What Is the Municipal Assistance Corporation (MAC)?
The Municipal Assistance Corporation (MAC) is a corporation created by the state of New York in 1975 to aid New York City in an extreme financial crisis. The city had exhausted all lending organizations and was no longer able to have any debt issuances underwritten. The MAC was authorized to sell bonds issued by the city to enable cash flow to return to the city's government.
Understanding the Municipal Assistance Corporation (MAC)
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.
How MAC Worked
According to a history of the MAC by Baruch College, in spring of 1975, New York City was unable to pay its bills, a default on outstanding debt was likely, and the specter of bankruptcy was very real. The MAC was born of a recommendation to Gov. Hugh L. Carey made by a special panel tasked to investigate the situation. The 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.
"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 MAC was closed in 2008 after the last of $10 billion worth of bonds were paid off. New York City has come a long way since the dark days of the 1970s. In 2018 its revenue was strong but 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 $85 billion—roughly equal to its bonded debt, for a total of more than $160 billion.