CASE STUDY 1
New York City Uses Taxable Municipals After 9/11 for Budget Relief and Affordable Housing
Emily A. Youssouf Managing Director JP Morgan Public Finance
ew York City faced a time of fiscal distress in the aftermath of the terrorist attacks of September 11, 2001, which resulted in the deaths of more than 2,800 people, the destruction of more than 11 million square feet of office space and 650,000 square feet of retail space and the loss of more than 100,000 jobs. Early in 2002, the city government faced a budget deficit of $4.8 billion790
created by a down turn in the economy that reduced property, sales and income taxes.
As the city struggled to close that gap, it sought and found innovative solutions. The issuance of these bonds by a public benefit corporation affiliated with the city government generated $308 million for the city while maintaining steady services to city residents.
FILLING A BUDGET GAP
The New York City Housing Development Corporation (HDC), a New York State-chartered public benefit corporation that works with the New York City government to finance the construction and preservation of affordable housing, issued $285 million in federally taxable, variable rate bonds (the 2002 Series D Bonds). Using proceeds from the sale of these bonds, HDC paid the city $223 million to purchase a 100% interest in the cash flows generated by approximately 380 city-originated and city-owned mortgage loans, and a mortgage-backed security evidencing the city’s ...