To resolve the shortfall in the city's debt issuance capacity (when compared with its spending plan), New York City's debt issuing limit associated with the Transitional Finance Authority (TFA) could rise to $12 billion next year, a 62% increase, said a source for the city.

"The city has known for a number of years that the amount of debt it's allowed to issue under state law is limited, and that we're approaching the limit," said the source. "So what we did was create the Transitional Finance Authority."

The TFA currently allows the city to issue another $7.5 billion in debt.

Even if you include that figure, the source explained, and combine it with the tobacco settlement securitization, "the controller's office did the calculations and said we still don't have enough capacity to meet our capital plan."

There are two primary alternatives, the source said.

"One is to change the [state's] constitution, and the other is to expand the Transitional Finance Authority," the source said. "When it was created, it was rated to have up to $12 billion in bonds in program size, but the state legislature only gave us $7.5 billion. So in theory we could go back and get more."

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