NEW YORK: The Anguished City Gears for D-Day

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Work will stop on $1 billion in city construction projects, endangering even the renovation of fabled Yankee Stadium. Holders of maturing city securities will be turned away emptyhanded. Some of the city's 18 public hospitals will be closed. Subsidies to the Metropolitan Museum, to plays in Central Park and other cultural activities will be cut off. Vendors of "nonessential" city supplies ranging from playground baseball bats to power turbines will not be paid on time. Thousands more—perhaps tens of thousands—city employees will be fired.

These dire events became more and more likely when President Ford vowed emphatically last week "to veto any bill that has as its purpose a federal bailout of New York City to prevent a default." That left city officials with virtually no hope of gaining a federal guarantee of securities that would enable New York to raise some $4 billion by June 30, the end of the fiscal year. Default is almost assured, either in mid-November if the city cannot raise $150 million to help meet payrolls and payoffs of securities due then, or during the week of Dec. 8, when the city must redeem $437.8 million in short-term notes.

In some secrecy, the city is preparing for what anguished officials call Dday. Since early October, a twelve-member team of bankers, businessmen and city officials has been plotting how New York could operate after a default. TIME'sNew York Bureau Chief Laurence Barrett reports that the committee set six priorities for expenditures. They are, in descending order: 1) police and fire protection and garbage collection, 2) food and shelter for welfare recipients, 3) hospital and emergency medical care for the poor, 4) payment to suppliers of essential goods and services, 5) public schools, and 6) interest on city debt. In short, cops, firemen, garbage collectors and welfare recipients will get paid first, though perhaps less than usual; teachers and bondholders will be the last on the list to be paid.

According to Presidential Assistant L. William Seidman, Ford decided to speak out because "the possibility of default was becoming a greater threat, and no one wanted to talk about what would follow." In his tough speech Ford blamed New York's plight on "bad financial management" over the past decade, during which the city's expense budget tripled to more than $12 billion. He warned that a loan guarantee would set "a terrible precedent." Moreover, he said that the primary beneficiaries of a bailout would be "officials who would thus escape responsibility for their past follies [and] the large investors and financial institutions who purchased these securities anticipating a high rate of tax-free return."