In his first budget proposal, New York City Mayor Zohran Mamdani delivered a nervy ultimatum to his partner in government, Gov. Kathy Hochul: Raise taxes on the wealthy and kick in more money to the city or be indirectly blamed for a property tax hike and drawing down city budget reserves.\u00a0<\/p>\n
That message, delivered prominently in Mamdani\u2019s presentation of a $127 billion proposed budget for fiscal year 2027, could land with a thud in Albany, where Hochul has drawn a line against raising taxes on high-earning individuals and corporations \u2013 as Mamdani has requested. And it comes just a day after the governor announced the state would kick in an additional $1.5 billion \u2013\u00a0including $500 million in recurring funding \u2013 to help close the city\u2019s $7 billion gap over the next two years to where it stands now, at $5.4 billion.<\/p>\n
\u201cThere are two paths to bridge this gap. The first is the most sustainable and the fairest path,\u201d Mamdani said on Tuesday, referring to his preferred option of taxing the rich and getting additional funding from the state. The latter option \u2013\u00a0raising property taxes and pulling from reserves \u2013\u00a0he called the option of \u201clast resort.\u201d<\/p>\n
The $127 billion budget for next fiscal year is a roughly $9 billion increase from the $118 billion budget for the current fiscal year. (The budget for fiscal year 2026 was revised up to $122 billion in Mamdani\u2019s presentation on Tuesday.) The bulk of that increase is funding to resolve underbudgeting under the last administration, including for a rental assistance program. It includes just $576 million in new spending on programs, including the hiring of 300 new employees at the Law Department and $100 million in extra snow clearing costs this winter.<\/p>\n
Hochul\u2019s resistance to raising personal income and corporate taxes would leave Mamdani with the path he has presented as \u201cmuch more damaging\u201d: raising property taxes and pulling from reserves to fill the remaining gap. The proposal includes a 9.5% property tax increase, which would need to be approved by the City Council. It would also include drawing down $980 million from the Rainy Day Fund this fiscal year and $229 million from the Retiree Health Benefits Trust in fiscal year 2027, a move budget watchdogs frown upon.<\/p>\n
\u201cThe Rainy Day Fund is intended to be used in the case of a recession, which is not the current situation. So using those resources is not prudent,\u201d said Ana Champeny, vice president for research at the fiscal watchdog group the Citizens Budget Commission.\u00a0<\/p>\n
Without pursuing either of those options, the city would be left with a $5.4 billion gap in fiscal year 2027, Mamdani said.\u00a0<\/p>\n
As City Hall knew it would, the prospect of raising property taxes raised some eyebrows on Tuesday too. The property tax system has long been decried as an unfair, broken system that favors single-family homes and higher-income homeowners in co-ops and condos. Comptroller Mark Levine called it<\/a> a \u201cpretty extreme option\u201d \u2013\u00a0and noted it also relied on \u201cpretty aggressive revenue projections.\u201d At an unrelated appearance in New York City, Hochul said<\/a> she didn\u2019t think a property tax increase was necessary.<\/p>\n Raising property taxes is a political third rail, unpopular with both Democrats and Republicans. \u201cIt\u2019s hard to buy a home now, so you\u2019re really setting back generational wealth,\u201d Queens Borough President Donovan Richards told reporters Tuesday, adding, \u201cYou\u2019re going to force people out of their homes.\u201d<\/p>\n \u201cRaising property taxes has got to be among the worst ideas imaginable to make our budget gap smaller,\u201d Council Member and Republican Minority Leader David Carr told City & State. \u201cThe reality is, it\u2019s among the most regressive taxes that the city levies on New Yorkers. And to say that we have a progressive administration that actually thinks that’s something they may need to do is ridiculous.\u201d<\/p>\n