NEW YORK — Mayor Zohran Mamdani and Council Speaker Julie Menin have been at loggerheads over how to close New York City’s multibillion-dollar budget gap.
Mamdani has maintained the deep deficit can only be plugged if the state raises taxes on millionaires and large corporations. Menin has countered that the gap can be addressed by trimming municipal bloat — a proposal Mamdani panned as “unrealistic” just weeks ago.
Tuesday brought a major deescalation: The two leaders joined forces to call on Gov. Kathy Hochul and state lawmakers to scale back a tax credit largely benefitting millionaires. Doing so would generate $1 billion in new revenue for the city, a windfall that could go a long way in helping the city balance its books, Menin and Mamdani said at a joint press conference.
“We are standing together today, we will stand together again,” Mamdani said, appearing alongside Menin in the City Hall Rotunda. “If we were to reduce this tax credit by just a quarter, as the speaker said, we would be talking about raising nearly $1 billion in additional revenue that would be critical in our city’s ability to balance this budget.”
Hochul, who’s still grappling with a state budget that’s now nearly a month late, immediately threw cold water on the new push from Mamdani and Menin.
“It’s not happening. We’re not changing the PTET,” Hochul told reporters in Albany later in the day, using an acronym for the Pass-Through Entity Tax credit.
In slamming the door on the proposal, Hochul is leaving Menin and Mamdani without a clear path forward on how to fill the city’s budget hole. The governor’s opposition to the tax credit push also creates an unusual new front in the negotiations on this year’s overdue state budget, with Mamdani and Menin on one side and Hochul on the other.
The fraught dynamic comes at a politically delicate time for the Buffalo-born governor, who is gearing up for a reelection bid and will need deep blue New York City if she wants to cruise to a second full term. Being at odds with Mamdani, who draws support from a fervent left-leaning base, would complicate Hochul’s political standing with many Democratic voters.
Mamdani and Menin made the joint plea for the tax credit changes in tandem while announcing they had agreed to push back the release of the mayor’s executive budget proposal until May 12, a deal first reported by POLITICO on Monday night.
The executive spending plan, which forms the basis for the final stretch of negotiations before the mayor and the Council must finalize a city budget by July 1, is technically due this Friday.
But as the state is now nearly a month late with its own budget, Mamdani and Menin are agreeing to delay the executive plan’s release in hopes that Albany will have its fiscal outlay in order by May 12. Without knowing how much revenue will flow to the city from the state, Mamdani and Menin both said there will be holes in the city’s spending plan that would be hard to reconcile.
While he’s pressed for tax increases for months, Mamdani has been careful not to call out Hochul directly on the issue, focusing instead on highlighting areas of agreement, like their shared focus on expanding free child care in New York. Menin, meantime, has until now largely refrained from calling for tax increases, aligning herself with the governor, who has made clear she does not want to increase levies that impact New York residents this year.
In pressuring Hochul for PTET concessions, Menin and Mamdani both run the risk of angering the governor, who has already committed $1.5 billion in direct aid for the city and $1.2 billion in new child care funding. She has also vowed to subject expensive secondary homes in the city to a new pied-Ã -terre tax celebrated by Mamdani.
Still, Hochul did not close the door Tuesday on providing the city with more public school aid.
“We’ll certainly look at education dollars, what those look like,” she told reporters during an unrelated news conference. “So there’s a couple of variables.”
The state budget is on the verge of being a month past its March 31 due date and no solution is on the horizon. Negotiating an additional bailout for New York City stands to further complicate the ongoing talks between the governor and the Democratic-led Legislature.
In Hochul’s telling, Mamdani and the City Council need to place more emphasis on finding savings in the city budget.
“January, February, March and April I’ve had those conversations,” Hochul said Tuesday. “They know, just like every other city, it’s not easy. But it’s required.”
The governor also cast doubt on boosting funding for the city under the Aid to Municipalities program — another request from Mamdani and Menin. The governor noted that money is primarily used to help local governments offset lost revenue from a statutory property tax cap.
“The city has no such restrictions, but we’re finding other ways to get them money,” Hochul said — and then noted how much the state has already committed: “Four billion dollars is pretty damn good.”
Mamdani and Menin said they’re both hard at work allocating savings in city coffers. But Mamdani said “there is no amount of savings that will absolve Albany from the partnership that’s required to get all of us to a balanced budget by the end of this process.”
While Mamdani and Menin struck an overall note of agreement Tuesday, there were signs they aren’t on the exact same page as it relates to PTET.
Menin, a more moderate Democrat than Mamdani, said she believes the proposed reduction — from 100 percent of a pass-through-entity’s income to 75 percent of it — should only be applied for two years.
“We’re talking about a short-term solution to this problem,” Menin said.
Mamdani did not echo that sentiment at the press conference. Asked afterward if the mayor agrees the reduction should only be temporary, his spokesperson said: “We’re looking for structural solutions to the structural challenges facing our city.”
The Mamdani-Menin PTET push is likely to get a warmer reception from leaders in the state Assembly and Senate, who included proposals for decreasing the credit in their non-binding budget plans earlier this year. The tax credit proposal has up until now not been a key focus in negotiations between lawmakers and Hochul’s team, however.
The moderate Democratic governor is heavily favored to win a second full term this year, but will need New York City voters to give her a decisive victory. Hochul has cultivated an alliance with Mamdani since his upset Democratic primary victory last year over her predecessor, ex-Gov. Andrew Cuomo.
Yet she has adamantly opposed Mamdani’s favored tax proposals, like broad rate increases for wealthy New Yorkers and corporations. Her pied-Ã -terre surcharge proposal, which is expected to generate $500 million in annual revenue for the city, would capture a relatively small amount of people who do not live full time in the five boroughs.
Hochul insisted Tuesday her relationship with the mayor remains strong and that the candid conversations are an indication of that strength. Mamdani endorsed Hochul’s reelection bid in February — a nod that helped clear the Democratic primary field. But there are limits to what the governor wants to do given the state’s own fiscal constraints.
“I can’t speak for anybody else in how they govern, I’m just being really honest in my conversations,” she said.
Any agreement to boost New York City’s finances must win approval from Albany lawmakers who are yet to receive a detailed briefing on the city’s desired solution. Though the Democratic lawmakers who dominate the Legislature have been supportive of a pied-Ã -terre surcharge like the one Hochul proposed, as well as altering PTET, any changes must be negotiated in the tax-and-spend talks.
“We’ve had New York City finances on the agenda from the very beginning,” State Senate Majority Leader Andrea Stewart-Cousins said. “We’re all trying to figure out a way that they can get there.”
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