New York City Mayor Zohran Mamdani chose an unusual pitch while introducing his first executive budget as he ramped up his case for increasing taxes on the wealthy and corporations.
"These are not the options we want to pursue," Mamdani said of choices he laid out in his budget presentation to close a massive shortfall. "They are the options of last resort."
Mamdani's proposal would impose higher property taxes, reserve spending and a billion dollars of efficiencies to balance the budget. But it functions as more of a threat than a solution, analysts said, as he spent much of his budget address pressuring state lawmakers to increase taxes on the wealthy and corporations.
Based on city councilmembers' reactions, Mamdani's proposed tax hikes seem unlikely to pass. City Council Speaker Julie Menin and Finance Chair Linda Lee released a
"Dipping into rainy-day reserves and proposing significant property tax increases should not be on the table whatsoever," the statement said. "The Council believes there are additional areas of savings and revenue that deserve careful scrutiny before increasing the burden on small property owners and neighborhood small businesses, which could worsen the affordability crisis."
Mamdani's executive budget totaled $127 billion — a $14 billion increase in spending, most of which plugs budget gaps, funds programs that depended on COVID aid and pays for unfunded mandates, he said.
The budget gap for fiscal years 2026 and 2027, which was estimated at $12 billion at the start of the year, has shrunk to $7 billion, thanks in part to far higher tax revenue from a record year on Wall Street and in part from the plan to find savings within city agencies.
New York Gov. Kathy Hochul announced prior to Mamdani's address the state will chip in $1.5 billion over two years and increase education funding statewide, bringing the budget gap down to $5.4 billion.
Mamdani said there were two options, or "paths," to raise funds to cover the rest of the shortage: raising income taxes on New Yorkers with incomes over $1 million and corporations — which Hochul has steadfastly refused to allow — or raising the city's property tax by 9.5%.
"We will spend the coming months doing everything in our power to ensure that our final budget reflects the first path," Mamdani said. "If we do not go down the first path, the city will be forced down a second, more harmful path. Faced with no other choice, the city would have to exercise the only revenue lever fully within our own control. We would have to raise property taxes."
But Ana Champeny, vice president for research of the Citizens Budget Commission, said that's a "false choice," and both paths have downsides.
"Raising the corporate business tax, or the income tax, will make the city less competitive," Champeny said. "Raising the property tax makes it less affordable. Both of these are not winning solutions."
New York City's property tax system badly needs reform, most observers agree, which makes raising the tax extra undesirable politically.
Mamdani himself has called the property tax system unfair and
"It's very difficult to get changes to the property tax system approved at the same time that you are pursuing a tax increase," said John Hallacy, president of John Hallacy Consulting.
Mamdani's plan also requires spending reserves: $980 million of the rainy-day fund this fiscal year and $229 million from the Retiree Health Benefits Trust in FY 2027.
The city will maintain $6.3 billion of reserves in FY26 and $6.1 billion in FY27, and he intends to replenish the reserves in fiscal 2028, assuming the city can find a revenue source, Champeny said.
The budget includes out-year gaps of $6.66 billion in FY 2028, $6.75 billion in FY 2029, and $7.1 billion in FY 2030.
The reserve spending is mostly in-year reserves, which are built into the city's budget in case of emergency or fluctuations in revenue, Champeny said. Mamdani wants to draw them down to the statutory minimum. She found this especially bad, given the city's revenue is at record highs.
"That is concerning, because it's leaving the city with very little cushion in case something comes up in the next year and a half," Champeny said. "And that something could include federal cuts."
Hallacy said one-time reserve spending is understandable when faced with a big budget gap.
"That's the primary reason reserves are there — to help out in more difficult times," Hallacy said. "The hard part is, how do those get replenished over time?"
96% of the
Mamdani's proposal leaves the city's borrowing plans mostly unchanged, J.P. Morgan Managing Director Peter DeGroot wrote for J.P. Morgan's Municipal Market Intelligence.
"All else equal, the continuity in planned issuance may ease near-term concerns among some market participants about a sharp increase in GO supply that had been inferred from campaign statements," DeGroot wrote.
Hallacy said he doesn't expect the market to react much to Mamdani's executive budget. If there is movement in the city's spreads, it's likely to come farther along in the budgeting process, he said.
Other parts of Mamdani's approach to budgeting drew praise.
Mamdani's predecessor, Eric Adams, consistently under-budgeted expenses including police overtime, a city housing voucher program and education-related lawsuits, leading to the current budget cap, said Howard Cure director of municipal bond research for Evercore Wealth Management.
Mamdani's budget was "more realistic" about budgeting accurately for these expenses in future years, he said.
Champeny noted, though, the CBC thinks Mamdani's revenue projections are too optimistic.
Champeny approved of Mamdani's plan to find savings within city agencies. It largely resembles prior mayors' programs to eliminate budget gaps, but the few differences are practical, Champeny said.
The new parts of Mamdani's approach include assigning specific people within each agency to find savings and write regular reports, filling some vacant positions in city government while eliminating others, and hiring 200 lawyers to defend against lawsuits and 50 auditors to find additional savings.
