It looks like New York City will once again pull back from the bankruptcy brink, despite the total collapse of talks last week between the city and its major banks over how to raise the money to repay its $1 billion moratorium debt.
Over the weekend New York City submitted a new plan to the U.S. Treasury on how it will deal with its moratorium debt without resort to help from the banks. Today the city's municipal labor unions said they would put up $127 million as part of the plan.
And Assistant Treasury Secretary designate Robert C. Altmen said there was "reason to be reasonably optimistic that the plan will be sufficient to release $255 million in federal loans requested by the city which have been held back by the Treasury until there was a "reasonable prospect" that the U.S. government would be repaid.
That release of funds will probably come Thursday, Altman indicated, after a meeting of the Emergency Financial Control Board established by the state to watch over the city's finances, which must approve the plan.
The city is scheduled to run out of money on Friday when it must meet a payroll.
"Not until the control board meets and gives us their report are we able to go ahead," said Altman, who met Sunday with officials in New York City along with Kenneth S. Axelson, another Assistant Treasury Secretary designate who was previously the city's deputy mayor for finance.
Today the city was putting finishing touches on its plan - which will raise the $1 billion through accelerated sale of city-held mortgages, the issuance of a new Municipal Assistance Corp. bond to savings institutions, a stretchout on repayments of other MAC bonds held by the city's pension funds, and a new offer to institutional note-holders subject to the court-reversed moratorium to "swap" for MAC bonds.
Altman said he and Axelson were studying the "detailed plan" they had received, and would probably make a recommendation to Treasury Secretary W. Micheal Blumenthal as to its feasibility on Tuesday.
"The New York City has been filled with peaks and troughs and there may yet be another trough," Altman cautioned, "but I hope not."
He said the unions' response to the plan also was critical since they are scheduled to loan the city another $1.1 billion from their employee pension funds between now and the middle of next year, and had been withholding their next contribution pending the outcome of the moratorium negotiations.
The response from the unions came today at a press conference where Victor Gotbaum, head of the Municipal Labor Council, announced that the unions have agreed to a repayment "stretch" on $89 million in MAC bonds they hold, and have also agreed to a $38 million reinvestment in other notes, for a total of $127 million.
Representatives of four of the city's biggest banks - Citibank, Chase Manhattan, Morgan Guaranty Trust and Bankers Trust - last Friday proposed that a new Budget Review Board, with stringent control over the city's finances, be created as a way to market a new city bond issue and as a precondition to their participation in any plan to finance the moratorium debt.
This proposal was rejected by mayor Abraham D. Beame and other city officials.