* § 3038. Conditions on extension of benefits to the city. The
corporation shall, at the time of any exchange of the corporation's
bonds and notes for short-term obligations of the city pursuant to
subdivision two of section three thousand thirty-five of this chapter or
any payment of funds of the corporation to the city or of any purchase
from the city of its obligations pursuant to section three thousand
thirty-seven of this chapter, require the city to agree to observe and
perform the conditions set forth below in this section, with such
limitations as to the implementation of such conditions as the
corporation may, subject to any contract with bondholders or
noteholders, then approve; provided, however, that no such specific
limitations shall be so substantial as to effectively constitute a
waiver of any such conditions. Any such conditions may thereafter, in
the discretion of the corporation, subject to any contract with
bondholders or noteholders, be further limited. Such conditions shall
cease to apply when all notes and bonds have been repaid or when the
corporation has accumulated in its capital reserve funds or otherwise an
amount equal to the principal of all outstanding notes and bonds and
interest accrued thereon. The city shall have the right at any time to
pay the corporation an amount which, when added to the capital reserve
funds, shall equal the principal of all outstanding notes and bonds and
interest accrued thereon and redemption premium if any. If the city
makes such payment at a time when the corporation has outstanding notes
or bonds that are not then callable, the city shall agree to pay the
corporation on demand an amount equal to the amount, if any, by which
the amount of interest on such notes or bonds shall exceed the
corporation's income from the investment of its funds. Subject to the
foregoing, the conditions that the corporation shall require the city to
observe and perform shall be as follows:

1. The city shall deliver a certificate, executed by the mayor and the
city comptroller in form prescribed by the corporation, (a) representing
that the city is in compliance with the conditions described below in
this section as the corporation may specify, (b) undertaking to comply
with any of such specified conditions as the corporation may then
require and (c) stating that all local legislative and executive action
then required to permit such compliance by the city has been taken. The
corporation may require the delivery with such certificate of an opinion
of the city's corporation counsel that all such legislative and
executive action has been taken.

2. (a) The city shall, within ninety days after the first such
agreement, initiate steps to adopt as the city's method of accounting
for purposes of reporting to the corporation with respect to the city's
financial condition and compliance with the conditions of this section,
the accounting principles set forth in the state comptroller's uniform
system of accounts for municipalities, as the same may be modified by
the state comptroller, in consultation with the city comptroller, for
application to the city. The city shall complete the transition to such
accounting method as promptly as reasonably practicable thereafter and,
in any event, so that the audited financial statements for the fiscal
year ending June thirtieth, nineteen hundred seventy-eight shall be
prepared in accordance with such accounting methods, except as provided
below in this subdivision. It is recognized that the adoption of such
accounting principles may result in substantial adjustments from the
accounting principles now followed by the city. The corporation and the
city shall consult, over the course of the introduction and adoption of
such accounting system and the accounting methods referred to in section
eight of the New York state financial emergency act for the city of New
York, and until the expiration of the fiscal year ending June thirtieth,
nineteen hundred seventy-eight, the corporation and the city may
formulate a mutually acceptable method of phasing such adjustments into
the accounting system described in this paragraph over such reasonable
period, not exceeding ten years, as the corporation may determine to be
appropriate and the financial statements and other information to be
furnished to the corporation may, notwithstanding any other provision of
this section three thousand thirty-eight be prepared in accordance with
such determination.

(b) For the fiscal year ending June thirtieth, nineteen hundred
seventy-nine, and for each fiscal year thereafter, the city's expense
budget shall be prepared in accordance with the provisions of section
eight of the New York state financial emergency act for the city of New
York.

3. The city shall take such action as may be necessary to enable the
state comptroller, or at his election an independent certified public
accounting firm retained by the city but satisfactory to the state
comptroller, to perform an annual audit and to furnish to the
corporation an annual report, for the fiscal year ending June thirtieth,
nineteen hundred seventy-eight upon the financial statements of the
city. For each subsequent fiscal year the city shall take such action as
may be necessary to enable a nationally recognized independent certified
public accounting firm selected and retained by the city at its cost in
accordance with the provisions of section seven-a of the New York state
financial emergency act for the city of New York to perform an annual
audit and to furnish to the corporation an annual report upon the
financial statements of the city. Each such report shall be prepared in
accordance with the accounting method prescribed under subdivision two
of this section. The city shall make available for inspection and
copying all books, records, work papers and other data and material as
required by the state comptroller or the independent certified public
accounting firm conducting such audit and the city shall make its
officers and employees available to and shall cooperate with such
auditors so as to permit such annual audit to be completed and the
report issued to the city and to the corporation within one hundred
twenty days after the close of the fiscal year. Such report shall be
made available to the public promptly thereafter.

4. Beginning with the fiscal year ending June thirtieth, nineteen
hundred seventy-seven and for each fiscal year thereafter, the city
shall deliver a proposed expense budget to the corporation. Delivery to
the corporation shall be made concurrently with the initial submission
of the proposed expense budget to the board of estimate and the city
council, but in any event not later than fifty days prior to the
beginning of such fiscal year or such other date as the corporation may
approve upon the request of the city. Beginning with the fiscal year
ending June thirtieth, nineteen hundred seventy-eight, and for each
fiscal year thereafter, the proposed expense budget submitted to the
corporation shall be prepared in accordance with the accounting methods
referred to in subdivision two of this section. Such budget shall be
identical to the proposed expense budget submitted to the board of
estimate and city council. The proposed expense budget delivered to the
corporation shall be accompanied by (i) a statement setting forth in
detail the assumptions of income and expense used in its preparation,
(ii) for the fiscal year ending June thirtieth, nineteen hundred
seventy-eight, a reconciliation of the differences, if any, between such
proposed expense budget and the proposed expense budget based on the
applicable accounting methods set forth in subdivision two a of this
section but without adjustments or modifications permitted by this
title, and for each subsequent fiscal year a reconciliation between such
proposed expense budget and the proposed budget based on the principles
described in section eight of the New York state financial emergency act
for the city of New York, and (iii) a certificate of the mayor stating
that such assumptions are reasonable and that operation within the
budget is feasible and explaining the reasons for any differences
therein from the proposed expense budget described in clause (ii) above.
Subject to and in accordance with the provisions of section eight of the
New York state financial emergency act for the city of the New York, as
the same may be amended from time to time, the city shall in every
fiscal year adopt and maintain an expense budget in which the total of
all income items equals or exceeds the total of all expenditure items.
For the fiscal year ending June thirtieth, nineteen hundred
seventy-eight and each subsequent fiscal year the total of all income
items shall also equal or exceed the total of all expenditure items in
each expense budget as adopted by the city, after the adjustments, if
any, required to conform to the accounting methods referred to in
subdivision two of this section (except as may be modified by the
application of subdivision five of this section) and the city shall also
maintain a budget balanced in accordance with such accounting
principles. Prior to July first, nineteen hundred eighty-two and
notwithstanding any other provision of this section to the contrary, any
expense item in the expense budget for any fiscal year, which item
relates to contributions by the city or other public employer to any
retirement system or pension fund, shall include only the amounts which,
under the provisions of law, rules or regulations expressly prescribing
the method of determining employer contributions to such retirement
system or pension fund and the time of payment thereof, are due and
payable in such fiscal year, and no such expense item shall include
amounts for any such contribution which, under such laws, rules or
regulations, do not become due and payable in such fiscal year.

5. The city shall, over a period of six fiscal years, beginning with
its fiscal year ending June thirtieth, nineteen hundred seventy-seven,
eliminate from its capital budget those expenses that are properly
includable only in its expense budget, as determined in accordance with
the accounting principles set forth in the state comptroller's uniform
system of accounts for municipalities, as the same may be modified by
the state comptroller, in consultation with the city comptroller, for
application to the city. The determination of which items are properly
includable only in the city's expense budget shall be made in accordance
with the aforesaid accounting principles regardless of any act of the
legislature prior or subsequent to the effective date of this title
otherwise classifying such items. To implement the foregoing:

(a) The mayor and the city comptroller shall, not later than October
thirty-first, nineteen hundred seventy-five, certify to the corporation,
a list, to the best of their information, of the expense items in the
city's capital budget for the fiscal year ending June thirtieth,
nineteen hundred seventy-six, and the amount of each such item;

(b) The comptroller (or the independent certified public accounting
firm then retained pursuant to subdivision three of this section) shall
prepare a determination of and shall report upon the expense items and
the amount thereof in the city's capital budget for the fiscal year
ending June thirtieth, nineteen hundred seventy-six and for each
subsequent fiscal year, in accordance with the aforesaid accounting
principles. Such report shall also include a statement as to the city's
compliance with the conditions of this subdivision for the fiscal year
reported upon and in the budget for the succeeding fiscal year;

(c) Unless the corporation shall approve the inclusion of a greater
amount with respect to any such fiscal year, the aggregate amount of all
such expense items included in the capital budget, including judgments
and claims related to other than capital projects, for the fiscal year
ending June thirtieth, nineteen hundred seventy-seven and for the
following fiscal year shall be reduced at the cumulative rate of ten
percent per year from the aggregate amount for the nineteen hundred
seventy-six fiscal year set forth in the report provided for under
paragraph (b) of this subdivision (or set forth in the certification
under paragraph (a) of this subdivision if such report has not then been
prepared). For the fiscal year ending June thirtieth, nineteen hundred
seventy-nine the maximum aggregate amount of all such expense items
included in the capital budget shall be four hundred fifty million
dollars and for each of the following two fiscal years the aggregate
amount of all such expense items included in the capital budget shall be
substantially reduced from the aggregate amount for the nineteen hundred
seventy-nine fiscal year. For the fiscal year ending June thirtieth,
nineteen hundred eighty-two and thereafter, no such expense items shall
be included in the city's capital budget;

(d) For the fiscal year ending June thirtieth, nineteen hundred
seventy-seven and continuing thereafter, the city shall not include any
new or additional item in its capital budget which, in accordance with
the aforesaid accounting principles, is properly includable only in its
expense budget; and

(e) To implement this subdivision, and in order to provide full
disclosure of all expense items properly includable only in the expense
budget, the city shall include in its expense budget for each fiscal
year by appropriation all expense items which are included in its
capital budget for such fiscal year pursuant to paragraph (c) of this
subdivision including judgments and claims related to other than capital
projects, such items shall be stated separately and distinctly and the
city may include in such expense budget as items of income, in addition
to all other items of income properly includable in such expense budget
pursuant to this section, all amounts to be applied to the payment of
such expense items, which amounts may be derived from any source
available to the city during such fiscal year, provided that such income
shall be listed separately and distinctly.

6. If after the adoption of the expense budget for any fiscal year,
any increase therein, or an increase in total expenditures shall be
proposed, the mayor shall cause such proposal to be submitted to the
corporation concurrently with its submission to the board of estimate
and the city council, together with a statement of the source of current
income or other identifiable and currently available funds required for
the payment of such additional amounts.

7. Commencing at such time as the corporation may specify, but not
later than December 1, 1975 the city budget director shall deliver to
the corporation, not less than thirty days before each fiscal quarter
(except, within thirty days after the commencement of the first fiscal
quarter), an expenditure plan to implement the city expense budget for
such fiscal quarter and within amounts based on current income or other
identifiable and currently available funds. The city budget director
shall deliver to the corporation within thirty days after the end of
each such fiscal quarter covered by an expenditure plan, an operations
report reflecting results of city operations for such fiscal quarter and
whether the city has operated within the related expenditure plan. Each
expenditure plan and operations report shall be in such form as the
corporation may specify and shall be certified by the city budget
director and shall detail and report upon action taken by the city to
maintain a balanced expense budget.

8. The city shall comply in all material respects with the expenditure
limitations in its budgets as adopted or modified in accordance with
subdivisions four and six of this section, and with section eight of the
New York state financial emergency act for the city of New York as the
same may from time to time be amended.

9. a. The city shall not, at any time issue any short-term obligations
which would cause the aggregate principal amount of its outstanding
short-term obligations plus the aggregate principal amount of all notes
and bonds issued by the corporation (less any notes or bonds of the
corporation which have been refunded, renewed, redeemed, paid or
cancelled and less any notes and bonds deemed to have been paid pursuant
to the provisions of any contract with noteholders or bondholders and
less any notes other than notes issued in anticipation of the issuance
of bonds of the corporation, or bonds of the corporation issued for a
purpose set forth in subparagraph (b) of section three thousand
thirty-seven or in subparagraph eighteen of section three thousand ten
of this article, and less any notes other than notes issued in
anticipation of the issuance of bonds of the corporation, or bonds of
the corporation issued for the purpose of making deposits into any of
its capital reserve funds, and less any short-term obligations of the
city then held by the corporation) to exceed (i) six billion six hundred
million (hereinafter called the base debt limit) plus (ii) an additional
amount, not exceeding ten percent of the base debt limit; provided,
however, that during the fiscal years ending June 30, 1976 and 1977 such
additional amount may not exceed thirty per cent of the base debt limit,
during the fiscal year ending June 30, 1978 the additional amount may
not exceed twenty-five per cent of the base debt limit, during the
fiscal year ending June 30, 1979, the additional amount may not exceed
twenty per cent of the base debt limit, and during the fiscal year
ending June 30, 1980 the additional amount may not exceed fifteen per
cent of the base debt limit.

b. In addition to the foregoing limitation the city shall not, at any
date, issue any short-term obligations which would cause the aggregate
principal amount of its outstanding short-term obligations (excluding
bond anticipation notes) plus the aggregate principal amount of all
notes and bonds issued by the corporation (less (i) any notes or bonds
which have been refunded or renewed and any notes or bonds in an amount
equal to the aggregate principal amount of bond anticipation notes of
the city acquired by the corporation, whether or not then held by the
corporation (except bond anticipation notes of the city acquired by the
corporation in consideration of the surrender by the corporation to the
city of bond anticipation notes of the city), and any notes or bonds
issued for a purpose set forth in subparagraph (b), (c) or (d) of
section three thousand thirty-seven, in subdivision two-a of section
three thousand thirty-three, or subparagraph eighteen of section three
thousand ten of this article, and less any notes or bonds of the
corporation issued for the purpose of making deposits into any of its
capital reserve funds, (ii) any short-term obligations of the city then
held by the corporation other than bond anticipation notes and (iii) any
short-term obligations of the city issued and payable within the same
fiscal year) to exceed four billion five hundred million dollars plus,
in the discretion of the board of directors, an additional amount not
exceeding five hundred million dollars plus, in the discretion of the
board of directors, until June thirtieth, nineteen hundred seventy-six,
a further additional amount not exceeding two hundred million dollars.

c. Notwithstanding any other provision of this act, the corporation
shall not have the authority to modify or waive the limitations on the
aggregate amount of outstanding short-term obligations of the city
permitted to be outstanding in excess of the limits specified in
paragraphs (a) and (b) of this subdivision.

d. Not less than twenty days prior to the issuance of any short-term
obligations by the city, other than such obligations to be issued to the
corporation, on or after July first, nineteen hundred seventy-five, the
city comptroller shall deliver to the corporation a notice of intent to
issue such obligations, specifying the amount and proposed terms thereof
and the authority under which such obligations are proposed to be
issued, together with a certificate of the city budget director
specifying the purpose and the proposed source of funds for the
redemption thereof. The city comptroller and the city budget director
shall provide such additional information and shall be available for
consultation as the corporation may request. If, within ten days after
the receipt of such a notice from the city, the corporation determines
after consultation with the city comptroller and the city budget
director, that the issuance of such obligations would violate the
limitation of this subdivision, the corporation shall deliver to the
city comptroller a certified copy of such determination within such
10-day period and the city comptroller shall not thereafter issue such
obligations.

* NB The corporation shall continue for a term ending the later of
July 1, 2008 or one year after its liabilities have been fully paid and
discharged per § 3033 sub 1.