama Housing
$ 209.9
-0-
-0-
C Construction
1. Transit Authority
181.1
169.2
138.1
2. Environmental Protection
152.9
151.9
126.4
3. Municipal Services
86.2
35.7
18.8
4. Education
165.4
75.1
37.9
5. Other
267.8
156.3
106.6
Total
$ 853.4
$ 588.2
$ 427.8
D CAPITAL BUDGET TOTAL
$1,760.3
$1,235.2
$1,024.8
E Effects of Reduction
1. Expense Items
677.0
605.2
555.2
2. Mitchell-Lama
126.0
28.0
-0-
3. Transit Authority
166.1
154.2
123.1
4. Environmental Protection
130.3
109.3
89.0
5. Municipal Services
72.9
10.3
4.6
6. Education
125.8
34.9
22.6
7. Other
254.7
144.5
100.0
Total
$1,552.8
$1,086.4
$ 894.5
Plus Reserve
46.3
13.6
34.5
F REVISED CAPITAL BUDGET TOTAL
$1,600
$1,100.0
$ 930.0
FORD & LIBRARY GENALD
Page 1.
SMT/TFS
Sindlinger's Economic Service
Harvard and Yale Avenues, Swarthmore, Pennsylvania 19081 215/544-9000
SINDLINGER
COMPANY
NEWS & ISSUES
Marketing
Opinion Research
Wednesday --- October 22, 1975
Report W-2:
New York Aid Opposed
Nearly two-thirds of Americans are opposed to federal help for New York City.
More than three-quarters balk at higher taxes to bail out nation's biggest city.
Most who favor aid reside in East. Opponents say own cities are in trouble.
Political and governmental leaders risk widespread public wrath if New York City
is helped and others are ignored.
American consumers are opposed by a 2-to-1 majority to use of federal money to help
New York City out of its financial dilemma.
The opposition becomes even more adamant when it is suggested that the proposed
federal aid could boost income taxes.
The widespread resistance to helping New York City was found by Sindlinger & Company
during a 14-day survey with a sample of 2,282 consumers in all parts of the 48 contiguous
United States.
Conducted via continuous daily telephone interviews, the September 25th-October 8th survey
also found that most of the minority that favored federal help lived in the northeastern parts.
of the country with the biggest bloc concentrated around the New York City metropolitan
area.
TWO-THIRDS OPPOSE AID
Nearly two-thirds of all American consumers - or 65% said the federal government should
not provide money to bail out the nation's largest city. Only 30.2% favored federal aid.
When the pocketbook issue was introduced, however, the sentiment for having New York
City find its own solutions grew markedly. More than three-quarters, or 76.5%, said they
would not be willing to pay one extra cent in taxes to help New York. Another 18.1% said
they hadn't thought about the issue while a mere 5.4% said they would be willing to accept
higher taxes.
These findings show that a fair sized bloc of people may like the idea of helping New York
City in principle but they themselves wouldn't be willing to ante up anything toward that
cause.
raye
Report W-231
SINDLINGER & COMPANY, INC. OF MEDIA IN PENNSYLVANIA
SPECIAL NEWS & ISSUES STUDY ON FEDERAL BAIL OUT OF NEW YORK CITY
14
DAYS
SEPTEMBER 25th-OCTOBER 8, 1975
TOTAL
MALE
FEMALE
Sample
%
Proj.
Sample
%
Proj.
Sample
%
Proj.
(000)
(000)
(000)
BASE ALL ADULTS
18 YEARS & OLDER
2282
100.0
147982
1138
100.0
71594
1144
100.0
76388
QUESTION 1
SOME PEOPLE SAY THE FEDERAL GOVERNMENT SHOULD BAIL
NEW YORK CITY OUT OF ITS FINANCIAL PROBLEMS WITH
GOVERNMENT MONEY OTHER PEOPLE SAY GOVERNMENT
MONEY SHOULD NOT BE GIVEN TO NEW YORK CITY AS OTHER
CITIES AND STATES HAVE FINANCIAL PROBLEMS AND WOULD
DEMAND EQUAL TREATMENT.
WHAT IS YOUR OPINION ON NEW YORK CITY?
1. GIVE GOVERNMENT MONEY.
691
30.2
44723
372
32.7
23411
379
27.9
21312
2. NOT GIVE MONEY
1482
65.0
96112
740
65.0
46536
742
64.9
49576
3. DON'T KNOW
109
4.8
7147
26
2.3
1647
83
7.2
5500
HOW MUCH WOULD YOU BE WILLING TO HAVE
ADDED TO YOUR INCOME TAX IF THE GOVERN-
MENT HAD TO BAIL OUT NEW YORK CITY?
1. NOTHING
1742
76.5
113093
843
74.1
53051
899
78.6
60042
2.
DON'T KNOW
416
18.1
26870
222
19.5
13961
194
16.9
12909
3. AN AMOUNT STIPULATED
124
5.4
8019
73
6.4
4582
51
4.5
3437
BASE: WITH AMOUNT
124
100.0
8019
73
100.0
4582
51
100.0
3437
1.
$1 - $5.00
20
16.3
1306
9
12.3
564
11
21.6
742
2.
$6.00 $10.00
34
27.7
2222
14
19.1
875
20
39.2
1347
3.
$10.00 $15.00
41
32.6
2611
34
46.7
2140
7
13.7
471
4.
$16.00 $20.00
13
10.6
851
5
6.8
311
8
15.7
540
5.
$21.00 $30.00
7
5.7
455
4
5.5
252
3
5.9
203
6.
$31.00 $40.00
8
6.3
510
6.
8.2
376
2
3.9
134
7.
$41.00 $50.00
1
0.8
64
1
1.4
64
0
0.0
00
GENEROSITY IS RARE
Even the 5.4% sliver that would be willing to accept higher taxes weren't all that generous.
One of three was willing to pay between $10 and $15 extra to comprise the largest bloc of
those who specified an amount.
More than three-quarters or 76.6% --- specified an amount between $1 and $15. Another
10.6% were willing to pay up to $20.
Practically all those who were willing to pay additional taxes resided in the northeast and
generally within close proximity to the financially troubled metropolis.
Copyright 1975: Sindlinger & Company, Inc., Post Office Box 646, Media, Pennsylvania 19063 (215) 565-2800
Report W-231
Page 1469
POLITICAL RISKS ABOUND
These findings could have rather important political ramifications.
Many members of the majority who opposed New York City aid claimed a principle reason
for their opposition was their belief that their own cities were in no better financial shape.
This, of course, opens the door to the much discussed possibility that if New York was
helped many other beleaguered cities would follow hat in hand. At the very least, leaders
of the other cities would be under public pressure to join the parade to Washington.
On the matter of political gain, the overwhelming opposition shows that New York City's
cause is not a popular issue around the country. Any political or government figure who
champions that city risks being damaged severely in the so-called hinterlands. Certainly
this would be a drawback that any presidential candidate must weigh if he is thinking of
leading the fight in Washington for New York.
Copyright 1975: Sindlinger & Company, Inc., Post Office Box 646, Media, Pennsylvania 19063 (215) 565-2800
NEWYORK
BERALD FORD LIBRARY
THE PRESIDENT HAS SEEN
Who's to Blame for
The Fix We're In
By Ken Auletta
"
The roll-overs, false revenue estimates, and plain lies that have
robbed taxpayers of billions
people have gone to jail for less
On October 7, 1965, William F.
crisis is primarily a symptom, not a
ization: anti urban bias; even the inven-
Buckley, then a candidate for mayor,
cause, of a deeper economic malaise,
tion of the automobile. Not to mention
warned, "New York City is in dire
whose roots reach back three decades
such nondecisions as insufficient federal
financial condition, as a result of mis-
and encompass a series of city, state,
and state aid and the failure to engage
management, extravagance, and politi-
and even federal decisions. This is a
in effective economic planning.
cal cowardice
New York City must
piece about those decisions, a chronicle
But to blame everybody is to blame
discontinue its present borrowing pol-
of the people and events that cumula-
nobody. There are particular villains in
icies, and learn to live within its in-
tively pulled us into our predicament.
this story. If there is a single common
come, before it goes bankrupt." Judg-
To pinpoint the most important of
thread weaving through these many de-
ing by the reaction, one would have
these decisions, I interviewed more
cisions, it would be what is called "pol-
thought Buckley had proposed to drop
than 40 public officials, labor leaders,
itics." And since "liberal" politicians
the atom bomb on Israel.
businessmen, bankers, and students of
have dominated city government these
It took a decade for Buckley to ap-
city government. My question was al-
many years, it is they who are more
pear "responsible." He was bucking
ways the same: What were the key
guilty than others. The roll-overs, false
the sixties, the Age of Good Intentions,
events and decisions that led to the
revenue estimates, and plain lies that
when candidates solemnly promised to
city's present fiscal crisis? After sorting
have robbed taxpayers of literally bil-
outspend their rivals. New ideas. New
through these responses, and assisted
lions through excessive borrowing to
programs. That's what we wanted. An
by a research associate, Robert Sullivan,
cover up excessive fraud
people
unwitting spokesman for the age was
I waded through old budgets, Board of
have gone to jail for less.
Mayor Robert F. Wagner, who, in his
Estimate minutes, press releases, news-
If the principal actors who have
last budget message, in 1965, declared:
paper clips, state laws, books, and pam-
guided our city's destiny these last sev-
"I do not propose to permit our fiscal
phlets. Then, when I had narrowed the
eral decades-Wagner, Rockefeller,
problems to set the limits of our com-
choices, I did more interviewing.
Beame, Lindsay-seem the chief vil-
mitments to meet the essential needs of
In time, twenty critical decisions
lains in this piece, it must be remem-
the people of the city."
seemed to me to be the key events that
bered that they could not have accom-
Consistent with that curious fiscal
let New York into financial ruin. The
plished all they did without a support-
philosophy, New York City persisted in
criterion for selection was not merely
ing cast of state legislators, borough
an ambitious-and compassionate-ef-
a "bad" or a "good" decision as such,
presidents, City Council members, and
fort to care for those less fortunate by
but also those that opened the door for
city comptrollers.
taxing those who could afford it. To-
later abuse.
Add to this list promiscuous bankers,
day, 14 per cent of our citizens are on
There are those who stress that New
voracious labor leaders and their mem-
welfare. We support nineteen municipal
York is primarily the victim of social
bers, and-by no means least-the
hospitals, free tuition at the City Uni-
forces beyond its control. They will
press, because it was too preoccupied
versity, open enrollment, day-care cen-
be disappointed in what they find here.
with gossip, too lazy, or assumed its
ters, foster homes-and we have an as-
Sure, there are general villains in
readers were too dumb or too bored to
sortment of more than 25 different
plenty: the migration since World War
bother with detail. Finally, there' is the
taxes. We have conducted a noble ex-
II which brought 2 million blacks and
press's audience, the public, which all
periment in local socialism and income
Hispanics (largely poor) to the city and
too often lived down to the press's low
redistribution. one clear result of which
the departure of 2 million primarily
expectations.
has been to redistribute much of our
white residents (largely middle income);
So, this is a story not only about
tax base and many jobs out of the city.
the loss of one out of ten jobs in the last
what our "leaders" did-and how-
The city's now overwhelming credit
five years; inflation; taxes; racial polar-
but about what we did to ourselves.
OCTOBER 27, 1975/NEW YORK
29
March 26, 1953: Governor
2.
Thomas E. Dewey signs a bill
allowing New York to impose
a payroll tax.
PICTORIAL PARADE
Governor Dewey, in a then common
Republican effort to win suburban and
upstate support by running against and
embarrassing Democratic New York
COLONIE
City, had the legislature pass a bill
granting the city authority to impose
a payroll tax of one-half of 1 per cent
on all wage earners-including com-
muters. The cost of this was to be
shared by the employer and the em-
ployee. There was a state string at-
tached, however. The tax could be im-
posed only if the city agreed to set up
a Transit Authority and commit itself
to make its mass transportation system
self-sustaining. Which was politically
impossible. The city got the Transit
Authority. What it didn't get was a
payroll tax. On the recommendation of
Mayor Wagner, the Board of Estimate
rejected it. Through the mid-sixties
the city retained this authority to im-
pose a payroll tax. It was unused, and
finally withdrawn by the state. For
years the city has fought, vainly, to get
permission of the State Legislature to
tax commuters. A payroll tax would
have provided a means to do so. If the
city now had the payroll tax John
Lindsay had asked for in 1970-his pro-
posal would also have abolished the
city income tax-an estimated addition-
Twenty Critical
al $400 million would have been re-
ceived from commuters alone this year.
Decisions That Broke
January 16, 1955: The Port
New York City
3.
Authority and the Triborough
Bridge and Tunnel Authority
agree on a master plan-
for cars.
June 22, 1944: The G.I. Bill
1.
of Rights is enacted.
PICTURIAL PARADE
Many factors were to contribute to
the erosion of the city's economic base
One cannot write about the city's
-repeal of the Lyons law, for example,
fiscal crisis without tracing the exodus
which had required city employees to
of 2 million middle-income people since
live in the city, and constantly rising
World War II to the suburbs. The de-
taxes. which encouraged business to
cision of the federal government in
leave town. But it was the highway
1944 to provide 4 per cent home loans
construction binge after World War II
to World War II veterans, with no
that made it easy to do so.
down payment required, opened the
The Port Authority and the TBTA
floodgates. The American dream of own-
agreed on a plan to build a second
ing a home and property converged
level of the George Washington Bridge,
with federal moneys to subsidize that
the Throgs Neck Bridge, and the Ver-
dream. There were few comparable in-
razano-Narrows Bridge-each to carry
centives to keep people in town. Im-
cars only-and for ribbons of access
plicitly, the government was saying:
roads and highways to go with them.
We invite you to the suburbs. Mil-
It was a $1.2-billion package, and its
lions took advantage of that offer. To
architect was Robert Moses. As Robert
get them to their new homes, various
Caro wrote in The Power Broker, his
governments and agencies would sub-
biography of Moses, the pact "sealed,
sequently, quite literally, pave the way.
perhaps for centuries, the future of
30
NEW YORK/OCTOBER 27, 1975
WIDE
New York and its suburbs." If the pro-
days off for blood donations; 35-hour,
posed money had been applied to mass
rather than 40-hour, weeks for most
transit-an abhorrent thought to Moses
city employees; eighteen days off a year
or the Port Authority's Austin Tobin-
for "chart" time for cops; fifteen min-
the city could have completely remod-
utes a day of paid wash-up time for
eled its subway system.
sanitationmen; more than three months
Little more than a year later, on
a year of paid vacation for teachers,
June 29, 1956, the Federal Highway
plus paid sabbaticals.
Trust Fund was established, creating a
Federal employees, who do not have
mechanism-a gasoline tax-to funnel
the same collective-bargaining rights,
new billions each year into highway
have received salary increases averag-
WIDE WORLD
construction. Between 1956 and 1965
ing 5.5 per cent in the last ten years.
alone, these funds paid for the con-
Oh
In the same period city salaries grew
struction of 439 miles of new highway
See the Mayor
by 10.4 per cent.
in the metropolitan area. In the same
See
One does not have to make labor a
the
period, not a mile of new rapid-transit
Mayor ru
scapegoat or excuse a weak manage-
track was completed.
Run
Mayor
run
ment to note, as Newsweek did recent-
P.S.
ly, that even after adjusting for dispari-
March 31, 1958: Mayor
ties in county, state, and federal aid, it
TEACHER
4
BECAUSE
TEACHER
VERTY
still costs New York City $1,446 per
Robert F. Wagner issues
BECAUSE
CAREL
BUDGET
EDUCATION
MEANS
capita to deliver the same services that
Executive Order Number 49.
TEACHERS
cost Atlanta only $650, Chicago $715,
nine
and Philadelphia $731.
What came to be called the "Little
Following Wagner's executive order
Wagner Act" was in fact the Big Wag-
in 1958, the New York Times editorial-
ner Act for municipal unions. The
ized:
city employees
will now
mayor's executive order granted to
be permitted to bargain harder for a
100,000 city employees the right to
pay rise that isn't there." Ultimately the
join the union of their choice and the
Times was right, but it took a calami-
right to bargain collectively. It was not
tously long time to make it so.
an easy decision. Wagner's advisers
were divided between those who op-
March 26, 1960: Governor
posed the order, claiming it would lead
to increased union pressure, and those
5.
Rockefeller signs a bill in-
who favored it, arguing it would im-
creasing by 5 per cent the
pose orderly machinery for the resolu-
state's contribution to state
tion of disputes, bring stability to city
agencies, and promote efficiency.
employees' pensions.
A labor adviser to Wagner, one who
urged the signing of the executive or-
On the face of it, this appears to be
der, now thinks it was a "mistake." He
a minor decision with small immediate
now believes it was wrong to assume
WIDE WORLD
dollar consequences. But, in fact, this
that a municipal union can be dealt
decision signaled the beginning of a
with like a trade union, because "the
process of leapfrogging, of open com-
city is not an employer in the tradition-
petition between the city and state to
al sense. Profits do not exist. Workers
outdo each other in rewarding their ser-
are not extracting a share of profits
vants. The bill for the first time made
but rather a share of taxes." He now
pensions a part of collective-bargain-
views municipal collective bargaining
ing settlements and invited competition
as part of the political rather than the
among public unions. Former Mayor
adversary process. Therefore, he says,
Wagner recalls a Loyalty Day Parade
municipal unions "are really a pressure
in the early sixties. He and Rockefeller
group, a special-interest group."
"were heading up the parade. The po-
A pretty powerful one, too. They
lice and firemen were shouting, 'Atta
are heavy contributors of money, print-
boy, Rocky!' So I turned to Nelson and
ing. and manpower to campaigns. As
I said, 'You son of a gun, taking all
Victor Gotbaum, head of District Coun-
the credit.' He laughed."
cil 37 of the State, County, and Munic-
The financial consequences of the 54
ipal Employees' union, recently re-
pension bills passed between 1960 and
marked: "We have the ability, in a
1970 are staggering. In 1961, according
sense, to elect our own boss."
to the State Scott Commission, the
The signing of the executive order
city paid $260.8 million to provide
led inexorably to the dilution of the
its employees with retirement and so-
power of city executives to manage
cial security benefits. By 1972, that had
their departments, since it placed such
jumped to $753.9 million, a growth of
matters as "workload and manning"
175 per cent. The rapid increase in city
on the collective-bargaining table.
employment accounted for only 30 per
City union contracts now specify two-
cent of this increase.
man, rather than one-man, patrol cars
This year, the city budget for retire-
in low-crime areas; four rather than five
ment benefits is $1.3 billion. But not
men to a fire truck; a set number of
even that sum gives the whole story.
OCTOBER 27, 1975/NEW YORK
31
The business-oriented Committee for
November 7, 1961: Voters
Economic Development has calculated
that when all the city's costs-includ-
sions will cost about 25 per cent of
7.
approve new city charter.
ing hidden ones-are figured in, pen-
This was an eventful day in New
payroll. And the payroll itself now con-
York. It was a day the voters re-elected
sumes 60 per cent of the city's budget.
Bob Wagner-running against his own
WIDE WORLD
eight-year record-as mayor. Less no-
ticed was a proposal supported by such
April 18, 1960: Governor
good-government groups as the City
6.
Rockefeller signs a bill creat-
Club and the League of Women Voters
ing the State Housing
to amend the city charter. It carried by
better than two to one. Among the
Finance Agency.
charter changes were two that would
strengthen the office of mayor. One em-
Until the creation of this agency,
powered the mayor to estimate general
BLACK STAR
public authorities were expected to be
fund revenues, a power formerly shared
self-sustaining. The things they built
with the comptroller, the Board of Esti-
were supposed to pay their own way.
Mirror
mate, and the City Council; the second
However, upon the recommendation
granted the mayor the power to esti-
of a housing task force consisting of
mate the maximum debt the city might
such luminaries as I. D. Robbins,
incur for capital projects, a power also
James Scheuer, and Harry Van Ars-
5
formerly shared.
dale, Rockefeller persuaded the State
Sweepspin
It was the belief at the time-much
Legislature to depart from this policy.
as it was in Washington-that we
The new agency would build noth-
needed a strong chief executive with
ing itself; it would provide money for
the power to make decisions. The char-
others to build with. There would be no
ter changes strengthened the mayor's
direct user revenues. The purposes for
powers, but they also opened these
which the money could be used were
powers to abuse. An audit check on the
broadly defined. As a way of getting
mayor had been removed.
around the state constitutional require-
The new charter took effect on Jan-
ment to hold a public referendum in
uary 1, 1963. Fiscal sleight-of-hand be-
order to sell bonds backed by the "full
gan almost instantly. On April 2, 1963,
faith and credit" of the state, the HFA
Wagner proposed to balance his $3-
would now rely on what was called
1664.
billion budget, in part, by waiving pay-
"the moral obligation" of the state, for
ment of $15 million to the city's Sta-
NY
which voter approval wasn't necessary.
bilization Reserve Fund for one year.
The "moral obligation" concept was
The City Council rubber-stamped this
thought up by John Mitchell, the bond
PICTORIAL PARADE
request, as did the State Legislature.
lawyer who went on to other things.
Comptroller Beame, unhappy with
The governor, in lining up support,
this approach, called on Wagner to use
tried to have it both ways. On the one
magic instead and balance the budget
hand, he told the public it would cost
by increasing general fund estimates by
the "taxpayers" no money. On the
$13.75 million and by changing the
other, he told investors that the state
payment dates on state aid, thereby
taxpayers would back the bonds. Years
shifting the following year's state aid
later we would all pay. "The decision
payments into the upcoming fiscal year.
on moral-obligation bonds," says Donna
Then, on May 6, Wagner solemnly
Shalala, a professor of government at
warned: "A way must be found to re-
Columbia University and a director of
place a $40-million loss from the out-
the Municipal Assistance Corporation,
of-city sales tax." But on May 14, he
"reinforced and led to the era of avoid-
suddenly saw a "brighter economic out-
ing constitutional requirements. It was
look" and said that the city could
difficult for the state to say to the city,
count on an additional $26.3 million in
'Look, you're avoiding statutory or con-
revenues.
stitutional requirements in preparing
"The significance of the charter
your budget' when the state ignored
change," argues a budget expert, "was
the constitution by not going to the
that when you had a mayor operating
voters on bond issues."
with a Budget Bureau which was crea-
WIDE WORLD
By the winter of 1975, the moral-ob-
tive, the sky was the limit."
ligation debt of state public authorities
had soared to $7.4 billion. Public au-
April 3, 1964: The New York
thorities had proliferated across the
state, now totaling 230. And in Feb-
ruary, 1975, one of the children of the
HFA-the Urban Development Cor-
8.
State Local Finance Law
is amended.
poration-defaulted on its moral ob-
The State Legislature and the gover-
ligations, setting off the chain reaction
nor, each of whom is required to pass
which now threatens the entire local
on every city budget, have often passed
and state government bond market.
on, winked at, or initiated gimmicks
32
NEW YORK/OCTOBER 27, 1975
WIDE WORLD
which allowed city officials to use the
war on poverty, the war on narcotics
capital budget-intended to pay for
addiction, the war on slums, the war
projects with a long economic life-for
on disease, and the war on civic ugli-
current expenses. Instead of requiring
ness."
politically painful budget cuts, Section
Such "wars" cost money, and Wag-
11, Paragraph 62 permitted officials to
ner presented a tricked-up, record-high
use the capital budget to borrow money
$3.87-billion budget to pay for them. It
for current expenses.
was deficit financing, and the implica-
Imagination bloomed. In his 1964-65
tions for the future were profound. In
capital budget, Mayor Wagner buried
July, Moody's lowered New York City's
$26 million in expense items. Governor
credit rating, thereby costing taxpayers
Rockefeller approved an administration
millions of dollars in additional interest
bill (Chapter 634 of the Laws of 1967)
charges. According to one official on the
BLACK STAR
which allowed "the costs of codifica-
privately funded Citizens Budget Com-
tion of laws and the fees paid to ex-
BLACK STAR
mission, an organization whose timely
perts [lawyers], consultants, advertis-
and pertinent warnings went largely
ing and costs of printing and dissemi-
unheeded over the years, "Wagner
nating" to be regarded as a capital ex-
showed it could be done. His action
pense by granting these expenses a
showed that our laws-with the help of
"three year period of possible useful-
the legislature, our constitution, and
ness." This from our present vice-presi-
our statutory framework-are sufficient-
dent, who is now campaigning against
ly elastic to encompass a devastating
"permissive liberals."
amount of mismanagement." Governor
The expanding use of this device and
Rockefeller helped round up sufficient
its long-range cost and effect on "in-
Republican votes in the legislature to
vestor confidence" should not be under-
pass this scheme.
estimated. Between 1965 and 1975, ac-
On June 30, 1965, the city's short-
cording to the Citizens Budget Commis-
term debt was $526 million. By Feb-
sion, a total of $2.4 billion in expense
ruary, 1975, it had grown to an insup-
items was smuggled into the capital
portable $5.7 billion.
budget at an added interest cost of
On December 21, 1965, Mayor-elect
$250 million. It has become a major
John Lindsay, sounding remarkably
GERALD AUVOSIT FORD
factor in the city's massive debt service,
similar to the man who would follow
which in this year is projected to re-
him into office eight years later, ex-
quire $1.886 billion, consuming 14
pressed alarm: "I face a budget gap
cents out of every expense budget
of almost a billion dollars for the first
dollar, or more than the city spends
fifteen months of my administration."
for police, fire, the City University, sani-
Wagner denied there was a deficit, as
tation, and the environment combined.
Lindsay would eight years later.
May 13, 1965: Mayor
January 12, 1966: Mayor
9.
Wagner closes a budget gap
10.
Lindsay settles a citywide
by short-term borrowing.
transit strike.
Mayor Wagner had planned to pre-
Mayor-elect John Lindsay journeyed
sent his last expense budget to the full
to the Americana Hotel on December
BLACK STAR
Board of Estimate before live television
27, 1965, to meet with representatives
cameras. But word had leaked out that
of the Transport Workers union and the
the mayor planned to close a $255.8-
Transit Authority. He asked both sides
million budget gap by issuing short-
to arrive at a "fair settlement" to avoid
term notes and by asking two sepa-
a transit strike and then, with unaccus-
rately elected state legislatures and the
tomed humility, declared: "I am not an
voters to approve a constitutional
expert on labor matters."
amendment permitting the city to in-
Over the next fifteen days he would
crease real estate taxes 20 per cent.
prove this. On January 1, 1966, 34,800
Editorialists screeched. City Comptrol-
transit workers went on strike, immo-
ler Beame, a close Wagner ally, blasted
bilizing most of the city. It was the first
the plan.
strike in TWU history, and the first ma-
The live TV plans were scratched.
jor citywide strike in the city's history.
Instead, Deputy Mayor Edward F. Cav-
Until this point, unions would threaten
anagh Jr. read a six-minute message to
and bluster but then sit down in some
two Board of Estimate members on the
smoke-filled room and work out a set-
same day John Lindsay announced his
tlement. This time-after Lindsay de-
candidacy for mayor. Among the high-
nounced what he called the "power
lights of the Wagner budget message
brokers," after the New York Times,
was his plan to "borrow now, repay
near hysteria, had blasted a judge for
later," as he phrased it. Expressing the
merely throwing union leaders in jail,
optimism and rhetoric of the day, he
after union president Michael Quill
said, "I intend that we shall press
had called his mayor a "pip-squeak"
ahead with the war on crime, the
and the Times a "meddler"-the strike
UPI
OCTOBER 27, 1975/NEW YORK
33
WORLD
was settled with a package of improve-
mention what it would later do to our
ments worth $52 million, or twice what
senior citizens in nursing homes and for
one of the three mediators said could
venal private nursing-home operators.
have been the price.
The city's share of Medicaid costs
Price aside, there was another impor-
is now greater than its share of welfare.
tant consequence. As former Mayor
Wagner now recalls, "They went on
January 4, 1967: The city's
strike-a violation of the law-and yet
as part of the settlement they were for-
12.
Office of Collective Bargain-
given, with no penalties to any extent."
ing names an impasse panel to
The 1966 transit strike was John
Lindsay's Bay of Pigs. It set the pattern
settle a pay-parity dispute.
for his future shaky dealing with muni-
cipal labor. Some feel he was the vic-
In 1967, faced with a tough quarrel
tim of poor advice. One participant re-
WIDE WORLD
involving old and sensitive relation-
calls. "There were four guys principal-
ships-"parities"-within police ranks,
ly responsible: Abc Raskin and John
and between police and fire pay scales,
Oakes of the New York Times were on
the city's Office of Collective Bargain-
the phone every day telling Lindsay
ing named an impasse panel to sort out
what to do. Then there was [pollster]
the issues. There followed the city's
Lou Harris and [Liberal party chief]
breaking of a written agreement with
Alex Rose. They were the architects of
the police, a lawsuit, appeals, rehear-
that settlement. They were all smart
ings, and a six-day police strike in 1971.
guys who understood public relations,
Ultimately, the city lost a suit brought
but not labor relations."
by the Patrolmen's Benevolent Associa-
Today, one of those four advisers
tion, and the financial consequences
reflected that Lindsay's mistake was
were great. "By the time other groups,
that he "surrendered" to the unions'
like firemen and sanitationmen, came
demands. His view was that Lindsay
forward with their related demands,"
should have drawn the line and sum-
writes professor Raymond Horton in his
moned the troops to battle. That may
book Municipal Labor Relations in New
be correct, but it presupposes that the
York City, "the cost to the city was
public, like a mighty army, would
considerable-estimated from $150 mil-
march in step behind their leader. Yet
lion to $215 million."
by the thirteenth day of the strike the
But the city paid another price for
WORLD
public - tired, inconvenienced, their
its parity debacle. The city had pre-
WIDE
work and life patterns disrupted--was
viously suffered strikes by its transit
the party most ready to "surrender."
workers, its teachers, sanitationmen,
welfare workers. But until January,
1971, it had been almost unthinkable
April 30, 1966: The State
that those responsible for public safety
11.
Medicaid law is enacted.
would strike. With that strike went
another piece of the social fabric, en-
Running for re-election in 1966, and
couraging citizens and investors alike
playing the role of a "liberal," Nelson
to lose confidence in the city's future.
Rockefeller signed Medicaid into law,
hailing it as "the most significant social
November 7, 1967: Voters
legislation in three decades."
WIDE WORLD
The significance should not be under-
13.
reject a new state constitution.
estimated. Almost everyone was for
Voters who can remember back to
Medicaid in 1966-Robert Kennedy,
1967 may dimly recall a strident argu-
both houses of the State Legislature,
ment over the wisdom of repealing the
labor, Republicans, and Democrats. It
so-called "Blaine Amendment" to the
was the compassionate thing to do-
state constitution, which forbade state
and a classic case of good intentions
aid to parochial schools. Repeal of
and goals being subverted by poor
Blaine was part of an extensive revi-
thinking and slovenly legislation. The
sion worked out in a constitutional
New York State Medicaid law prom-
convention. The package was resound-
ised free medical care to the poor, to
ingly defeated. But for the city of New
senior citizens, and part of the middle
York, which cast 56 per cent of its bal-
class as well. The state was going to
lots against the revisions, the new con-
spend money-Rockefeller said "$90
stitution would have helped a great
million" subsidize medical care. But
deal in other ways.
the state neglected to provide money or
Article V, Section 25b of the pro-
a plan to expand medical facilities and
posed constitution called for the state
provide the beds, doctors, nurses, and
to assume over a ten-year period the
technicians that would be necessary.
full cost of operating all courts in the
Costs exploded as too many people
city of New York. In the 1975-76 year
chased too few doctors and facilities—
the city's share of court costs is budg-
making medical care prohibitively ex-
eted at $94.2 million.
pensive for many New Yorkers. Not to
Article X, Section 16 of the proposed
34
NEW YORK/OCTOBER 27, 1975
WORLD
HEIDRIAL
FAMAGE
constitution called for the state to as-
coalition, to be more political. He hired
sume over a ten-year period-10 per
a talented campaign manager, Richard
cent each year-the total cost of all
Aurelio, and instructed his key aides
city welfare. In 1967-68 the local cost
to check important government deci-
for welfare was $267.2 million. By
sions with Aurelio. If he was to win he
1975-76 the local share of welfare and
had to do what most elected executives
Medicaid costs had multiplied to more
do: use his government powers to ad-
than $1 billion.
vance his campaign. Only John Lind-
Article IX, Section 1d of the pro-
say had to do more. He was still a Re-
posed constitution would have changed
publican in a town where that party is
the city's state-school-aid formula. In-
nearly extinct. And more he did.
stead of being based on attendance, as
"That was a year the mayor wanted
it now is (with the city's high rate of
labor peace," Lindsay's deputy budget
absenteeism), the formula would have
director at the time, David Grossman,
been switched and would have been
now recalls. It was the year, says Ray-
based on pupil registration, benefiting
mond Horton, "when John Lindsay
densely populated areas like the city.
stopped fighting with the unions and
went to bed with them."
November 5, 1968: The elec-
Before the 1969 election, lucrative
14.
new pension benefits had been awarded
tion of Richard Nixon.
attendance teachers, sanitationmen,
The name Nixon will be remembered
higher-education employees, police, fire-
for various perfidies-Watergate, Cam-
men, and library teachers. Lindsay's re-
bodia, Chile, Vietnam. But as far as
election campaign would ultimately
the city's fiscal crisis is concerned, Nix-
win the support of such powerful city
on should be remembered as the presi-
unions as those of the state, county,
dent who, in the words of urban his-
WIDE WORLD
and municipal employees and the sani-
torian Richard Wade, "abandoned the
tationmen. Albert Shanker, head of the
notion of compensatory spending for
teachers' union-who in 1968 spoke of
our cities and instead switched to per
Lindsay in terms that would make Mike
capita aid, which favored the burgeon-
Quill proud-remained neutral. The
ing suburbs." Though in absolute num-
mayor's people considered this a pro-
bers federal aid to the city grew incre-
Lindsay posture. In 1970, the teachers
mentally during each of the years Nix-
were rewarded with an extravagant
on was president, by 1973-74 it de-
pension settlement.
creased as a percentage of the city's
Lindsay also used his budget for a
budget-and it is certain that had a
series of manipulations to tide him
progressive been president, the city
through the election. He balanced his
would have received considerably more
expense budget by counting $116.7-
million in nonexistent revenues. He
support. Additionally, as the federal
government cut back on matching grant
doubled expense moneys slipped into
programs, the city, in an attempt to
the capital budget. Playing Santa Claus,
continue those services, often overex-
he reversed a long-held position and
tended itself. "A critical series of de-
promised to hire more firemen; he also
cisions," argues a former deputy mayor,
dangled overtime pay for policemen
"was the acceptance of federal pro-
who worked a new night shift.
grams forced on us during the Johnson
With the involuntary help of the tax-
years. In the liberal euphoria over
payers, and assisted by a brilliant cam-
these programs too little attention was
paign. the Liberal party, and a clown
paid to the long-term costs of these
named Procaccino, Lindsay won-with
programs."
42 per cent of the total vote.
March 18, 1969: John
June 18, 1971: Rockefeller
15.
Lindsay announces his can-
16.
signs an amendment to the
didacy for re-election.
Local Finance Law.
New York State first resorted to
Lindsay was in trouble, and he knew
budget notes in 1942 as a method of
it. In February, 1968, he had suffered
meeting emergency expenditure needs by
a massive, city-wide sanitation strike in
borrowing against next year's revenues.
which he threatened to call out the Na-
The legislation spoke of "epidemic,
tional Guard. In a union town, labor
riot, flood, storm, earthquake, or other
leaders were calling him anti-labor.
unusual peril." Looking at New York
Even worse, in the wake of the Septem-
City's recent fiscal history one would
ber, 1968, teachers' strike over decen-
think that "epidemic," "earthquake,"
tralization, many Jews-the city's lar-
and "unusual peril" were annual
gest and most powerful ethnic group-
events.
were openly calling the mayor anti-
In 1971, in order to "balance" the
Semitic.
city budget, city leaders got behind an
He had to try to rebuild an electoral
overly optimistic forecast of how much
OCTOBER 27, 1975/NEW YORK
35
WIDE WORLD
CAMERA a
federal aid the city could expect. When
on a proposed 1973-74 Expense Budget
Congress hedged on revenue-sharing,
by the Mayor, the Comptroller, the
the city got caught short by several
Board of Estimate and City Council
hundred million dollars. Governor
leaders." The New York Post reported:
Rockefeller responded by signing into
"This was the first year in the past
law an amendment to the Local Finance
four that Lindsay and Beame practiced
Law which, in effect, said: if New
budget politics of consensus instead of
York City makes a mistake in its esti-
confrontation."
mate of additional revenues from fed-
Among their budget tricks were (1)
eral revenue sharing in fiscal 1971-72,
the placing of $564 million of expense
not exceeding $100 million, and gets
items in the city's capital budget, an in-
insufficient aid from the federal gov-
crease of $290 million from the pre-
ernment, it can issue one-year budget
vious year; (2) the city ended at mid-
notes. But if the city can't come up
year its existing subsidies of transit
with this money by 1974, it would be
fares for schoolchildren and the elderly,
permitted to ask the State Legislature
pretending the need would disappear
for money to cover the budget notes,
or that the state or federal government
and the legislature "will make a first-
would bail the city out; (3) the City
instance appropriation." That is, it
Council arbitrarily freed "revenues"
would lend the city the difference.
of $148.5 million by, among other
At that time, John Lindsay used this
things, postponing the statutory repay-
special power to issue $308 million of
ment of $96 million to the "rainy day"
such notes to cover false revenue esti-
fund; (4) Lindsay announced a deficit
mates. The legislature also permitted
of $211 million and simply summoned
the city to repay these notes as late as
the state to close it; (5) they made
July 31, 1974, on the presumption the
good a Beame campaign pledge by add-
city would repay a part each year.
ing to the budget an authorization for
Instead, each year the city simply
3,000 more cops, even though the city
rolled over that debt. This takes us to
had at the time 2,250 police vacancies;
May 30, 1974, a gubernatorial election
(6) they approved a one-year roll-over
year. In preference to prudence, Gov-
of the $308 million in budget notes
ernor Malcolm Wilson and the legisla-
issued to cover the 1970-71 budget
ture created the New York City Sta-
deficit.
bilization Reserve Corporation at the
A high official in the present comp-
request of Mayor Beame to repay the
troller's office calls that budget an ex-
budget notes of 1971-72.
WIDE WORLD
ample of outright fraud.
The legislature then created the Sta-
David Grossman, Lindsay's budget
bilization Corporation to be a borrow-
director at the time, described in a
ing agency in order to borrow money
June, 1973, memo the importance of his
to pay for the borrowings the city
and Lindsay's-and Beame's-budget
could not. In brief, this new agency
for 1973-74: "It was not until recently
was encouraged to borrow money to
-from June 30, 1973, to March, 1975-
repay borrowed money-paying inter-
that the really sharp increase in short-
est on interest. And digging the city in
term borrowing occurred and the mar-
deeper and deeper until it faced a true
ket began to ask what was going on. In
"epidemic" in 1975.
those two years, short-term debt went
up by an astounding 138 per cent (from
$2.5 billion to the current $6 billion
June 19, 1973: The Board of
level). During the same two years, the
17.
Estimate and City Council
expense budget went up 19 per cent
while the state and federal aid compo-
approve Lindsay's 1973-74
nent rose by only 7 per cent. Small
expense budget.
wonder, then, that the city ran into a
crisis of confidence in March, 1975, and
It was a good year for wine but a
ceased to be able to sell its short-term
lousy year for the city budget. It was
debt. What accounts for the very rapid
an unusual budget in that it was shaped
growth in short-term borrowing in only
by both an outgoing mayor (Lindsay)
two years? It would appear that the
and by a comptroller (Beame) who
answer lies mostly in the way in which
was to be the incoming mayor. Though
the last two city budgets were con-
UPI
Beame has repeatedly blamed the $1.5-
structed-built on hoped-for revenues
billion deficit he says he inherited for
that never arrived, on budgetary tech-
much of the city's current woes, as
niques that anticipated future revenues
comptroller and mayoral frontrunner
by borrowing cash in the present, and
his fingerprints were all over the docu-
on a continuing roll-over of past deficits
ment. He attended breakfast meetings
from year to year
The current cash
on June 11 and 15 with Lindsay to
crisis is, in budgetary terms, the end re-
achieve a compromise toward what
sult of a political process that saw the
they called a "balanced budget." On
city adopt two successive budgets in
June 18. 1973, City Hall issued a joint
which the hard issue of budget balance
statement. Agreement has been reached
was avoided." (Continued on page 40)
36
NEW YORK/OCTOBER 27, 1975
Regular: 17 mg. "lar," 1,3 mg. nicotine,
Menthol: 18 mg. "tar." 1.3 mg nicotine
Warning: The Surgeon General Has Determined
av. per cigarette by FTC Method.
That Cigarette Smoking Is Dangerous to Your Health.
Here's
Max.
The maximum
120mm cigarette.
A lot longer than 100's. Yet, not a
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Great tobaccos. Terrific taste.
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MAX
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FILTER 120° by KENT
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Lorillard 1975
O
<<<<<<<<<<<<<
(Continued from page 36)
ruary 1, he said layoffs had been avert-
November 6, 1973: The
LAYOFFS OF 40,000
ed because city unions were forgoing
18
election of Abe Beame.
ORDERED AS CITY
contractual rights. The mayor seemed
to be saying that the current year's bud-
"The whole disaster of the city is
ENDS FISCAL YEAR
get crisis was no more. On February
Beame," bitterly complains an official
15, Beame projected a $1.68-billion
with the Citizens Budget Commission.
budget gap for the next fiscal year.
"The people in the Budget Bureau are
19,000 in Effect at Once-
Nonmayoral Units May Cut
Then he announced layoffs that later
and have been his. The secret of his
Equivalent of 21.000
did not materialize. He blamed Repub-
powers is his mastery of the Budget
licans in Washington. Then he blamed
Bureau. If you take a look at the 'crea-
2.000 FIREMEN SEVERED
Albany. On May 29, standing in the
tive decisions' in the city, you have to
well of the Council Chamber before
stand in admiration. There is an unbe-
live television cameras, the mayor
lievable technical elegance that one has
blamed the banks and "editorial col-
to admire. What led to Beame and
umns" for a "conspiracy" to create "an
Deputy Mayor Cavanagh's downfall
atmosphere of doubt and uncertainty
was the fact that these two guys were
about New York's securities." On June
unable to adjust to changes in the new
TALKS CONTINUE
24, First Deputy Budget Director John
intergovernmental ball game we have.
J. Lanigan, a long-time Beame-Cav-
The city came to depend for 40 to 45
ON BILL CREATING
anagh associate, said, "I think there's a
per cent of its budget on state and fed-
eral government funds. They could not
CITY AID AGENCY
possibility we'll end up with a bal-
anced budget" for the 1974-75 fiscal
shuffle these funds.
year. By July 7, the mayor was sitting
"The nature of the city's budget
Governmental and Banking
calmly in his office and announcing
changed, but Beame did not adjust to
Negotiators Wrestle With
that the fiscal crisis was "behind us.
the situation. He still continued to
Limits on Borrowing
Like Nixon with Watergate, he had
claim savings based on expenditures
CLOCK IS RUNNING OUT
treated the city's fiscal crisis as a
not made, and which never would have
public-relations problem.
been made to begin with. The city
Hope Is to Avoid a Default
On March 24 he warned, "Nobody
claimed hundreds of millions in savings
on $792-Million in Debts
is going to tell me how to run the city."
on people it could not have hired. It
Due on Wednesday
On June 10, the state Municipal Assis-
was as if my washing machine broke
tance Corporation was created. By July
and my wife got it repaired for $50. If
18 Beame meekly told the MAC he
I were Abe Beame I would claim a
would do "whatever is necessary" to
$250 saving since I didn't have to go
win back the investors he had accused
out and buy a new washing machine."
of "conspiracy" on May 29. By Septem-
Abe Beame did something like that
ber, the State Legislature had passed a
in the spring of 1974 when he pre-
bill, a main purpose of which was to
sented his 1974-75 budget. Rather than
advertise to investors that Abe Beame
make painful cuts to balance his bud-
was no longer in charge. He had been
get, he raised the already highest taxes
stripped of his budgetary powers, as
in the nation by $44 million; he smug-
the city-through the default of its
gled $722 million of expense items into
leaders-had been stripped of repre-
his capital budget; borrowed $520 mil-
sentative government.
lion through the creation of the Stabili-
"Abe Beame could have done much
zation Reserve Corporation, to be repaid
more much earlier and paid much less."
over ten years; raised some $280 million
a high state official told me in July. "In
by advancing the date of sewer-rent col-
fact, if the city had been willing to get
lections and siphoning what he called
honest with its figures last winter and
BEAME THREATENS
"excess" pension earnings to meet
35000
had presented a two- or three-year fiscal
88,000 DISMISSALS
the city's share of pension contribu-
plan and agreed to limit its borrowing,
tions. The city had increased its reli-
there could have been an agreement
ance on borrowed funds to cover in-
with the financial community and there
Offers "Horror List' of Cuts
sufficient current revenues, thus push-
would have been no need for Big MAC."
to Be Made If State Aid of
$640-Million Is Denied
ing off still larger debt payments to
next year.
Besides his budget failures, Abc
June 15, 1974: The Port Au-
Beame's performance directly led to the
G.O.P. in Albany Rejects
Beame's 640-Million Plea
therefore, the city's-credibility. At first,
19.
thority's 1962 covenant is
undermining of confidence in his-and,
repealed.
he blamed whatever budget problems
In 1962 the Port Authority made a
he had on the $1.5-billion deficit he
deal with the governors of New York
said he inherited from terrible John
and New Jersey. The authority agreed
Lindsay. Then on December 2, 1974,
to take over and modernize the bank-
he blamed City Comptroller Goldin's
rupt and decaying trans-Hudson com-
differing deficit estimates for the 9.5
muter tubes in return for winning the
per cent interest the city was forced to
approval of the governors to build the
pay for short-term notes. Then, over
World Trade Center. As an additional
the next two months, he separately an-
incentive, the legislatures of the two
nounced what he called Phase One,
states passed covenants assuring the
Two, and Three of city layoffs. On Feb-
authority, together with its bondholders,
40
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WIDE WORLD
that never again would it be required to
million per day it owed contractors.
assume any deficit mass-transit operation.
The agency had clearly overextended
Since mass-transit systems chronically
itself. After a series of frenetic meet-
lose money. this effectively took the au-
ings and touch-and-go negotiations with
thority out of the mass-transit business.
the banks, on February 26 the governor
For years, critics of the Port Author-
fashioned a bipartisan plan to provide
ity have lashed out at this failure to in-
refinancing and stave off the collapse
vest in mass transit. A leader in the
of this important state agency. At the
fight to wrench the authority into help-
time everyone hailed the statesmanship
ing finance mass transit was labor at-
exhibited by all sides. Largely over-
torney Theodore Kheel, who said in the
looked was an event which took place
spring of 1974, "Repeal of the 1962
the day before, and seemed less signifi-
statutory covenant will in no way im-
WIDE WORLD
cant. On February 25, New York State
pair the security of Port Authority
-rather than appropriating state mon-
bondholders." He was backed by Gov-
eys and perhaps raising taxes to cover
ernor Brendan Byrne of New Jersey,
$104.5 million in due notes-chose to
who signed the repeal on April 30. Then
default on UDC obligations for four
overwhelming majorities in both houses
weeks. Governor Carey double-talked,
of the New York State Legislature
saying that since these were short-term
WIDE WORLD
passed the repeal. Governor Malcolm
notes they "do not carry the moral ob-
Wilson, switching from the support he
ligation of the state."
had promised Nelson Rockefeller in the
Four weeks later the state made
fall of 1973, hesitated in signing the
good on this money. But the damage
measure. He was fearful, he said later,
had been done. UDC became the first
that his approval of the measure would
major government agency since the De-
"overturn a solemn pledge of the state."
pression to become insolvent. As Rich-
He was immediately attacked by fel-
ard Ravitch, the man Carey installed as
low Republicans, by Kheel, by all the
Logue's successor, had warned on Feb-
then-Democratic-candidates for gov-
ruary 9, "People did business with the
ernor, by the City Bar Association, by
UDC-small businessmen, architects,
just about everyone in politics. Wilson
civil-rights organizations-thinking they
had been warned that repeal would
were doing business with the state
seriously undermine "investor confi-
of New York. The fact that they tech-
PHOTOWORLD
dence," words then foreign to most of
nically were not doesn't matter now."
us. Finally, on June 15, only minutes
The message communicated to inves-
before the signing deadline-and know-
tors was that state moral obligations
ing he faced a difficult November elec-
were not legal obligations. Like the
tion-Governor Wilson relented and
Port Authority bond covenant, in the
approved the measure.
eyes of the investment community the
Donna Shalala, a member of the
state was breaking a contract. Said a
MAC board, reports that in her deal-
Wall Street bond trader: "Why should
ings with bankers they often cite the
I buy the moral obligations of immoral
repeal as undermining "confidence" in
politicians?" The consequences were
government securities. To investors the
swift. The Wall Street Journal re-
repeal served as a warning-despite
ported "public bonds fell an aver-
assurances from the state and the Port
age of $15 for each $1,000 face
Authority-that what the state giveth
amount." Within days New York City
it can taketh away.
was forced to accept a then astronom-
ical 8.69 per cent interest rate on $537-
February 25, 1975: The New
million of bond-anticipation notes—
20.
up from 7 per cent two weeks before.
York State Urban Develop-
In a joint statement Beame and Goldin
ment Corporation defaults.
said, "The recent default by the state
Urban Development Corporation" has
The first sentence of UDC President
created an "unwarranted climate of
Edward J. Logue's 64-page annual re-
suspicion in the marketplace." They
port for 1974 begins: "1975 can be a
charged that New York City taxpayers
WIDE WORLD
banner year
It was, of sorts.
were being forced to pay for the mis-
On January 21, State Comptroller
takes of "another jurisdiction." The
Arthur Levitt deplored yet again the
State Housing and Finance Agency
"moral obligation" gimmick used by
Parer Drive
Mids Who
Cleaning Up
postponed a scheduled note sale-made
Another Renun?
Can't Learn
AI College
UDC and other agencies to avoid con-
New York Post
finally on April 23 for a record 9.6
stitutionally required voter approval
per cent. By April, construction of
for state borrowing. He also blamed
the banks for "cooperating with a ven-
MAC S56M Short
more than $1 billion in nursing homes,
hospitals, facilities for the handicapped,
geance" to reap profits from UDC. In
As Deadline Nears
and other projects was held up for
succeeding days Governor Carey ap-
lack of investors. The municipal-bond
pointed task forces to study and seek
market was going to hell. And the city
to prevent the nation's most powerful
of New York, the most flagrant violator
housing agency from drowning in $1-
Rocky in New Call for Aid
of that market's rules, was thus set up
billion in debts outstanding, and the $1-
to reap a whirlwind.
OCTOBER 27, 1975/NEW YORK
41
ODE
COLLECTION ALBERT AND MARK NEWGARDEN
Starred and feathered: In London in 1918, Baron de Meyer used
his familiar shimmered light to enhance the beauty of "Dolores."
And Masters of Fashion Photography
In another century they might have become a Gainsborough, a Terborch, or,
with a little luck and pluck, a Mme. Vigée-Lebrun. But in the twentieth century
they became photographers, and as a result, the art of recording fashion lost status. No
matter how arresting, inventive, or beautiful fashion photographs might be, they were
generally considered as ephemeral and commercial as the apparel they displayed. Yet,
paradoxically, many of them were taken by such men as Steichen, Man Ray, Beaton,
and Avedon, whose work outside the field of fashion was highly acclaimed.
All this is about to be rectified, thanks to Robert Littman, the enterprising director
of the Emily Lowe Gallery of Hofstra University. He has organized the first major exhi-
bition of outstanding fashion photographs from World War I to the present, from
Baron de Meyer's luminous plumes (above) to Deborah Turbeville's bathhouse blues
(page 46). The show opens in Hempstead on October 30 and moves to the Korn-
blee Gallery in New York on December 16. Chosen from the work of 25 of the world's
top photographers, the 200 pictures on display not only chronicle the changing modes
and evolving mores of this century but confirm the place of fashion photographs among
the high-status-and now high-priced-masterworks of the camera.-Dorothy Seiberling
42 NEW YORK/OCTOBER 27, 1975
John Simon Diagnoses Ken Russellmania
The John Connally Comeback Road, by Aaron Latham
Great Fashion Photographs of the Last 50 Years
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OCTOBER 27, 1975
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