New York City Loan Guarantee Act
PL 95-339 (H.R.12426), enacted 08/08/1978

92 STAT. 460 
PUBLIC LAW 95-339—AUG. 8, 1978 
Public Law 95-339 
95th Congress 
An Act 
Aug. 8. 1978 
P
J
.
Q authorize the Secretary of the Treasury to provide financial assistance for 
[H.R. 12426] 
the city of New Yorli. 
Be it eruicted hy the Senate amd House of Representatives of the 
New York City 
United States of America in Congress assembled, 
Loan Guarantee 
Act of 1978. 
SHORT TITLE 
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SECTION 1. This Act may be cited as the "New York City Loan 
note. 
Guarantee Act of 1978". 
TITLE I—LOAN GUARANTEES 
DEFINITIONS 
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SEC. 101. For the purpose of this title, the term— 
(1) "city" means the city of New York; 
(2) "State" means the State of New York; 
(3) "Secretary" means the Secretary of the Treasury; 
(4) "independent fiscal monitor" means an agency, board, or 
other entity authorized by the law of the State which has the 
authority to control the fiscal affairs of the city during the entire 
period for which assistance under this title will be outstanding 
and which authority the State has covenanted will not be sub-
stantially impaired during such period; 
(5) "financing agent" means any agency or instrumentality of 
the State duly authorized by the law of the State to act on behalf 
of or in the interest of the city, and no other subdivision of the 
State, with respect to the city's financial affairs; 
(6) "city indebtedness" means indebtedness for borrowed money 
of (A) a financing agent, but only if the proceeds thereof are 
advanced to or applied for the benefit of the city, or (B) the city; 
and 
(7) "fiscal year" means a fiscal year of the city, except in 
section 111. 
GUARANTEE AUTHORITY 
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SEC. 102. (a) Upon the written request of the city and the Governor 
of the State, the Secretary may guarantee the payment, in whole or 
in part, of interest, principal, or both, of city indebtedness in accord-
ance with this title, but any such guarantee shall cease to be effective 
not later than fifteen years after the date of the issuance of the city 
indebtedness involved. 
(b) A guarantee under this title is effective only with respect to city 
indebtedness which is issued or is to be issued to employee pension 
funds of the city or of the State, or of any agency of the city or of 
the State, and shall terminate whenever such indebtedness is sold or 
otherwise disposed of by such a fund (other than to a successor in 
interest not involving a change in beneficial ownership). 
(c) Whenever the payment of principal and iilterest on city 
indeotedness is guaranteed under this title, the Secretary shall assess 
PUBLIC LAW 95-339—AUG. 8, 1978 
92 STAT. 461 
and collect from the issuer, no less frequently than annually, a guar-
antee fee computed daily at a rate of no less than one-half of 1 per 
centum per annum on the outstanding principal amount of city indebt-
edness guaranteed hereunder'. All funds received by the Secretary 
in payment of such fees shall be paid into the general fund of the 
Treasury. The Secretary may periodically escalate the guai-antee fee 
to induce the obligor to enter the public credit markets. 
CONDITIONS OF El.IGIBILITY 
SEC. 103. The Secretary may make guarantees under this title only 31 USC 1523. 
if— 
(1) there is a reasonable prospect of repayment of the city 
indebtedness to be guaranteed in accordance with its terms and 
conditions; 
(2) the Secretary determines that the city is effectively unable 
to obtain credit in the public credit markets or elsewhere in 
amounts and terais sufficient to meet the city's financing needs; 
(3) the interest rate on such city indebtedness is reasonable, tak-
ing into consideration current average market yields for other 
obligations guaranteed by the United States; 
(4) during the four-year period ending June 30,1982, the long-
term and seasonal borrowing needs of the city (other than borrow-
ing assisted or to be assisted under this title) will be met through 
commitments from the State, an agency of the State, private 
sources, or through public credit markets, in amounts which will 
be sufficient to enable the city, when the guarantee authority con-
ferred by this title has terminated, to meet all of its long-term and 
seasonal borrowing needs through the public credit markets, and 
for the purpose of making such determination, the Secretary may 
assume that all other conditions under this section are and will 
be fulfilled; 
(5) (A) the independent fiscal monitor is requiring the city to 
adopt and adhere to budgets covering all expenditures other than 
capital itemSj the results of which would not, for fiscal years of 
the city beginning after June 30, 1981, show a deficit when 
reported in accordance with generally accepted accounting prin-
ciples and, for fiscal years of the city beginning on or prior 
thereto but after June 30, 1978, to make substantial progress 
toward that goal, and, for each fiscal year of the city beginning 
prior to June 30, 1981, but after June 30, 1978, is requiring the 
city to adopt and adhere to budgets covering all expenditures other 
than capital items, the results of which would not show a deficit 
when reported in accordance with accounting principles estab-
lished under State law; 
(B) the city has submitted to the Secretary, with the approval 
of the independent fiscal monitor, in such detail and in accordance 
with such accounting principles as the Secretary may prescribe, a 
plan for bringing all of its expenditures other than capital items 
into balance with its revenues for each of the first three full fiscal 
years of the city beginning after June 30,1978, and the city agrees 
to publish, after the completion of each fiscal year covered by 
the plan, an analysis reconciling its actual revenues and expendi-
tures with projected revenues and expenditures, and to publish 
periodic projections which reflect the impact of the plan on tax 
rates; and 
92 STAT. 462 
PUBLIC LAW 95-339—AUG. 8, 1978 
Independent 
public 
accountants, 
opinions. 
Audit committee. 
Establishment. 
(C) the city submits, with the approval of the independent 
fiscal monitor, in such detail as the Secretary may prescribe and 
in accordance with generally accepted accounting principles, a 
plan for bringing all of its expenditures other than capital items 
into balance with its revenues no later than the final fiscal year 
of the four year period which begins with the fiscal year begin-
ning July 1, 1978, and the city is required, on or before the first 
day of each fiscal year thereafter during which city indebtedness 
guaranteed under this title is outstanding, to have prepared and 
submit a plan covering the four year period beginning with such 
fiscal year which will result in budgets which would not show a 
deficit when reported in accordance with accounting principles set 
foi-th in subparagraph (A); 
(6) the independent fiscal monitor demonstrates to the satis-
fjiction of the Secretary that it has the authority to control the 
Hscal affairs of the city for the entire period during which assist-
ance under this title will be outstanding; 
(7) the city has agreed— 
(xA) to obtain and submit to the Secretary, as soon as 
practicable after the close of each fiscal year of the city 
(luring which the Secretary may make guarantees under this 
title or during which any city indebtedness guaranteed heie-
nnder is outstanding, an opinion of independent public 
accountants setting forth the results of an audit by sucli 
accountants of the financial statements of the city for such 
fiscal year, which opinion shall describe any deviation in the 
preparation of such financial statements from generally 
accepted accounting principles applicable to governmental 
bodies and shall state that the audit of such financial state-
ments was made in accordance with generally accepted audit-
ing standards and accordingly included such tests of the 
accounting records and such other auditing procedures as 
were considered necessary under the circumstances; and 
(B) to establish an audit committee which shall assist in 
* 
the determination of areas of inquiry for, review the progress 
of, and evaluate the results of, audits to be conducted by such 
independent public accountants, and which shall consist of 
the mayor of the city, the comptroller of the city, the presi-
dent of the city council, two individuals with expertise in 
municipal finance, and two officers or employees of two differ-
ent firms of independent public accountants which ai-e not 
engaged either by the city or by the comptroller of the city, 
such individuals and such officers or employees of such firms 
to be selected by the independent fiscal monitor; 
(8) (A) in the case of guarantees issued after June 30,1979, the 
State has furnished to the Secretary satisfactory assurances 
that the amount of financial assistance to be provided by the State 
to the city during the fiscal year in which such guarantee is to be 
issued will not be less than the amount of such assistance which 
was provided during the fiscal year ending June 30, 1979, except 
during any fiscal year for which the city has presented a budget 
which the Secretary has determined is balanced in accordance with 
generally accepted accounting principles; and 
(B) the State or an agency of the State, subject to and in 
accordance with applicable State law, when any guarantee here-
under is made by the Secretary, shall deposit in a fund approved 
by the Secretary, an amount which, together with all amounts 
PUBLIC LAW 95-339—AUG. 8, 1978 
92 STAT. 463 
previously so deposited in such fund, shall equal not less than 5 
per centum of the principal of and of one year's interest on the 
then outstanding city indebtedness then guaranteed under this 
title, and which shall, under the direction of the Secretary, be 
used to pay, or to reimburse the Treasury for paying, principal 
and interest which the city fails to pay, the payment of which 
is guaranteed under this title, but in no case will the fund be used 
to pay or reimburse an amount in excess of 5 per centum of the 
principal amount of and of one year's interest on all guaranteed 
city indebtedness outstanding on the date of the failure; 
(9) the city has agreed, in addition to other efforts undertaken 
Information, 
by the city to increase employee productivity, to establish a pro- availability to the 
ductivity council (A) which shall consist of representatives of public, 
the city government and of city employee unions, (B) which shall 
develop and seek to implement methods for enhancing the produc-
tivity of the city's labor force, and (C) which shall have a repre-
sentative of the independent fiscal monitor as an observer, and the 
independent fiscal monitor shall review and report, not less than 
annually, on the development and implementation of such meth-
ods, such report to be published and made available to the public, 
and transmitted to the Secretary; 
(10) the city has agreed to offer to sell for distribution to the 
public its short-term notes in fiscal years 1980,1981, and 1982 and 
its long-term bonds in fiscal years 1981 and 1982, unless the Secre-
tary determines that any such offer would be inconsistent with 
the financial interests of the city; 
(11) the city has agreed that— 
(A) following the fiscal year ending June 30, 1982, and 
during any fiscal year thereafter in which a guarantee under 
this title is outstanding, the city will pay or provide for the 
payment of city indebtedness than guaranteed hereunder, 
giving priority to city indebtedness having the longest matur-
ity or maturities, in a principal amount not less than 15 per 
centum of the net proceeds of city indebtedness issued in 
public credit markets during such year, except that the Secre-
tary may modify or waive such 15 per centum requirement to 
the extent he determines that its application (i) would sub-
stantially impair the city's ability to meet its essential capital 
needs, or (ii) would substantially overburden the market for 
long-term city indebtedness; and 
(B) as soon as practicable after the Secretary detennines 
that the city has demonstrated its ability to meet its long-
term credit needs through public credit markets, the city will 
implement a program satisfactory to the Secretary of refund-
ing any outstanding city indebtedness guaranteed under this 
title for the purpose of achieving complete I'epayment of such 
indebtedness at the earliest practicable date, taking into con-
sideration such factors as the Secretary deems appropriate, 
including the effect of such refunding on the city's need to 
maintain the city's continued access to public credit markets 
for its long-term credit needs; and 
(12) the city and the State are meeting their respective obliga-
tions under this section. 
Ajiy determination by the Secretary that the conditions set forth in 
this section have been met shall be conclusive, such determination to be 
evidenced by the making of such guarantee, and the validity of any 
guarantee so made shall be incontestable in the hands of the holder of 
92 STAT. 464 
PUBLIC LAW 95-339—AUG. 8, 1978 
such city indebtedness, except for fraud or material misrepresentation 
on the part of such holder. The Secretary is authorized to determine 
the manner in which such guarantees will be issued and, in addition to 
the terms and conditions required by this section, to require from, or 
agree to with, the city, a financing agent, the holders of the city 
indebtedness guaranteed, and any other party in interest such other 
terms and conditions as he may deem appropriate, including provision 
of security for the repayment of amounts paid pursuant to any 
guarantee under this title. Any such other term or condition may be 
modified, amended, or waived in the discretion of the Secretary. 
LIMITATIONS ON GUARANTEE AUTHORITY 
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SEC. 104. (a) (1) The authority of the Secretary to extend guarantees 
under this title shall not at any time exceed $1,650,000,000 in the 
aggregate principal amount outstanding. 
(2) During the fiscal year beginning on July 1,1978, not to exceed 
$750,000,000 shall be available for the guarantee of city indebtedness— 
(A) of which not to exceed $500,000,000 shall" be available for 
the guarantee of city indebtedness maturing more than one year 
after its date of issuance, and 
(B) of which not to exceed $325,000,000 shall be available for 
the guarantee of city indebtedness maturing in one year or less 
after its date of issuance, but only to the extent authorized by 
the provisions of subsection (b). 
(3) During the fiscal year beginning on July 1, 1979, not to exceed 
the sum of— 
(A) $250,000,000, and 
(B) $750,000,000 reduced by the principal amount of city 
indebtedness guaranteed prior to July 1, 1979, and outstand-
ing on the date on which the guarantees are made under this 
paragraph, 
shall be available for the guarantee of city indebtedness maturing more 
than one year after its date of issuance, except that no guarantees may 
be made under this paragraph if prior to July 1,1979, either the Senate 
or the House of Representatives agrees to a resolution stating in sub-
stance that it disapproves such guarantees. 
(4) During the fiscal year beginning on July 1, 1980, not to exceed 
the sum of— 
(A) $325,000,000, and 
(B) $1,000,000,000 reduced by the sum of (i) the principal 
amount of city indebtedness guaranteed under paragraphs (2) (A) 
and (3) and outstanding on the date on which the guarantees are 
made under this paragraph, and (ii) the amount, if any, covered 
by a resolution agreed to by the Senate or the House of Repre-
sentatives pursuant to paragraph (3), 
shall be available for the guarantee of city indebtedness maturing 
more than one year after its date of issuance, except that no guarantees 
may be made under this paragraph if prior to July 1, 1980, either the 
Senate or the House of Representatives agrees to a resolution stating in 
substance that it disapproves such guarantees. 
(5) During the fiscal year beginning on July 1, 1981, not to exceed 
the sum of— 
(A) $325,000,000, if the Secretary determines, in accordance 
with generallv accepted accounting principles, that the city has 
presented a balanced budget, and 
PUBLIC LAW 95-339—AUG. 8, 1978 
92 STAT. 465 
(B) $1,325,000,000 reduced by the sum of (i) the principal 
amount of city indebtedness guaranteed under paragraphs 
(2) (A), (3), and (4) and outstanding on the date on which the 
guarantees are made under this paragraph, and (ii) the sum of 
the amounts, if any, covered by resolutions agreed to by the Senate 
or the House of Representatives pursuant to paragraphs (3) 
and (4), 
shall be available for the guarantee of city indebtedness maturing more 
than one year after its date of issuance. 
(b) The Secretary may guaraintee the payment of principal or 
interest, or both, on city indebtedness issued prior to January 1, 1979, 
and maturing prior to July 1, 1979, but only to the extent that the 
Secretary determines, after taking into account any commitments the 
employee pension funds of the city have made with respect to the 
purchase of city indebtedness maturing more than one year from its 
issuance, that the employee pension funds of the city are not able to 
provide sufficient amounts of seasonal financing as required under sec-
tion 103(4) of this title without being considered to have failed to 
meet the requirements of section 401(a) of the Internal Revenue Code 
of 1954 (as such requirements apply to such pension funds) or being 26 USC 401. 
considered to have engaged in a prohibited transaction desci'ibed in 
section 503(b) of the Internal Revenue Code of 1954. 
26 USC 503. 
REMEDIES 
SEC. 105. (a) The Secretary shall take such action as may be 31 USC 1525. 
appropriate to enforce any right accruing to the United States or any 
officer or agency thereof as a result of the issuance of guarantees under 
this title. Any sums recovered pursuant to this section shall be paid 
into the general fund of the Treasury. 
(b) The Secretary shall be entitled to recover from the boirower, or 
any other person liable therefor, the amount of any payment made 
pursuant to any guarantee agreement entered into under this title, and 
upon making any such payment, the Secretary shall be subi'ogated to 
all the rights of the recipient thereof. 
(c) Notwithstanding any other provision of law, the Secretary shall 
provide for the Avithholding of any payment from the United States 
to the city or State which may be or may become due pursuant to any 
law and offset the amount of such withheld payment against any claim 
the Secretary may have against the city or Stat« pui-suant to this title. 
(d) The remedies prescribed in this title shall be cumulative and 
not in limitation of or substitution for any other remedies available to 
the Secretary or the United States. 
(e) With respect to any debt of the United States arising under this "Person." 
title, for the purposes of section 3466 of the Revised Statutes (31 
U.S.C. 191), the term "person" includes the city and any financing 
agent. Notwithstanding the provisions of such section, the Secretary Waiver, 
is authorized to waive, wholly or partially, the priority for the United 
States established thereunder with respect to any indebtedness of the 
city or the financing agent issued after the effective date of this title 
(other than any indebtedness the proceeds of which are applied to the 
repayment prior to the stated maturity thereof of indebtedness out-
standing on or before the effective date of this title owed to the lender 
of such proceeds) if, in his judgment such waiver is necessary to facil-
itate the ability of the city to meet its financing needs. No waiver under 
the preceding sentence shall by its terms subordinate the claims of the 
92 STAT. 466 
PUBLIC LAW 95-339—AUG. 8, 1978 
United States to those of any creditor of the city or any financing 
agent. 
Civil action. 
(f) The Secretary may bring a civil action in any United States 
Jurisdiction. 
district court or any other appropriate court to enforce compliance 
with the provisions of this title, any agreement related thereto, or any 
provision of State law related thereto, by the city, the State, the 
financing agent, the independent fiscal monitor, or any official of any 
of the foregoing, or any other party to any such agreement, and such 
court shall have jurisdiction to enforce such compliance and enter such 
orders as may be appropriate. 
INSPECTION OF DOCUMENTS 
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SEC. 106. At any time a request for a guarantee is pending or 
indebtedness guaranteed under this title is outstanding, the Secretaiy 
is authorized to inspect and copy all accounts, books, records, mem-
orandums, correspondence, and other documents of the city or any 
financing agent relating to the city's financial affairs. 
GENERAL ACCOUNTING OFFICE AUDITS 
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SEC. 107. The General Accounting Office is authorized to make such 
audits as may be deemed appropriate by the Comptroller General of all 
accounts, books, records, and transactions of the city and any financ-
ing agent. No guarantee may be made under this title unless and until 
the city and any financing agent agree, in writing, to allow the General 
Report to 
Accounting Office to make such audits. The General Accounting Office 
Congress. 
shall report the results of any such audit to the Congress. 
REPORTS TO CONGRESS 
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SEC. 108. Within three months after the date of enactment of this 
title, and at six-month intervals until June 30, 1982, and thereafter 
at twelve-month intervals, the Secretary shall transmit tx> the Com-
mittee on Banking, Housing, and Urban Affairs of the Senate and the 
Committee on Banking, Finance and Urban Affairs of the House of 
Representatives a report containing a detailed statement of his activi-
ties under this title. 
SEVERABILITY 
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SEC. 109. If any provision of this title is held to be invalid, or the 
application of such provision to any person or circumstance, is held 
to be invalid by a court of competent jurisdiction, the remainder of 
this title, or the application of such provision to persons or circum-
stances other than those as to which it is held invalid, shall not be 
affected thereby. 
TERMINATION 
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SEC. 110. The authority of the Secretary to make guarantees under 
this title terminates on June 30, 1982. Such termination does not affect 
the carrying out of any contract, guarantee, or other obligation entered 
into pursuant to this title, or the taking of any action necessary to 
preserve or protect the interests of the United States arising here-
under, except that no commitment to guarantee the payment of prin-
cipal or interest on city indebtedness under this title shall be effective 
after such date. 
PUBLIC LAW 95-339—AUG. 8, 1978 
92 STAT. 467 
AUTHORIZATION 
SEC. 111. (a) There are authorized to be appropriated beginning 31 USC 1531. 
October 1, 1978, and to remain available without fiscal year limitation, 
such sums as may be necessary to carry out this title. 
(b) Any other provision of this title to the contrary notwithstand-
ing, the authority of the Secretary to make any guarantee under this 
title shall be limited to such extent or amounts as are provided in 
advance in appropriation Acts. 
T I T L E I I — A M E N D M E N T S TO T H E I N T E R N A L R E V E N U E 
CODE O F 1954 
SEC. 201. TAXABILITY OF CERTAIN FEDERALLY GUARANTEED OBLI-
GATIONS. 
(a) CERTAIN FEDERALLY GUARANTEED OBLIGATIONS.—Section 108 of 
the Internal Revenue Code of 1954 (relating to interest on certain 26 USC 103. 
governmental obligations) is amended by redesignating subsection (f) 
as subsection (g) and by inserting after subsection (e) the following 
new subsection: 
"(f) 
CERTAIN FEDERALLY GUARANTEED OBLIGATIONS.—Any obliga-
tion the payment of interest or principal (or both) of which is guaran-
teed in whole or in part under title I of the New York City Loan 
Guarantee Act of 1978 shall, with respect to interest accrued during 
the period for which such guarantee is in effect, be treated as an 
obligation not described in subsection (a).". 
(b) OBLIGATIONS MAY NOT B E ACQUIRED BY FEDERAL FINANCING 
12 USC 2285a. 
BANK.—Nothing in any provision of law shall be construed to author-
ize the Federal Financing Bank to acquire any obligation the payment 
of interest or principal of which has at any time been guaranteed in 
whole or in part under title I of the New York City Loan Guarantee 
Act of 1978. 
(c) EFFECTIVE DATE.—The amendments made by subsection (a) 26USC 103note, 
shall apply to taxable years ending after the date of the enactment 
of this Act. 
Approved August 8, 1978. 
LEGISLATIVE HISTORY: 
HOUSE REPORTS: No. 95-1129, Pt. 1 (Comm. on Banking, Finance and Urban 
Affairs), and Pt. 2 (Comm. on Ways and Means); and No. 95-1369 
(Comm. of Conference). 
SENATE REPORT No. 95-952 (Comm. on Banking, Housing, and Urban Affairs). 
CONGRESSIONAL RECORD, Vol. 124 (1978): 
June 6-8, considered and passed House. 
June 29, considered and passed Senate, amended. 
July 25, House agreed to conference report. 
July 27, Senate agreed to conference report. 
WEEKLY COMPILATION OF PRESIDENTIAL DOCUMENTS, Vol. 14, No. 32: 
Aug. 8, Presidential statement.