The physical location makes sense. Its the ideology of the UN. At least one function of the UN seems to prevent "States" from escaping debt.
This Boroughs jurisdiction strikes me municipal. There must be a reason for the state capital to be up in Albany. Everybody might presume NY City is the state capital. Otherwise wouldn't people cry foul for any American, no matter how wealthy to give American ground away as "international soil". Traditional constitutional law allows for consulates, embassies etc. But this evolution of the League of Nations seems an animal all its own all right.
Albany used to be Fort Orange ala William of Orange of Glorious Revolution 1688 fame.
New York was New Amsterdam, seat of Dutch colonial government at North America.
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Oh, btw, shikamuru in case you missed out on key backstory:
Otto the Orange, Syracuse University (former?) mascot.