2012 annual report - new york · pdf fileudon yd intuctue ootion 3 a subway extension...

Hudson Yards Infrastructure Corporation A Component Unit of The City of New York

2012ANNUAL REPORT

Hudson Yards Infrastructure Corporation

TABLE OF CONTENTS

2 LETTER FROM THE PRESIDENT

5 INDEPENDENTAUDITORS’REPORT

6 MANAGEMENT’SDISCUSSIONANDANALYSIS

BASIC FINANCIAL STATEMENTS

Government-wide Financial Statements: 16 StatementsofNetAssets(Deficit)

17 StatementsofActivities

Governmental Funds Financial Statements: 18-19 GovernmentalFundsBalanceSheets 20 ReconciliationsoftheGovernmentalFundsBalanceSheetstotheStatements

ofNetAssets(Deficit)

21-22 GovernmentalFundsStatementsofRevenues,ExpendituresandChanges inFundBalances

23 ReconciliationsoftheGovernmentalFundsStatementsofRevenues,ExpendituresandChangesinFundBalancestotheStatementsofActivities

24 NOTES TO FINANCIAL STATEMENTS

2Hudson Yards Infrastructure Corporation

LETTER FROM THE PRESIDENT

WearepleasedtopresenttheannualreportfortheHudsonYardsInfrastructureCorporation(“HYIC”)forthefiscalyearendingJune30,2012.HYICisalocaldevelopmentcorporationcre-atedin2005bytheCityofNewYork(the“City”)undertheNot-For-ProfitCorporationLawoftheStateofNewYork.

TheCorporationwascreatedtofinancecertainpropertyacquisitionandinfrastructurework(the“Project”),includingtheextensionoftheNo.7subwayline,aspartofthedevelopmentoftheHudsonYardsFinancingDistrict,theapproximately45squareblockareagenerallyboundedbySeventhandEighthAvenuesontheeast,West43rdStreetonthenorth,EleventhandTwelfthAvenuesonthewest,andWest29thand30thStreetsonthesouth(the“ProjectArea.”)

TheHudsonYardsDevelopmentCorporation(“HYDC”)isalocaldevelopmentcorporationcreatedbytheCitytomanageandimplementtheproject.Ithasitsowndistinctauditedfinancialstate-ments,whicharepublishedseparatelyfromtheauditedfinancialstatementsofHYIC.

TheHYIC’soperationsconsistofcarryingouttherequirementsofitsindenture,includingcollect-ingrevenues,applyingrevenuestopayprincipalandinterestonitsbondsanddisbursingbondproceedstopayProjectcosts.HYICislegallyseparatebothfromtheCityandfromtheHYDC.AsaninstrumentalityoftheCity,HYICisincludedintheCity’sfinancialstatementsasablendedcomponentunit.HYICdoesnothaveanyemployees;itsaffairsareadministeredbytheemploy-eesoftheCityandofanothercomponentunitoftheCity,forwhichHYICpaysamanagementfee,rentandoverhead.

OnDecember21,2006,HYICissued$2billionofbonds.Thebondsreceivedcreditratingsof“A”,“A3”,andA-fromStandard&Poor’sRatingsServices,Moody’sInvestorsService,andFitch,Inc.AftertheinitialHYICbondsalein2006,thecreditratingsofHYICwereincreasedbyMoody’sInvestorsServicetoA2fromA3,andbyFitch,Inc.toAfromA-.

OnOctober19,2011,HYICpricedtheremaining$1billionofbondstocompletetheproject.HYICsoldthebondsonanegotiatedbasisthroughitsunderwritingsyndicateledbybook-runningse-niormanagerJ.P.Morgan,withGoldman,Sachs&Co.servingasco-seniormanageronthesale.

UndertheSupportandDevelopmentAgreementbetweenHYIC,HYDCandtheCity,theCityhasagreedtomakepayments,subjecttoannualappropriation,inanamountsufficient,togetherwithanyrevenuesHYICreceivesfromdevelopmenttopayinterestonitsbonds,foraslongasthosebondsareoutstanding.TheprincipalamountofbondswhichHYICmayissuethatareentitledtothebenefitsoftheInterestSupportAgreementiscappedat$3billion.

HYICresourcespledgedtoHYICbonds,inadditiontointerestsupportpaymentsfromtheCity,includepaymentsinlieuofpropertytaxesandmortgagerecordingtaxesreceivedasaresultofdevelopmentintheProjectArea,taxequivalencypaymentsbytheCityequaltorealpropertytaxesorpaymentsinlieuoftaxesreceivedbytheCityonnewdevelopmentsintheProjectArea,certainpaymentsfromthesaleofthetransferabledevelopmentrightsovertheEasternRailyardpurchasedbyHYICfromtheTriboroughBridgeandTunnelAuthorityandpaymentsbypropertyownerstoobtainadditionaldensityfordevelopmentsintheProjectArea.

(continued on next page)


ASubwayExtensionMemorandumofUnderstandingenteredintobetweentheHYIC,theCity,HYDCandtheMetropolitanTransportationAuthority(the“MTA”)providedthatHYIC,theCityorHYDCwouldfundtheextensionoftheNo.7subwaylineapproximatelytwomilesfromitsterminuson West41stStreetbetweenSeventhandEighthAvenueswestwardunderWest41stStreettoEleventhAvenueandthensouthwardtoanewterminalstationatWest34thStreetandEleventhAvenue.

ConstructionisbeingperformedbytheMTAandisonschedule.AsofDecember2012,the tunnels,threeoffourventilationbuildings,andthestation’smainpassagewayshavealreadybeenconstructed.Installationoftracksandelectricalandoperationaltestingmakeupthemajorityoftheremainingwork.

Additionally,designanddemolitionworkfortheHYIC-fundedHudsonParkandBoulevard,afour-acresystemofparksandgreenwaysthroughtheProjectArea,hasbeencompleted.Constructionofthesubsurfaceinfrastructurebeganearlierthisyearandisproceedingonschedule.ConstructionworkontheHudsonRiverParkandBoulevardisbeingperformedbyHYDC.

Verytrulyyours,

AlanAndersPresident

LETTER FROM THE PRESIDENT (continued)

FIN

AN

CIA

L ST

ATEM

ENTS


TotheMembersoftheBoardofDirectorsandthe AuditCommitteeoftheHudsonYardsInfrastructureCorporation

WehaveauditedtheaccompanyingfinancialstatementsofthegovernmentalactivitiesofHudsonYardsInfrastructureCorporation(“HYIC”),acomponentunitofTheCityofNewYork,asofandfortheyearsendedJune30,2012and2011,aslistedinthetableofcontents.ThesefinancialstatementsaretheresponsibilityofHYIC’smanagement.Ourresponsibilityistoexpressanopiniononthesefinancialstatementsbasedonouraudits.

WeconductedourauditsinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica.Thosestandardsrequirethatweplanandperformtheaudittoobtainreasonableassuranceaboutwhetherthefinancialstatementsarefreeofmate-rialmisstatement.Anauditincludesexamining,onatestbasis,evidencesupportingtheamountsanddisclosuresinthefinancialstatements.Anauditalsoincludesassessingtheaccountingprinciplesusedandsignificantestimatesmadebymanagement,aswellasevaluatingtheoverallfinancialstatementpresentation.Webelievethatourauditsprovideareasonablebasisforouropinion.

Inouropinion,thefinancialstatementsreferredtoabovepresentfairly,inallmaterialrespects,therespectivefinancialpositionofthegovernmentalactivitiesofHudsonYardsInfrastructureCorporationasofJune30,2012and2011andtherespectivechangesinfi-nancialpositionthereoffortheyearsthenended,inconformitywithaccountingprinciplesgenerallyacceptedintheUnitedStatesofAmerica.

AccountingprinciplesgenerallyacceptedintheUnitedStatesofAmericarequirethatthemanagement’sdiscussionandanalysisinformationonpages6through15bepresentedtosupplementthebasicfinancialstatements.Suchinformation,althoughnotapartofthebasicfinancialstatements,isrequiredbytheGovernmentalAccountingStandardsBoard,whoconsidersittobeanessentialpartoffinancialreportingforplacingthebasicfinancialstatementsinanappropriateoperational,economic,orhistoricalcontext.WehaveappliedcertainlimitedprocedurestotherequiredsupplementaryinformationinaccordancewithauditingstandardsgenerallyacceptedintheUnitedStatesofAmerica,whichconsistedofinquiriesofmanagementaboutthemethodsofpreparingtheinforma-tionandcomparingtheinformationforconsistencywithmanagement’sresponsestoourinquiries,thebasicfinancialstatements,andotherknowledgeweobtainedduringourauditsofthebasicfinancialstatements.Wedonotexpressanopinionorprovideanyassuranceontheinformationbecausethelimitedproceduresdonotprovideuswithsuf-ficientevidencetoexpressanopinionorprovideanyassurance.

NewYork,NYSeptember28,2012

5

INDEPENDENTAUDITORS’REPORT

Hudson Yards Infrastructure Corporation 6

MANAGEMENT’SDISCUSSIONANDANALYSIS AsofandfortheyearsendedJune30,2012and2011

OVERVIEW OF THE FINANCIAL STATEMENTS

ThefollowingisanarrativeoverviewandanalysisofthefinancialactivitiesoftheHudsonYardsInfrastructureCorporation(“HYIC”)asofJune30,2012and2011andfortheyearsthenended.ItshouldbereadinconjunctionwithHYIC’sgovernment-widefinancialstate-ments,governmentalfundsfinancialstatementsandthenotestothefinancialstatements.Thefinancialstatementsconsistoffourparts:(1)management’sdiscussionandanalysis(thissection);(2)thegovernment-widefinancialstatements;(3)thegovernmentalfundsfinancialstatements;and(4)thenotestothefinancialstatements.

Thegovernment-widefinancialstatements,whichincludethestatementsofnetassets(deficit)andthestatementsofactivities,arepresentedtodisplayinformationaboutHYICasawhole,inaccordancewithGovernmentalAccountingStandardsBoard(“GASB”)standards.ThisistoprovidethereaderwithabroadoverviewofHYIC’sfinances.Thegovernment-widefinancialstatementsarepreparedusingtheeconomicresourcesmea-surementfocusandtheaccrualbasisofaccounting.Accordingly,revenueisrecognizedwhenearnedandexpensesarerecordedwhenaliabilityisincurred,regardlessofthetimingofcashflows.

HYIC’sgovernmentalfundsfinancialstatementsarepresentedusingthecurrentfinancialresourcesmeasurementfocusandthemodifiedaccrualbasisofaccounting,inwhichrevenueisrecognizedwhenitbecomessusceptibletoaccrual;thatis,whenitbecomesbothmeasurableandavailabletofinanceexpendituresinthecurrentfiscalperiod.Ex-pendituresarerecognizedwhentherelatedliabilityisincurred,exceptforprincipalandinterestonbondspayableandliabilitiesonarbitragerebatepayable,whicharerecog-nizedwhendue.

Thereconciliationsofthegovernmentalfundsbalancesheetstothestatementsofnetassets(deficit)andreconciliationofthegovernmentalfundsstatementsofrevenues,expendituresandchangesinfundbalancestothestatementsofactivitiesarepresentedtoassistthereaderinunderstandingthedifferencesbetweengovernment-wideandgovernmentalfundsfinancialstatements.

ORGANIZATIONAL OVERVIEW

HYIC’spurposeisthefinancingofcertaininfrastructureimprovementsintheHudsonYardsareaontheWestSideofManhattan(the“Project”).HYICdoesnotengageinthedevelopmentdirectly,butfinancesthedevelopmentwhichisspearheadedbytheHud-sonYardsDevelopmentCorporation(“HYDC”)andcarriedoutbyexistingpublicenti-ties.TheProjectisinanareagenerallyboundedbySeventhandEighthAvenuesontheeast,West43rdStreetonthenorth,TwelfthAvenueonthewestandWest29thand30thStreetsonthesouth(the“ProjectArea”).TheProjectconsistsof:(1)designandconstruc-tionofanextensionoftheNo.7Subwayfromitscurrentterminusat7thAvenueand41stStreettoanewstationat11thAvenueandWest34thStreet(the“SubwayExtension”),(2)acquisitionfromtheMetropolitanTransportationAuthority(“MTA”)ofcertaintransferabledevelopmentrights(“TDRs”)overitsrailyardsbetweenTenthandEleventhAvenuesandbetweenWest30thandWest33rdStreets(“EasternRailYards”or“ERY”),(3)construc-tionofthefirstphaseofasystemofparks,publicopenspaces,andstreetsintheProjectArea(“PublicAmenities”)and(4)propertyacquisitionfortheProject.


MANAGEMENT’SDISCUSSIONANDANALYSIS(continued) AsofandfortheyearsendedJune30,2012and2011

ORGANIZATIONALOVERVIEW (continued)

HYICfulfillsitspurposethroughtheissuancesofbondstofinancetheProject,includ-ingtheoperationsofHYDC,andthecollectionofrevenuestosupportitsoperationsandserviceitsdebt.HYICrevenuesincludeand/orwillinclude:(1)InterestSupportPayments(“ISP”)tobemadebyTheCityofNewYork(“TheCity”)underthetermsoftheSupportandDevelopmentAgreement(“Agreement”)thatobligatesTheCitytopaytoHYIC,sub-jecttoannualappropriation,ISPsonupto$3billionofHYICbondsinanamountequaltothedifferencebetweentheamountoffundsavailabletoHYICtopayinterestonthosebondsandtheamountofinterestdueonsuchbonds;(2)paymentsinlieuofrealestatetaxes(“PILOT”)thathavebeenassignedtoHYICunderagreementswiththeNewYorkCityIndustrialDevelopmentAgency(“IDA”),TheCity,andtheMTA,andthataretobemadeinaccordancewithagreementsbetweendevelopersandIDAandothers(“PILOTAgreements”);(3)TaxEquivalencyPayments(“TEP”)tobemadebyTheCityunderthetermsoftheAgreement,whichobligatesTheCitytopaytoHYIC,subjecttoannualap-propriation,theamountofrealpropertytaxescollectedbyTheCityonnewdevelopment(includingsubstantialrehabilitationofexistingbuildings)intheProjectArea;(4)DistrictImprovementBonuses(“DIB”)paidbyprivatedevelopersinexchangefortherighttocreateadditionaldensityintheProjectArea;and(5)paymentsinlieuofthemortgagerecordingtax(“PILOMRT”)requiredtobemadebyprivatedevelopersenteringintoPILOTAgreements.PILOTAgreementsareexpectedtobeenteredintobydevelopersbecausethePILOTpaymentsduringthefirst19yearswillbesubstantiallylowerthantherealestatetaxesthatwouldotherwisebedue.Interestearnedonunspentbondproceedsisgenerallyusedfordebtservice,inaccordancewiththetermsoftheTrustIndenturebetweenHYICandUSBankdatedDecember1,2006,asamended(the“Indenture”).

ProceedsreceivedbyHYICforsalesoftheTDRs(asdiscussedbelow),uptotheamountofHYIC’sinvestment(includingthe$200millionpurchasepriceandinterestcoststhereon),willalsobeusedbyHYICtosupportitsoperationsandserviceitsdebt.

TheConversionDateisthedateonwhichHYICcertifiesthat,foreachofthetwopre-cedingfiscalyears,HYIC’sPILOTpaymentsplusTEPrevenueslessHYIC’soperatingexpenses(“NetRecurringRevenues”)werenotlessthan125%ofthemaximumannualdebtserviceonallthen-outstandingseniorbondsandnotlessthan105%ofmaximumannualdebtserviceonalloutstandingbonds.Afterthedateonwhichbondsarefirstcall-able(February15,2017)andpriortotheConversionDate,allrevenuesreceivedbyHYICinafiscalyearremainingafterfundingoperatingexpensesandinterestmustbeusedtopurchaseorredeemseniorbondsinadvanceoftheirmaturity,exceptthat,if,duringsuchfiscalyear,TheCityhasmadeISPs,thenHYICmustfirstreimburseTheCityforsuchISPs.PriortotheConversionDate,HYICisnotobligatedtomakeanypaymentsofprin-cipalofitsbondspriortomaturityunlessanduntilHYICreceivesrevenuesinamountssufficienttomakesuchpayments.AftertheConversionDate,HYICmustestablishascheduleofsinkingfundinstallmentsforalloutstandingdebtnolaterthanJune30thofthatyear.BondsissuedbyHYICaftertheConversionDatearenotentitledtoISPsundertheAgreement.



Revenues: Programrevenue Otherrevenue

Total revenues

Expenses: Project BondInterest Arbitragerebate Other

Total expenses

Change in net assets

Net(deficit)-beginningofyear

Net(deficit)-endofyear

2012

$30,630

236,317

266,947

279,678 122,623 (5,111) 1,644

398,834

(131,887)

(1,687,139)

$(1,819,026)

2011

$30,572

45,296

75,868

348,076 85,652 (1,419) 1,585

433,894

(358,026)

(1,329,113)

$(1,687,139)

2010

$13,318

19,960

33,278

384,589 86,030 1,430 1,476

473,525

(440,247)

(888,866)

$(1,329,113)

Change 2012 vs 2011

$58

191,021

191,079

(68,398) 36,971 (3,692)

59

(35,060)

226,139

(358,026)

$(131,887)

Change 2011 vs 2010

$17,254

25,336

42,590

(36,513) (378)

(2,849) 109

(39,631)

82,221

(440,247)

$(358,026)

FINANCIAL HIGHLIGHTS AND OVERALL ANALYSIS—GOVERNMENT-WIDE FINANCIAL STATEMENTS (amounts in thousands, except as noted)

OnDecember21,2006HYICissueditsFiscal2007SeriesASeniorRevenueBonds(“FY07Bonds”)intheamountof$2billion,topartiallyfinancetheProject.TheFY07BondsaretermbondswithsemiannualinterestpaymentdatesbeginningonAugust15,2007andmaturingonFebruary15,2047.OnOctober26,2011,HYICissueditsFiscal2012SeriesASeniorRevenueBonds(“FY12Bonds”)intheamountof$1billion,tofinancetheremainingportionoftheproject.TheFY12BondsaretermbondswithsemiannualinterestpaymentsbeginningonFebruary15,2012andmaturingonFebru-ary15,2047.Asdiscussedabove,priortotheConversionDate,HYICisnotobligatedtomakeanypaymentsofprincipalontheBondspriortomaturity,unlessanduntil–andtotheextentthat–HYICreceivesrevenuesinamountssufficienttomakesuchpayments.

ThefollowingsummarizestheactivitiesofHYICfortheyearsendedJune30,2012,2011and2010:

ForthefiscalyearsendedJune30,2012and2011,programrevenuewascomprisedofDIBandTEP,comparedtofiscalyear2010whereprogramrevenuewasonlycomprisedofTEP.HYICrecognizedapproximately$30.6millionofprogramrevenueinfiscalyear2012andfiscalyear2011.Theincreaseof$17.3millioninfiscalyear2011whencom-paredtofiscalyear2010wasduetothecollectionof$12.6millionmoreofTEP,asnewdevelopmentprogressedintheProjectArea.Inaddition,HYICcollected$4.6millionofDIBinfiscalyear2011whileitdidnotcollectDIBinfiscalyear2010.

Otherrevenueinfiscalyear2012wascomprisedofISPs,investmentearnings,andagrantfromTheCity.Theincreaseof$191millioninfiscalyear2012wasprimarilyduetoa$155milliongrantfromTheCityand$36millionmoreinISPstomeetHYIC’sdebtser-vicerequirements.ThegrantfromTheCitywillbeusedtopayHYIC’sdebtserviceandisexpectedtoreducetheamountoffutureISPrequiredfromTheCity.



FINANCIALHIGHLIGHTSANDOVERALLANALYSIS—GOVERNMENT-WIDEFINANCIALSTATEMENTS (continued) (amounts in thousands, except as noted)

Otherrevenueinfiscalyear2011wascomprisedof$42.7millionofISPsand$2.6millionofinvestmentearnings,comparedtofiscalyear2010whenotherrevenuewasonlycom-prisedof$19.9millionofinvestmentearnings.Therewasasignificantdecreaseofinvest-mentearningsinfiscalyear2011becauseasbondproceedsweredrawndowntopayprojectcosts,thereducedholdingsresultedinlowerinvestmentearnings.ThedecreaseininvestmentearningswasoffsetbythecollectionofISPsinfiscalyear2011.

Projectexpensesincurredduringfiscalyear2012wereapproximately$279.7millioncomparedtofiscalyear2011whenHYICincurredapproximately$348.1million.Sub-wayextensionexpensesincreasedbyapproximatelyby$40millionastunneloutfittingincreased.Thesubwayprojectincreasewasmorethanoffsetbythedecreaseof$108millioninlandacquisitionandpublicamenitiescostasadeterminationinfavorofHYICwasissuedbytheNewYorkSupremeCourteliminatedapreviouslyaccruedcontingentliabilityintheamountof$60.4millionforadditionalcondemnationcosts.

Projectexpensesincurredduringfiscalyear2011wereapproximately$348.1millioncomparedtofiscalyear2010whenHYICincurredapproximately$384.6millioninprojectexpenses.Subwayextensionexpensesdecreasedbyapproximately$35millionasmajortunnelingworkwascompletedinfiscalyear2011andlandacquisitionandpublicameni-tiescostsdecreasedbyapproximately$2millionasalargeobligationforfuturecondem-nationclaimswasincurredinfiscalyear2010.

Bondinterestexpenseincreasedinfiscalyear2012duetotheissuanceofbondsinOctober2011.

Thedecreaseininvestmentearningscausedadecreaseinarbitragerebateexpenseinfiscalyear2012andfiscalyear2011.Arbitrageistheestimatedamountofinterestearn-ingsonbondproceedsabovetheyieldofHYICtaxexemptbonds,whichHYICexpectstorebatetotheUnitedStatesInternalRevenueServiceinthefuture.


FINANCIALHIGHLIGHTSANDOVERALLANALYSIS—GOVERNMENT-WIDEFINANCIALSTATEMENTS (continued) (amounts in thousands, except as noted) ThefollowingsummarizesHYIC’sassets,liabilitiesandnetassets(deficit)asofJune30,

2012,2011and2010:

10


Assets: Non-capital

Total assets

Liabilities: Currentliabilities Long-termliabilities

Totalliabilities

Netassets(deficit): Restricted Unrestricted

Totalnet(deficit)

2012

$1,430,691

1,430,691

130,783 3,118,934

3,249,717

906,497(2,725,523)

$(1,819,026)

2011

$581,638

581,638

118,385 2,150,392

2,268,777

161,963(1,849,102)

$(1,687,139)

2010

$941,785

941,785

102,660 2,168,238

2,270,898

538,026(1,867,139)

$(1,329,113)

Change 2012 vs 2011

$849,053

849,053

12,398 968,542

980,940

744,534(876,421)

$(131,887)

Change 2011 vs 2010

$(360,147)

(360,147)

15,725 (17,846)

(2,121)

(376,063)18,037

$(358,026)

TotalassetsatJune30,2012weregreaterthan2011duetothedepositofproceeds fromtheissuanceof$1billionofbonds.TotalassetsatJune30,2011werelowerthan2010,asaresultofbondproceedsbeingdrawn-downtopaytheProjectcosts.

Currentliabilitiesincreasedby$12.3millionattheendoffiscalyear2012primarily becauseofincreasedaccruedbondinterestexpensefromtheissuanceofthe2012SeriesABonds.

Currentliabilitiesincreasedby$15.7millionattheendoffiscalyear2011primarily becausethearbitragerebatepayablebecameacurrentliabilityinfiscalyear2011, aspaymentwasdueDecember2011.Thisincreasewasslightlyoffsetbyadecline inaccruedProjectcosts,assubwayextensionandacquisitioncostsdeclined,as previouslydiscussed.

Long-termliabilitiesincreasedsubstantiallyinfiscalyear2012becauseoftheissuanceof$1billionofbonds,aspreviouslydiscussed.

Long-termliabilitiesdecreasedinfiscalyear2011by$17.8millionbecausethearbitragerebateliabilitybecameacurrentliability,aspreviouslydiscussed.Also,theannualamor-tizationofbondpremiumreducedlong-termliabilities.

Thelargenegativeunrestrictedandtotalnetassets(deficit)balancesatJune30,2012,2011and2010wereprimarilyduetotheissuanceofbondsthatwillberepaidfrom futurerevenues.



FINANCIAL HIGHLIGHTS AND OVERALL ANALYSIS—GOVERNMENTAL FUNDS FINANCIAL STATEMENTS (amounts in thousands, except as noted)

HYICreportsgovernmentalactivityusingthreefunds:(1)ageneralfund(“GF”),(2)adebtservicefund(“DSF”),and(3)acapitalprojectsfund(“CPF”).Infiscalyear2011,HYICimplementedGovernmentalAccountingStandardsBoardStatementNo.54,Fund Balance Reporting and Governmental Fund Type Definitions(“GASB54”).GASB54resultedinthecreationofageneralfundandtherestatementofthoseactivitiesthatwereformerlypresentedinthedebtservicefundandnowreportedinageneralfund.HYICnowaccountsforandreportsintheGFitsadministrativeandoperatingexpendituresalongwiththeportionofrevenuesandaccumulatedresourcesusedorheldforusetopayforthoseoperatingactivities,pursuanttotheIndenture.

ThefollowingsummarizesthechangesintheGFbalancesfortheyearsendedJune30,2012,2011,and2010:


Total revenues

Expenditures

Otherfinancinguses

Netchangeinfundbalance

Fundbalance-beginningofyear

Fundbalance-endofyear

2012

$ 1,068

31

1,099

9,519

(252)

(8,672)

25,357

$ 16,685

2011

$ 13,091

118

13,209

837

-

12,372

12,985

$ 25,357

2010

$ 13,318

99

13,417

728

-

12,689

296

$ 12,985

Change 2012 vs 2011

$ (12,023)

(87)

(12,110)

8,682

(252)

(21,044)

12,372

$ (8,672)

Change 2011 vs 2010

$ (227)

19

(208)

109

-

(317)

12,689

$ 12,372

ProgramrevenuedepositedintheGFduringfiscalyears2012was$1.0millionandpro-gramrevenuedepositsduringfiscalyears2011and2010were$13.1and13.3million,respectively.TheamountofprogramrevenuedepositedintheGFwasbasedonthepro-jectedadministrativeandarbitragerebateexpenditures.Otherrevenuewascomprisedofinterestincome.Theincreaseinexpendituresduringfiscalyear2012wasentirelyduetoan$8.8millionarbitragepaymenttotheUnitedStatesTreasury.



FINANCIALHIGHLIGHTSANDOVERALLANALYSIS—GOVERNMENTALFUNDFINANCIALSTATEMENTS(continued)(amounts in thousands, except as noted)

ThefollowingsummarizesthechangesintheDSFbalancesfortheyearsendedJune30,2012,2011and2010:

Allprogramrevenue,exceptthatrequiredtopayadministrativeandoperatingexpendi-tureswasdepositedintotheDSF,aspreviouslydiscussed.Infiscalyears2012and2011,$29.6millionand$17.5millionweredepositedfordebtservicepayments,respectively.Infiscalyear2010,therewasnoprogramrevenuedepositedintheDSFasallprogramrevenuecollectedthatyearwasdepositedintheGFtofundHYIC’sarbitrageliability.

Thelargeincreaseofotherrevenueinfiscalyear2012wasprimarilyduetoa$155grantfromTheCityand$36millionmoreinISPtomeetHYIC’sdebtservicerequirements, aspreviouslydiscussed.Theincreaseofotherrevenueinfiscalyear2011wasmainly comprisedofISPsneededtocoverdebtservice.Otherrevenueforfiscalyear2010 wascomprisedonlyofinterestincomeasHYIC’sresourcesweresufficienttocover debtserviceandthereforenoISPswererequiredtobecontributedbyTheCityinfiscalyear2010.

TheDSFexpendituresincreasedinfiscalyear2012duetotheissuanceofthe2012SeriesABonds.

Thedecreaseinotherfinancingsourcesinfiscalyear2012wasprimarilyduetothe expirationofhighinterestratebearingflexiblerepurchaseagreements.Thedecreaseinfiscalyear2011comparedtofiscalyear2010resultedfromdeclinesininterestcollectedonadecliningbalanceofunspentbondproceeds.Theinterestwastransferredto theDSFfromtheCPF,tobeusedtopaydebtservice,inaccordancewiththetermsof theIndenture.


Total revenues

Expenditures

Otherfinancinguses




2012

$29,562

234,939

264,501

105,065

1,261

160,697

240,129

$400,826

2011

$17,481

42,670

60,151

88,223

30,495

2,423

237,706

$240,129

2010

$-

113

113

88,601

46,141

(42,347)

280,053

$237,706

Change 2012 vs 2011

$12,081

192,269

204,350

16,842

(29,234)

158,274

2,423

$160,697

Change 2011 vs 2010

$17,481

42,557

60,038

(378)

(15,646)

44,770

(42,347)

$2,423




ThefollowingsummarizesthechangesintheCPFbalancesfortheyearsendedJune30,2012,2011and2010:

TheCPFrevenuescomprisedofinvestmentearnings,decreasedinfiscalyear2012comparedtofiscalyear2011duetotheexpirationofhighinterestratebearingflexiblerepurchaseagreements.Thedecreaseinfiscalyear2011comparedtofiscalyear2010wasduetothedrawingdownofbondproceedstopayprojectcosts;thereducedhold-ingsresultedinlowerinvestmentearnings.

Totalprojectexpendituresincreasedbyapproximately$23.7millionfrom2010to2011.Althoughactualsubwayextensioncostsdecreasedbyapproximately$35millionasthetunnelingworkwascompletedinfiscalyear2011,allotherprojectcostsincludingacqui-sitions,condemnationcounsel,leases,andpublicamenitiesincreasedby$58millionastheprojectpreparesforitnextphaseofoutfittingthesubwaysystemandconstructingtheparkandboulevardsites.

Otherfinancingsources(uses)net,duringfiscalyear2012primarilyreflectedthebondproceedsfromtheissuanceof2012SeriesABonds.Otherfinancingusesduringfiscalyears2011and2010reflectedthetransferofinterestcollectedonunspentbondpro-ceedsfromtheCPFtotheDSF,tobeusedtopaydebtservice,inaccordancewiththetermsoftheIndenture.

Revenues

Expenditures: Project/CostofIssuance

Total expenditures

Otherfinancingsources(uses)net




2012

$1,347

345,661

345,661

1,029,918

685,604

222,370

$907,974

2011

$2,508

347,996

347,996

(30,495)

(375,983)

598,353

$222,370

2010

$19,748

324,262

324,262

(79,474)

(383,988)

982,341

$598,353

Change 2012 vs 2011

$(1,161)

(2,335)

(2,335)

1,060,413

1,061,587

(375,983)

$685,604

Change 2011 vs 2010

$(17,240)

23,734

23,734

48,979

8,005

(383,988)

$(375,983)




ThefollowingsummarizestheGFassets,liabilities,andfundbalancesasofJune30,2012,2011and2010:

TheGFtotalassetsdecreasedby$8.7infiscalyear2012,asanarbitragerebatepay-mentof$8.8wasmadetotheUnitedStatesTreasury.TheGFtotalassetsincreasedinfiscalyear2011from2010asthemajorityofprogramrevenuedepositedintheGFwasconstrainedtopayHYIC’sarbitrageobligation,aspreviouslydiscussed.

ThefollowingsummarizestheDSFassets,liabilities,andfundbalancesasofJune30,2012,2011and2010:

Assets: Cashequivalents&investments PrepaidInsurance

Total assets

Liabilities: AccountsPayable

Totalliabilities

Fundbalances: Nonspendableprepaidexpense Assignedtoarbitragepayment Unassigned

Totalfundbalances

Totalliabilitiesandfundbalances

2012

$16,562

151

$16,713

$28

28

151 16,365

169

16,685

$16,713

2011

$25,236

151

$25,387

$30

30

151 24,964

242

25,357

$25,387

2010

$12,869

151

$13,020

$35

35

151 12,365

469

12,985

$13,020

Change 2012 vs 2011

$(8,674)

-

$(8,674)

$(2)

(2)

- (8,599)

(73)

(8,672)

$(8,674)

Change 2011 vs 2010

$12,367

-

$12,367

$(5)

(5)

- 12,599

(227)

12,372

$12,367

Assets: Restrictedcashequivalents

andinvestments Transferabledevelopmentrights DuefromCapitalProjectsFunds

Total assets

Liabilities

Fundbalances: Restricted

Totalfundbalances


2012

$157,679 242,958

189

$400,826

$-

400,826

400,826

$400,826

2011

$6,448 233,681

-

$240,129

$-

240,129

240,129

$240,129

(restated) 2010

$13,302 224,404

-

$237,706

$-

237,706

237,706

$237,706

Change 2012 vs 2011

$151,231 9,277 189

$160,697

$-

160,697

160,697

$160,697

Change 2011 vs 2010

$(6,854) 9,277

-

$2,423

$-

2,423

2,423

$2,423




TheDSFrestrictedcashequivalentsandinvestmentswerehigherinfiscalyear2012becauseofa$155milliongrantfromTheCity,aspreviouslydiscussed.

TheTDRswerehigheratJune30,2012and2011,becauseoftheincreaseinthevalueoftheTDRs.TheincreaseinthevalueoftheTDRsreflectsthecostofborrowedfundsusedtopurchasetheTDRs,whichHYICisentitledtorecoverwhentheTDRsaresold.

ThefollowingsummarizestheCPFassets,liabilities,andfundbalancesasofJune30,2012,2011and2010:

Assets: Restrictedcashequivalents

andinvestments

Total assets

Liabilities: Project DuetoDebtServiceFund

Totalliabilities

Fundbalances: Restricted

Totalfundbalances


2012

$981,071

$981,071

$72,908 189

73,097

907,974

907,974

$981,071

2011

$289,956

$289,956

$67,586 -

67,586

222,370

222,370

$289,956

2010

$664,145

$664,145

$65,792 -

65,792

598,353

598,353

$664,145

Change 2012 vs 2011

$691,115

$691,115

$5,322 189

5,511

685,604

685,604

$691,115

Change 2011 vs 2010

$(374,189)

$(374,189)

$1,794 -

1,794

(375,983)

(375,983)

$(374,189)

CPFassetsonhandatJune30,2012,2011,and2010representunspentbondpro-ceeds.Theincreaseinfundbalancesinfiscalyear2012wasduetobondproceedsfromtheissuanceof2012SeriesAbondsandthedecreaseinfundbalancesinfiscalyear2011reflectedprojectexpendituresmadeduringtherespectivefiscalyears,asdis-cussedpreviously.

ThisfinancialreportisdesignedtoprovideageneraloverviewofHYIC’sfinances.Ques-tionsconcerninganyoftheinformationinthisreportorrequestsforadditionalfinancialinformationshouldbedirectedtoRaymondOrlando,ManagerofInvestorRelations,HudsonYardsInfrastructureCorporation,255GreenwichStreet,NewYork,NY10007

……


STATEMENTSOFNETASSETS(DEFICIT) AsofJune30,2012and2011(amountsinthousands)

Assets: Unrestrictedcashequivalents Restrictedcashequivalents Unrestrictedinvestments Restrictedinvestments Interestreceivable Prepaidinsurance Transferabledevelopmentrights Unamortizedbondissuecosts

Total assets

Liabilities: Projectcostspayable Accruedexpenses PayabletoTheCityofNewYork PayabletoHudsonYardsDevelopmentCorporation PayabletoNewYorkCityEconomicDevelopmentCorporation

Arbitragerebateliability Accruedbondinterestpayable Contingentliabilities

Longtermdebt: Portionduewithinoneyear Portiondueafteroneyear Unamortizedbondpremium

Totalliabilities

NetAssets(deficit): Restrictedforcapitalprojects Unrestricted

Totalnetassets(deficits)

See notes to financial statements.

2011

$272 227,419 24,964 68,985

- 151

233,681 26,166

581,638

53,310 30

13,991 103 182

13,936 36,833 60,407

-

2,000,000 89,985

2,268,777

161,963 (1,849,102)

$(1,687,139)

2012

$197 217,506 16,365

921,243 1

151 242,958 32,270

1,430,691

57,630 28

15,180 51 47 -

57,847 1,477

-

3,000,000 117,457

3,249,717

906,497 (2,725,523)

$(1,819,026)


STATEMENTS OF ACTIVITIES FortheyearsendedJune30,2012and2011(amountsinthousands)

Revenues: Districtimprovementbonusrevenue Taxequivalencypaymentrevenue Grant from The City of New York Interestsupportpaymentrevenue Investmentincome

Total revenues

Expenses: Project-subwayextension Project-landacquisitionandpublicamenities Project-transfertoHudsonYardsDevelopmentCorporation Bondinterest Arbitragerebate Amortizationofbondissuancecosts Generalandadministrative

Total expenses

Change in Net Assets

Net(deficit)-beginningofyear

Net(deficit)-endofyear


2012

$2,951 27,679

155,595 79,347 1,375

266,947

316,439 (39,787)

3,026 122,623 (5,111)

949 695

398,834

(131,887)

(1,687,139)

$(1,819,026)

2011

$4,635 25,937

- 42,667 2,629

75,868

275,609 69,269 3,198

85,652 (1,419)

748 837

433,894

(358,026)

(1,329,113)

$(1,687,139)


GOVERNMENTAL FUNDS BALANCE SHEET AsofJune30,2012(amountsinthousands)

Assets: Unrestrictedcashequivalents Restrictedcashequivalents Unrestrictedinvestments Restrictedinvestments Interestreceivable DuefromCapitalProjectsFund Prepaidinsurance Transferabledevelopmentrights

Total assets

Liabilities: Projectcostspayable Accountspayable DuetoDebtServiceFund PayabletoTheCityofNewYork PayabletoHudsonYards

DevelopmentCorporation PayabletoNewYorkCityEconomic DevelopmentCorporation

Totalliabilities

Fundbalances: Nonspendableprepaidexpense Restrictedfor: DebtService CapitalProjects Assignedtoarbitragerebatepayment Unassigned

Totalfundbalances



General Fund

$197

- 16,365

- - -

151 -)

$16,713)

$- 28 - -

-

-

28

151

- -

16,365 169

16,685

$16,713

Capital Projects Fund

$-

137,199 -

843,871 1 - - -

$981,071

$57,630 -

189 15,180

51

47

73,097

-

-

907,974 - -

907,974

$981,071

Debt Service Fund

$-

80,307 -

77,372 -

189 -

242,958

$400,826)

$- - - -

-

-

-

-

400,826

- - -

400,826

$400,826

Total Governmental

Funds

$197 217,506 16,365

921,243 1

189 151

242,958

$1,398,610

$57,630 28

189 15,180

51

47

73,125

151

400,826 907,974 16,365

169

1,325,485

$1,398,610


GOVERNMENTAL FUNDS BALANCE SHEET AsofJune30,2011(amountsinthousands)

Assets: Unrestrictedcashequivalents Restrictedcashequivalents Unrestrictedinvestments Restrictedinvestments Interestreceivable DuefromCapitalProjectsFund Prepaidinsurance Transferabledevelopmentrights

Total assets

Liabilities: Projectcostspayable Accountspayable DuetoDebtServiceFund PayabletoTheCityofNewYork PayabletoHudsonYards

DevelopmentCorporation PayabletoNewYorkCityEconomic

DevelopmentCorporation

Totalliabilities

Fundbalances: Nonspendableprepaidexpense Restrictedfor: DebtService CapitalProjects Assignedtoarbitragerebatepayment Unassigned

Totalfundbalances



General Fund

$272

- 24,964

- - -

151 -

$25,387

$- 30 - -

-

- )

30

151

- -

24,964 242

25,357

$25,387


$-

220,971 -

68,985 - - - -

$289,956

$53,310 - -

13,991

103

182

67,586

-

- 222,370

- -

222,370

$289,956

Debt Service Fund

$-

6,448 - - - - -

233,681

$240,129

$- - - -

-

-

-

-

240,129 - - -

240,129

$240,129

Total Governmental

Funds

$272 227,419 24,964 68,985

- -

151 233,681

$555,472

$53,310 30 -

13,991

103

182

67,616

151

240,129 222,370 24,964

242

487,856

$555,472


RECONCILIATIONS OF THE GOVERNMENTAL FUNDS BALANCE SHEETS TOTHESTATEMENTSOFNETASSETS(DEFICIT) AsofJune30,2012and2011(amountsinthousands)

Totalfundbalances-governmentalfunds

Amountsreportedforgovernmentalactivitiesinthestatementsofnetassetsaredifferentbecause:

Costsofbondissuancearereportedasexpendituresinthegovernmentalfundsfinancialstatements.However,inthestatementsofnetassets(deficit),thecostsofbondissuancearereportedascapitalizedassetsandamortizedoverthelifeofthebonds.

Bondpremiumsarereportedasotherfinancingsourcesinthegovernmentalfundsfinancialstatements.However,inthestatementsofnetassets(deficit),bondpremiumsarereportedasacomponentofbondspayableandamortizedoverthelifeofthebonds.

Someliabilitiesarenotdueandpayableinthecurrentperiodfromcurrentlyavailablefinancialresourcesandarethereforenotreportedinthegovernmentalfundsfinancialstatements,butarereportedinthestatementsofnetassets(deficit).Thoseliabilitiesare: Bondspayable Accruedbondinterestpayable Arbitragerebate Contingentliabilities

Net(deficit)-governmentalactivities


2012

$1,325,485

32,270

(117,457)

(3,000,000) (57,847)

-(1,477)

$(1,819,026)

2011

$487,856

26,166

(89,985)

(2,000,000) (36,833) (13,936) (60,407)

$(1,687,139)


GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FortheyearendedJune30,2012(amountsinthousands)


Total revenues Expenditures: Project-subwayextension Project-landacquisitionandpublicamenities Project-transferstoHudsonYards

DevelopmentCorporation Bondinterest Generalandadministrative Costsofbondissuance

Total expenditures

Otherfinancingsources(uses): PrincipalAmountofBondsIssued BondPremium Transfers(fromCapitalProjectsFund)toDebt

ServiceFund Transfer(fromGeneralFund)toDebt

ServiceFund

Totalotherfinancingsources(uses)

Netchangeinfundbalances

Fundbalances-beginningofyear

Fundbalances-endofyear


General Fund

$-

1,068 - - 31

1,099

- -

- -

9,519 -

9,519

- -

-

(252)

(252)

(8,672)

25,357

$16,685


$-

- - -

1,347

1,347

316,439 19,143

3,026

- -

7,053

345,661

1,000,000 30,927

(1,009)

-

1,029,918

685,604

222,370

$907,974

Debt Service Fund

$2,951

26,611 155,595 79,347

(3)

264,501

- -

-

105,065 - -

105,065

- -

1,099

252

1,261

160,697

240,129

$400,826

Total Governmental

Funds

$2,951 27,679

155,595 79,347 1,375

266,947

316,439 19,143

3,026

105,065 9,519 7,053

460,245

1,000,000 30,927

-

-

1,030,927

837,629

487,856

$1,325,485


GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FortheyearendedJune30,2011(amountsinthousands)


Total revenues

Expenditures: Project-subwayextension Project-landacquisitionandpublicamenities Project-transferstoHudsonYards DevelopmentCorporation Bondinterest Generalandadministrative

Total expenditures

Otherfinancingsources(uses): Transfers(fromCapitalProjectsFund)toDebt ServiceFund

Totalotherfinancingsources(uses)

Netchangeinfundbalances

Fundbalances-beginningofyear

Fundbalances-endofyear


General Fund

$-

13,091 - -

118

13,209

- -

- -

837

837

-

-

12,372

12,985

$25,357


$-

- - -

2,508

2,508

275,609 69,189

3,198

- -

347,996

(30,495)

(30,495)

(375,983)

598,353

$222,370

Debt Service Fund

$4,635

12,846 -

42,667 3

60,151

- -

-

88,223 -

88,223

30,495

30,495

2,423

237,706

$240,129

Total Governmental

Funds

$4,635 25,937

- 42,667 2,629

75,868

275,609 69,189

3,198

88,223 837

437,056

-

-

(361,188)

849,044

$487,856


RECONCILIATIONS OF THE GOVERNMENTAL FUNDS STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENTS OF ACTIVITIES FortheyearsendedJune30,2012and2011(amountsinthousands)

Netchangefundbalances-totalgovernmentalfunds

Amountreportedinthestatementsofactivitiesaredifferentbecause:

Bondproceedsprovidecurrentfinancialresourcestogovernmentalfunds,butdebtis-suedincreaseslong-termliabilitiesonthestatementofnetassets.

Governmentalfundsreportbondpremiumsasotherfinancingsources.However,onthestatementofactivities,premiumsareamortizedoverthelifeofthedebt.

Governmentalfundsreportcostsofdebtissuanceasexpenditures.However,onthestatementsofactivities,thecostofdebtissuanceisamortizedoverthelifeofthebonds

Governmentalfundsreportbondpremiumsasotherfinancingsourcesuponissuance.

However,onthestatementsofactivities,premiumsarerecognizedasanoffsetofinterestexpenseoverthelifeofthebonds.

ArbitrageearningsrebatabletotheFederalgovernmentarereportedonthestatementsofactivitiesonanaccrualbasis.However,arbitrageexpendituresarereportedingovern-mentalfundswhentheoutlayoffinancialresourcesisdue.

Contingentliabilitiesarereportedonthestatementofactivitiesontheaccrualbasis.How-ever,contingentexpendituresarereportedinthegovernmentalfundswhentheoutlayofcurrentfinancialresourcesisdue.

Changeinnet(deficit)-governmentalactivities


2012

$837,629

(1,000,000)

(30,927)

6,105

(17,559)

13,935

58,930

$(131,887)

2011

$(361,188)

- -

(748)

2,571

1,419

(80)

$(358,026)


NOTES TO FINANCIAL STATEMENTS AsofandfortheyearsendedJune30,2012and2011(amountsinthousands,exceptasnoted)

1. ORGANIZATION

HudsonYardsInfrastructureCorporation(“HYIC”)isalocaldevelopmentcorporationestablishedbyTheCityofNewYork(“TheCity”)underArticle14oftheNot-for-ProfitCorporationLawoftheStateofNewYork.HYIC’spurposeisthefinancingofcertaininfrastructureimprovementsintheHudsonYardsareaontheWestSideofManhattan(the“Project”).TheHYICdoesnotengageindevelopmentdirectly,butfinancesdevelopmentspearheadedbyHudsonYardsDevelopmentCorporation(“HYDC”)andcarried outbyexistingpublicentities.TheProjectisinanareagenerallyboundedbySeventhandEighthAvenuesontheeast,West43rdStreetonthenorth,TwelfthAvenueonthewestandWest29thand30thStreetsonthesouth(the“ProjectArea”).TheProjectcon-sistsof:(1)designandconstructionofanextensionoftheNo.7Subwayfromitscurrentterminusat7thAvenueand41stStreettoanewstationat11thAvenueandWest34thStreet(the“SubwayExtension”),(2)acquisitionfromtheMetropolitanTransportationAuthority(“MTA”)ofcertaintransferabledevelopmentrightsoveritsrailyardsbetweenTenthandEleventhAvenuesandbetweenWest30thandWest33rdStreets(“EasternRailYards”or“ERY”),(3)constructionofthefirstphaseofasystemofparks,publicopenspaces,andstreetsintheProjectArea(“PublicAmenities”)and(4)propertyacquisitionfortheProject.

HYICfulfillsitspurposethroughtheissuanceofbondstofinancetheProject,includingtheoperationsofHYDC,andthecollectionofrevenues,includingpaymentsinlieuoftaxesanddistrictimprovementbonusesfromprivatedevelopersandappropriationsfromTheCity,tosupportitsoperationsandpayinterestonitsoutstandingbonds.HYICisgovernedbytheBoardofDirectorselectedbyitsfivemembers,allofwhomareofficialsofTheCity.HYIC’sCertificateofIncorporationrequiresthevoteofanindependentdirec-torasaconditiontotakingcertainactions;theindependentdirectorwouldbeappointedbytheMayorpriortoanysuchactions.HYICdoesnothaveanyemployees;itsaffairsareadministeredbyemployeesofTheCityandofanothercomponentunitofTheCity,forwhichHYICpaysamanagementfeeandoverheadbasedonitsallocatedshareofpersonnelandoverheadcosts.

AlthoughlegallyseparatefromTheCity,HYICisaninstrumentalityofTheCityand,ac-cordingly,isincludedinTheCity’sfinancialstatementsasablendedcomponentunit,inaccordancewiththeGovernmentalAccountingStandardsBoard(“GASB”)standards.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Measurement Focus and Basis of Accounting

Thegovernment-widefinancialstatementsofHYIC,whichincludethestatementsofnetassets(deficit)andthestatementsofactivities,arepresentedtodisplayinforma-tionaboutthereportingentityasawhole,inaccordancewithGASBstandards.Thestatementsofnetassets(deficit)andthestatementsofactivitiesarepreparedusingtheeconomicresourcesmeasurementfocusandtheaccrualbasisofaccounting.Revenuesarerecordedwhenearnedandexpensesarerecordedwhenincurred,regardlessofthetimingofcashflows.


2.SUMMARYOFSIGNIFICANTACCOUNTINGPOLICIES(continued)

HYIC’sgovernmentalfundsfinancialstatementsarepresentedusingthecurrentfinancialresourcesmeasurementfocusandthemodifiedaccrualbasisofaccounting.Revenueisrecognizedwhenitbecomessusceptibletoaccrual,whichiswhenitbecomesbothmeasurableandavailabletofinanceexpendituresinthecurrentfiscalperiod.Revenueisgenerallyconsideredavailableifexpectedtobereceivedwithinoneyearafterpe-riodend.Expendituresarerecognizedwhentherelatedliabilityisincurred,exceptforprincipalandinterestonbondspayableandestimatedarbitragerebateliabilitywhicharerecognizedwhendue.

HYICusesthreegovernmentalfundsforreportingitsactivities:aGeneralFund(“GF”),aDebtServiceFund(“DSF”)andaCapitalProjectsFund(“CPF”).TheDSFisusedtoaccountforthereceiptanddisbursementofresources–includingTransferableDevelop-mentRights(seeNote5)-usedtopayinterestonandprincipaloflongtermdebt.TheCPFisusedtoaccountforthebondissuancesandproceedsandforprojectexpendi-tures.TheGFisusedtoaccountforallfinancialresourcesnotaccountedforintheDSFortheCPF,generallythoseusedorheldforuseforadministrativeexpendituresandarbi-tragerebateexpenditures.HYICaccountsfortheactivitiesintheGFinaccordancewiththeTrustIndenturebetweenHYICandUSBankdatedDecember1,2006,asamended(the“Indenture”).

Fund Balance

Fundbalancesareclassifiedaseither:1)nonspendable,2)restricted,3)committed,4)assigned,or5)unassignedinaccordancewithgovernmentalaccountingstandards.

TheBoardofDirectorsofHYIC(“Board”)constitutesHYIC’shighestlevelofdecision-makingauthority.ResolutionsadoptedbytheBoardthatconstrainfundbalancesforaspecificpurposeareaccountedforandreportedascommittedforsuchpurposeunless,anduntil,asubsequentresolutionalteringthecommitmentisadoptedbytheBoard.

Fundbalanceswhichareconstrainedforuseforaspecificpurposebasedonthedirec-tionofanyofficerofHYICdulyauthorizedunderitsbondindenturetodirectthemove-mentofsuchfundsareaccountedforandreportedasassignedforsuchpurpose,unlessanduntilasubsequentauthorizedactionbythesameoranotherdulyauthorizedofficer,orbytheBoard,istakenwhichremovesorchangestheassignment.

Whenbothrestrictedandunrestrictedresourcesareavailableforuseforaspecificpurpose,itisHYIC’spolicytouserestrictedresourcesfirstthenunrestrictedresourcesastheyareneeded.Whencommitted,assigned,orunassignedresourcesareavailableforuseforaspecificpurpose,itisHYIC’spolicytousecommittedresourcesfirst,thenassignedresources,andthenunassignedresourcesastheyareneeded.

ResourcesconstrainedfordebtserviceorredemptioninaccordancewithHYIC’sInden-tureareclassifiedasrestrictedonthestatementsofnetassets(deficit)andthegovern-mentalfundsbalancesheets.

Cash Equivalents

Cashequivalentsconsistofmoneymarketfundsandinvestmentsmaturingwithin90daysfromthepurchasedate.

NOTES TO FINANCIAL STATEMENTS (continued) AsofandfortheyearsendedJune30,2012and2011(amountsinthousands,exceptasnoted)



Capital Assets

HYICwillnotbetheowneroftheProjectassetsthatareconstructedoracquired,asthoseassetsbecomethepropertyofTheCity.Therefore,HYICreportsnoinfrastructureassetsorconstructionworkinprogress.

ForfixedassetsusedintheoperationsofHYIC,HYIC’spolicyistocapitalizethe purchaseorconstructioncostsofassetshavingaminimumusefullifeoffiveyears andhavingacostofmorethan$35thousand.Nosuchassetshavebeenacquired orconstructed.

Revenues

HYICrevenuesincludeand/orwillinclude: 1)InterestSupportPayments(“ISP”)tobemadebyTheCityunderthetermsofthe

SupportandDevelopmentAgreement(“Agreement”)thatobligatesTheCitytopaytoHYIC,subjecttoannualappropriation,ISPonupto$3billionofHYICbondsissuedpriortotheConversionDate(describedbelow),forsolongassuchbondsareout-standing,inanamountequaltothedifferencebetweentheamountoffundsavailabletoHYICtopayinterestonthosebondsandtheamountofinterestdueonsuchbonds;

2)Paymentsinlieuofrealestatetaxes(“PILOT”)whichhavebeenassignedtoHYICunderagreementswiththeNewYorkCityIndustrialDevelopmentAgency(“IDA”),TheCity,andtheMTA,andthataretobemadeinaccordancewithagreementsbetweendevelopersandIDAandothers(“PILOTAgreements”);

3)TaxEquivalencyPayments(“TEP”)tobemadebyTheCityunderthetermsoftheAgreementthatobligatesTheCitytopaytoHYIC,subjecttoannualappropriation,theamountofrealpropertytaxescollectedbyTheCityonnewdevelopment(includingsubstantialrehabilitationofexistingbuildings)intheProjectArea;

4)DistrictImprovementBonuses(“DIB”)paidbyprivatedevelopersinexchangefortherighttocreateadditionaldensityintheProjectArea;

5)Paymentsinlieuofthemortgagerecordingtax(“PILOMRT”)requiredtobemadebyprivatedevelopersenteringintoPILOTAgreements;

6)Interestearnedonunspentbondproceeds,whichisgenerallyusedfordebtservice;and

7)GrantsfromTheCity.Suchgrantsarerecognizedasrevenueuponreceipt.

TheConversionDateisthedateonwhichHYICcertifiesthat,foreachofthetwopre-cedingfiscalyears,HYIC’sPILOTpaymentsplusTEPrevenues,lessHYIC’soperatingexpenses,(“NetRecurringRevenues”)werenotlessthan125%ofthemaximumannualdebtserviceonallthen-outstandingseniorbondsandnotlessthan105%ofmaximumannualdebtserviceonalloutstandingbonds.Afterthedateonwhichbondsarefirstcall-able(February15,2017)andpriortotheConversionDate,allrevenuesreceivedbyHYICinafiscalyearremainingafterfundingexpensesandinterestmustbeusedtopurchaseorredeemseniorbondsinadvanceoftheirmaturity,exceptthat,if,duringsuchfiscalyear,TheCityhasmadeISPs,thenHYICmustfirstreimburseTheCityforsuchISPs.PriortotheConversionDate,HYICisnotobligatedtomakeanypaymentsofprincipalonitsbondspriortomaturityunlessanduntilHYICreceivesrevenuesinamountssufficienttomakesuchpayments.AftertheConversionDate,HYICmustestablishascheduleofsink-ingfundinstallmentsforalloutstandingdebtnolaterthanJune30thofthatyear.BondsissuedbyHYICaftertheConversionDatearenotentitledtoISPsundertheAgreement.




ArbitrageRebate

TomaintaintheexemptionfromFederalincometaxofinterestonbondsissuedonDe-cember21,2006,HYICwillfundamountsrequiredtoberebatedtotheFederalGovern-mentpursuanttoSection148oftheInternalRevenueCodeof1986,asamended(the“Code”).TheCoderequiresthepaymenttotheUnitedStatesTreasuryoftheexcessoftheamountearnedonallobligationsovertheamountthatwouldhavebeenearnedifthegrossproceedsoftheissuewereinvestedatarateequaltotheyieldontheissue,togetherwithanyearningsattributabletosuchexcess.Constructionfunds,debtservicefundsoranyotherfundsoraccountsfundedwithproceedsofsuchbonds,includingearnings,orpledgedtoorexpectedtobeusedtopayinterestonsuchbondsaresub-jecttothisrequirement.Paymentistobemadeaftertheendofthefifthbondyearandaftereveryfifthbondyearthereafter,orwithin60daysafterretirementofthebonds.

AsofJune30,2011,HYIChadaccruedapproximately$13.9millionasanestimatedarbi-tragerebateobligation.Duringfiscalyear2012,HYICmadeaarbitragerebatepaymenttotheUnitedStatesTreasuryforitsrequiredarbitrageobligationofapproximately$8.8million.Thedifferenceofapproximately$5.1millionbetweenwhatwasaccruedinprioryearsandwhatwaspaidinfiscalyear2012isreflectedasanarbitragerebatecreditinthegovernment-widefinancialstatements.Theannualestimatedarbitrageobligationwasaccruedeachyearonthegovernment-widefinancialstatements,butwasnotreportedasanexpenditureinthegovernmentalfundfinancialstatementsuntilfiscalyear2012whentheactualpaymentwasmadetotheFederalgovernment.

Bond Premium and Issuance Costs

Bondpremiumandissuancecostsarecapitalizedandamortizedoverthelivesoftherelateddebtusingtheinterestmethodinthegovernment-widefinancialstatements.TheamountsofunamortizedbondpremiumatJune30,2012and2011were$117,457and$89,985,respectively,whichwerenetofaccumulatedamortizationof$16,310and$12,855,respectively.TheamountsofunamortizedissuancecostsatJune30,2012and2011were$32,270and$26,166,respectively,whichwerenetofaccumulatedamortiza-tionof$4,687and$3,738,respectively.

Use of Estimates

Thepreparationoffinancialstatementsinaccordancewithaccountingprinciplesgener-allyacceptedintheUnitedStatesofAmericarequiresHYIC’smanagementtomakeestimatesandassumptionsindeterminingthereportedamountsofassetsandliabilitiesasofthedateofthefinancialstatementsandthereportedamountsofrevenuesandexpendituresduringthereportingperiod.Actualresultscoulddifferfromthoseestimates.

Recent Accounting Pronouncements

AsacomponentunitofTheCity,HYICimplementsnewGASBstandardsinthesamefiscalyearastheyareimplementedbyTheCity.ThefollowingarediscussionsofthestandardsrequiringimplementationinthecurrentyearandstandardswhichwillormayimpactHYICinfutureyears.




• InNovember2010,GASBissuedStatementNo.60,Accounting and Financial Re-porting for Service Concession Agreements(“GASB60”).GASB60establishesthefinancialreportingforserviceconcessionagreements,whichareatypeofpublic-privateorpublic-publicpartnership.GASB60iseffectiveforfinancialstatementsperiodsbeginningafterDecember15,2011.AsHYIChasnotenteredintoanyser-viceconcessionagreements,GASB60isnotexpectedtohaveanimpactonHYIC’sfinancialstatements.

• InNovember2010,GASBissuedStatementNo.61,The Financial Reporting Entity: Omnibus – An Amendment of GASB Statements No. 14 and No. 34(“GASB61”).GASB61amendsexistingstandardsrelatingtothecompositionandreportingofthegovernmentalfinancialreportingentity.GASB61iseffectiveforfinancialstatementperiodsbeginningafterJune15,2012,butisnotexpectedtohaveanimpactonHYICoritsstatusasablendedcomponentunitofTheCity.

• InDecember2010,GASBissuedStatementNo.62,Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 GASB and AICPA Pronouncements(“GASB62”).GASB62incorporatesalargevolumeofFASBandAICPAaccountingpronouncementsintotheGASBhierarchyofgenerallyacceptedaccountingprinciplesforUSstateandlocalgovernments.GASB62isef-fectiveforfinancialstatementperiodsbeginningafterDecember15,2011.HYIChasnotcompletedtheprocessofevaluatingGASB62,butdoesnotexpectittohaveanimpactonitsfinancialstatements.

• InJune2011,GASBissuedStatementNo.63, Financial Reporting of Deferred Out-flows of Resources, Deferred Inflows of Resources, and Net Position(“GASB63”).GASB63establishesnewreportingrequirementsoftwoelements(deferredoutflowsofresourcesanddeferredinflowsofresources)andrenamestheStatementofNetAssetstoStatementofNetPosition,aswellasreportedNetAssets,andcomponentsthereof,toNetPosition.GASB63iseffectiveforfinancialstatementsforperiods beginningafterDecember15,2011.HYIChasnotcompletedtheprocessofevalu-atingGASB63,butitisexpectedtochangeonlytheformattingandrenamingofHYIC’sfinancialstatementstoNetPositionandcomponentsthereof,withnooverallfinancialimpact.

• InJune2011,GASBissuedStatementNo.64,Derivative Instruments: Application of Hedge Accounting Termination Provision(“GASB64”).GASB64clarifiestheexist-ingrequirementsfortheterminationofhedgeaccountingupondefaultorterminationofaswapcounterpartyorswapcounterparty’screditsupportprovider.GASB64iseffectiveforfinancialstatementsforperiodsbeginningafterJune15,2011.AsHYIChasnotenteredintoanysuchagreements,GASB64doesnothaveanimpactonitsfinancialstatements.




• InMarch2012,GASBissuedStatementNo.65,Items Previously Reported as Assets and Liabilities(“GASB65”).GASB65establishesaccountingandreportingstan-dardsthatreclassifycertainitemsthatarecurrentlyreportedasassetsandliabilitiestodeferredoutflowsofresourcesordeferredinflowsofresourcesandrecognizecertainitemscurrentlybeingreportedasassetsandliabilitiesasoutflowsandinflowofresources.Inaddition,itlimitstheuseofthetermdeferredinthefinancialstate-mentpresentation.TheprovisionsofGASB65areeffectiveforfinancialstatementforperiodsbeginningafterDecember15,2012.HYIChasnotcompletedtheprocessofevaluatingGASB65,butitexpectstochangeitsaccountingonhowdebtissuancecostsarerecognizedandreportedinthegovernment-widefinancialstatementsinthatthecarryingvalueofcostofissuancewillnotbereportedonthestatementofnetassets,resultinginarestatementofbeginningnetassetsuponimplementation.

• InMarch2012,GASBissuedStatementNo.66,Technical Corrections-2012 an amendment of GASB Statements No. 10 and No. 62(“GASB66”).GASB66resolvesconflictingaccountingandreportingguidancethatresultedfromtheissuanceoftwopronouncements,StatementNo.54Fund Balance Reporting and Governmental Fund Type Definitions,andStatementNo.62Codification of Accounting and Financial Re-porting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronounce-ments.TheprovisionsofGASB66areeffectiveforfinancialstatementsforperiodsbeginningafterDecember15,2012.HYIChasnotcompletedtheprocessofevaluat-ingGASB66,butdoesnotexpectittohaveanimpactonitsfinancialstatements.

• InJune2012,GASBissuedStatementNo.68,Accounting and Financial Report-ing for Pensions(“GASB68”).GASB68establishesstandardsofaccountingandfinancialreportingfordefinedbenefitpensionsanddefinedcontributionpensionsprovidedtotheemployeesofstateandlocalgovernmentalemployers.Therequire-mentsofGASB68areeffectiveforfinancialforfiscalyearsbeginningafterJune15,2014.HYIChasnotcompletedtheprocessofevaluatingGASB68,butdoesnotexpectittohaveanimpactonitsfinancialstatements.

3. CASH AND CASH EQUIVALENTS

AsofJune30,2012and2011,HYICdidnothaveanycashdepositsonhand.CashequivalentswerecomprisedofU.S.TreasuryMoneyMarketFundsandcommercialpapermaturingwithin90days,primarilyrestrictedforcapitalprojects.HYIC’scashandcashequivalentsconsistedofthefollowingatJune30,2012and2011:

CashCashEquivalents(seeNote4)

TotalCashandCashEquivalents

2012

$- 217,703

$217,703

2011

$- 227,691

$227,691



4. INVESTMENTS HYIC’sinvestmentsconsistedofthefollowingatJune30,2012and2011:

HYIC’smanagementinvestsfundswhicharenotimmediatelyrequiredforoperations,debtserviceorcapitalprojectexpenses.EachaccountofHYICisheldpursuanttotheIndentureandmaybeinvestedinsecuritiesorcategoriesofinvestmentsthatarespecifi-callyenumeratedaspermittedinvestmentsforsuchaccountpursuanttotheIndenture.Investmentsarereportedatfairvalueusingmarketpricesinanactivemarketasofthefinancialstatementdate.

Custodial Credit Risk

Custodialcreditriskistheriskthat,intheeventofthefailureofthecustodian,HYICmaynotbeabletorecoverthevalueofitsinvestmentsorcollateralsecuritiesthatareinthepossessionofanoutsideparty.AllinvestmentsareregisteredandareheldbyHYIC’sagentinHYIC’sname.

Unrestricted: U.S.TreasuryMoneyMarketFunds FederalHomeLoanMortgageCorporationdiscountnotes

(maturingwithinoneyear) FederalHomeLoanMortgageCorporationmediumtermnotes

(maturingafteroneyear) U.S.TreasuryBills(maturingwithinoneyear) Total unrestricted RestrictedforDebtService: U.S.TreasuryMoneyMarketFunds U.S.TreasuryBills(maturingwithinoneyear)

TotalrestrictedforDebtService

Restricted for Capital Projects: U.S.TreasuryMoneyMarketFunds CommercialPaper(maturingwithin90days) CommercialPaper(maturingafter90days) FederalFarmCreditBankdiscountnotes (maturingwithinoneyear) FederalNationalMortgageAssociationdiscountnotes (maturingwithinoneyear) U.S.TreasuryBills(maturingwithinoneyear) Total restricted for Capital Project Total investments including cash equivalents Lessamountsreportedascashequivalents(seeNote3)

Total investments

2012

$197

-

- 16,365

16,562

3,311 154,368

157,679

94,375 42,824

419,032

24,993

149,962 249,884

981,070

1,155,311

(217,703)

$937,608

2011

$272

7,617

17,347 -

25,236

6,448 -

6,448

42,435 178,536 68,985

-

- -

289,956

321,640

(227,691)

$93,949



4. INVESTMENTS (continued)

Credit Risk

AllinvestmentsheldbyHYICatJune30,2012and2011areobligationsof,orguaran-teedby,theUnitedStatesofAmerica;orareinvestedinFederalHomeLoanMortgageCorporationsecuritieswhichareratedbyS&PA-1+,MoodyP-1,andFitchF1+;FederalNationalMortgageAssociationsecuritieswhichareratedbyS&PAA+,MoodysAaa,andFitchAAA;moneymarketfundswhichareratedbyS&PAAAandMoodysAaa-;andcommercialpaperthatareratedinthehighestcategorybyatleasttworatingagencies.

Interest Rate Risk

HYIC’sshorttermmaturitiesaresubjecttominimalriskoffairvaluedeclinesduetochangesinmarketinterestrates.Investmentswithlongertermsareexpectedtobehelduntilmaturitytherebylimitingtheexposurefromrisinginterestrates.

Concentration of Credit Risk

ConcentrationofcreditriskistheriskoflossattributedtothemagnitudeofHYIC’sinvest-mentsinasingleissuer(5%ormore).HYIC’sinvestmentpolicyplacesnolimits,exceptforsecurities,ontheamountHYICmayinvestinanyoneissuerofeligibleinvestmentsasdefinedintheIndenture.AsofJune30,2012,HYIC’sinvestmentsareineligiblegovern-mentobligationsandcommercialpaper.Theseare60%and40%ofHYIC totalinvestments,respectively.

5. TRANSFERABLE DEVELOPMENT RIGHTS

HYICacquireda50%interestinEasternRailYardsTransferableDevelopmentRights(“TDRs”)forthepurposeofresale,underanagreementamongTheCity,theMTA,theTriboroughBridgeandTunnelAuthorityandtheLongIslandRailRoadCompany(“TDRAgreement”).ThepurchasebydevelopersofTDRswillpermittheconstructionofbuild-ingsoflargersizethanwouldotherwisebepermissibleas-of-rightunderapplicablezoninglaw.ProceedsreceivedbyHYICforsalesoftheTDRs,uptotheamountofHYIC’sinvestment(includingthe$200milliontotalpurchasepriceandinterestcoststhereon)willbeusedbyHYICtosupportitsoperationsandserviceitsdebt.

UnderthetermsoftheTDRAgreement,HYICmadetheinitialinstallmentpaymentof$100,000infiscalyear2007,andwasrequiredtomakethreemoreannualpaymentsof$33,333inSeptemberof2007,2008and2009forthisinterestofwhichallthepaymentsweremade.ThefullvalueoftheTDRs,including,thefullpurchasepriceandHYIC’scostoffunds,isreflectedasanassetinthegovernmentalfundsbalancesheetsandinthestatementsofnetassets(deficits).



6. LONG-TERM LIABILITIES

ChangesinLong-termLiabilities

OnDecember21,2006,HYICissuedtheSeries2007ABondsintheamountof$2billiontopartiallyfinancetheProject.TheSeries2007ABondsaretermbondswithsemiannualinterestpaymentdatesbeginningonAugust15,2007andmaturingonFebruary15,2047.OnOctober26,2011,HYICissueditsFiscal2012SeriesASeniorRevenueBondsintheamountof$1billion.HYIChaspledgedallrevenuesanditsproceedsfromsalesofTDRstosecurethebondstofinancetheremainingportionoftheProject.TheSeries2012ABondsaretermbondswithsemiannualinterestpaymentsbeginningonFebruary15,2012andmaturingonFebruary15,2047.

InterestontheSeries2007ABondsandSeries2012ABondsarepayablesemiannuallyonFebruary15andAugust15.PaymentsofprincipalontheSeries2007ABondsandtheSeries2012ABondswillbemadebyHYICfromrevenuesandTDRssaleproceedsreceivedasaresultofdevelopmentintheHudsonYardsFinancingDistrict.PriortotheConversionDate(discussedinNote2),HYICisnotobligatedtomakeanypaymentsofprincipalonthebondspriortomaturityunlessanduntil–andtotheextentthat–HYICreceivesrevenuesandTDRssaleproceedsinamountssufficienttomakesuchpay-ments.Afterthefirstcalldate(February15,2017)forthebondsandpriortotheConver-sionDate,allrevenuesremainingafterfundingexpensesandinterestmustbeusedtopurchaseorredeemSeriesbonds(exceptthat,ifTheCityhasmadeISPsduringsuchfiscalyear,thenHYICmustfirstreimburseTheCityforsuchISPs).TheIndenturespeci-fiesthatascheduleofsinkingfundinstallmentsmustbeestablishedforthebondsnolaterthantheJune30thfollowingtheConversionDate.Thebondsbearinterestatfixedratesrangingfrom4.5%to5.25%.

AsummaryofchangesinoutstandingbondsandotherlongtermdebtduringtheyearendedJune30,2012follows:

Period Ended June 30, 2012

Series Fiscal2007SeriesA Fiscal2012SeriesA TotalLong-termDebt

Balance June 30, 2011

$2,000,000

-

$2,000,000

Deletions

$-

-

$-

Additions

$-

1,000,000

$1,000,000


$2,000,000

1,000,000

$3,000,000

Due Within One Year

$-

-

$-

Series Fiscal2007SeriesA TotalLong-termDebt


$2,000,000

$2,000,000

Deletions

$-

$-

Additions

$-

$-


$2,000,000

$2,000,000

Due Within One Year

$-

$-

AsummaryofchangesinoutstandingbondsandotherlongtermdebtduringtheyearendedJune30,2011follows:

Period Ended June 30, 2011



Years Ended June 30, 201320142015201620172018to20222023to20272028to20322033to20372038to20422043to2047

Totals

Principal

$- - - - - - - - - -

3,000,000

$3,000,000

Total

$153,125 153,125 153,125 153,125 153,125 765,625 765,625 765,625 765,625 765,625

3,612,500

$8,206,250

Interest

$153,125 153,125 153,125 153,125 153,125 765,625 765,625 765,625 765,625 765,625 612,500

$5,206,250

6.LONG-TERMLIABILITIES(continued)

Debtservicerequirementsonbonds,includingprincipalandinterest,atJune30,2012,areasfollows:

Claims and Litigation

AsofJune30,2011,TheCitywasadefendantinseveralcondemnationproceedingspertainingtotheHudsonYardsProject.Thepotentialfutureliabilityattributabletoclaimsassertedinsuchcondemnationproceedingswasestimatedtobe$60million,whichwasHYIC’sbestestimateasoftheendoffiscalyear2011,baseduponavailableinformation.InSeptember2011,theNewYorkStateSupremeCourt(the“Court”)issuedadetermi-nationthattheClaimants’appraisalshadrelieduponanerroneouszoningassumption.HYIChasreversedthe$60millionliabilityaccrual,resultinginaprojectexpensecreditof$39.8millionbeingreportedinthegovernment-widefinancialstatements.TheClaimantshaveappealedtheCourt’sdeterminationtotheAppellateDivisionfortheFirstDepart-mentandhavenotsubmittedrevisedappraisals.InviewoftheaforesaiddeterminationbytheCourtandtheClaimants’appealthereof,theCorporation’spotentialliabilityasofJune30,2012,ifany,withrespecttoanyrevisedclaimscannotbeestimated.

DuringthefiscalyearendedJune30,2012,anewclaimant,whowasnotapartytotheaboveproceedings,hasfiledsuitrelatedtovaluationaspartofcondemnationproceed-ings.Assuch,anaccrualof$1.4millionhasbeenrecordedasofJune30,2012untilsuchtimethatadeterminationismadewithregardstotheclaim.Theestimatemayberevisedasfurtherinformationisobtainedandaspendingcasesarelitigatedorsettled.

……



DIRECTORS & OFFICERS

Directors Mark Page DirectorofManagementandBudgetoftheCityofNewYork John C. Liu CityComptroller Christine Quinn CityCouncilSpeaker RobertK.Steel DeputyMayorforEconomicDevelopment CasHolloway DeputyMayorforOperations

Officers AlanL.Anders President Marjorie E. Henning VicePresidentandSecretary F.JayOlson Treasurer Philip Wasserman DeputyTreasurer PrescottD.Ulrey AssistantSecretary JeffreyM.Werner AssistantSecretary Michele Mark Levine Comptroller RobertBalducci DeputyComptroller KemrajNarine AssistantComptroller

DirectorofMedia& RaymondJ.Orlando Investor Relations [email protected] 212.788.5875

255GreenwichStreetNewYork,NY10007

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