Understanding the Municipal Assistance Corporation's Role in NYC's Crisis

What Was the Municipal Assistance Corporation (MAC)?

The Municipal Assistance Corporation (MAC) was a public-private corporation created by the state of New York in 1975 to help stabilize New York City during its 1970s fiscal crisis and avert bankruptcy.

MAC restored access to financing by facilitating the sale of city bonds, which brought cash flow back to the city government when traditional underwriting had dried up. After fulfilling its mission, MAC closed in 2008.

How the Municipal Assistance Corporation (MAC) Operated

In the spring of 1975, the City was unable to pay its bills, a default on outstanding debt was likely, and the specter of bankruptcy was very real. The Corporation was born of a recommendation to Governor Hugh L. Carey made by a special panel comprised of Simon H. Rifkind, Felix G. Rohatyn, Richard M. Shinn, and Donald B. Smiley. MAC had a Board of Directors consisting of nine private citizens and was endowed with the authority to borrow billions backed by State revenue and to exercise specific policing powers over City fiscal practices.

The state stepped in to avoid a breakdown of services in the nation's largest city, which had mismanaged its finances to the point where it was on the brink of being unable to pay government employees. The state also advanced the city with additional funds to assist the revamping of their financial state and tide them over until enough of the new bonds could be issued.

The MAC was closed in 2008 after the last $10 billion worth of bonds were paid off. New York City has come a long way since the dark days of the 1970s. In the years that followed the MAC's closure, NYC's revenue has remained stable, although the city was still grappling with a pile of debt—its long-term obligations including pensions, compensated absences for municipal employees (accrued sick and vacation leave payable at retirement), and other post-employment benefits was roughly equal to its bonded debt.

Impact of MAC on New York City's Financial Recovery

"MAC’s creation and success were due to the combined efforts of public and private institutions and individuals dedicated to restoring the City’s fiscal health. In a unique undertaking, those with competing financial interests and historically adversarial relationships came together to restore the City to a firm financial footing," according to the Baruch archive.

When the city asked the federal government for help, then-President Gerald Ford demurred, prompting the New York Daily News to print the famous front-page headline: "Ford to City: Drop Dead." Although Ford never uttered those words, they summed up the feelings of many New Yorkers, who felt abandoned by all levels of government as their city crumbled.

The Bottom Line

MAC helped New York City stabilize its finances during the 1970s fiscal crisis through a public-private partnership that restored cash flow and access to bond markets. It dissolved in 2008 after completing its mission. The city's finances improved over time, though debt and long-term liabilities have remained a challenge.