Mayor Zohran Mamdani’s socialist dream for New York City is facing a wake-up call – in the form of a cash crunch and spiraling borrowing costs from investors who are increasingly alarmed over his Marxist experiments, On The Money has learned.
Mamdani – who has proclaimed that he will “replace the frigidity of rugged individualism with the warmth of collectivism” – balanced his $124.7 billion annual budget as required by New York law with a series of gimmicks, so-called one-shot revenue raisers that included delaying some pension payments.
The result, On the Money has learned, includes a looming cash shortage that has been signaled by City Comptroller Mark Levine. As earlier reported by Melissa Russo of NBC 4, the amount of money the city has on hand is alarmingly low, and risks drying up altogether come November.
Wall Street is getting nervous – increasingly so about what Mamdani is looking to accomplish and how. Accordingly, it continues to demand higher interest rates on debt. That’s the case not only with long-term debt, but also the usually super-safe, short-term variety.
My municipal market sources confirm the squeeze. Since the beginning of the year (when Mamdani took office) the so-called “spread” or difference between triple-A short-term bonds, and those issued by NYC with a maturity of one year has jumped nearly 20%.
That skittishness is also reflected in the 13.7% spike in longer dated, 10-year debt, the so-called risk premium investors are demanding to finance all that collectivist warmth.
And it may be why the mayor’s office isn’t tapping short-term borrowing markets to make up for the looming cash deficit, Wall Street analysts tell On The Money. Instead, as Russo has reported, City Hall has played with delaying payments to nonprofits to ride out the storm and god knows what else as it scrambles for funds.
A City Hall rep didn’t respond to On The Money’s request for comment.
True, this does happen from time to time with big, profitable companies who tap short-term borrowing markets to keep the lights on and paychecks flowing until revenues start to perk up. But NYC isn’t a big profitable company; its budget is growing to pay for Mamdani’s socialist dreams.
As I have written previously on these pages, the result is that taxpayers are fleeing. They’re being replaced by poor immigrants who tap into its extensive welfare state. Mamdani is an avowed socialist, doubling down on all of the above.
Richard Farley has a particularly firm grasp of the city’s fiscal problems and how Mamdani’s policies are making them worse and potentially unsustainable. Gotham could be heading toward financial Armageddon, he warns.
He’s a Wall Street lawyer who specializes in debt, and a historian of the city’s fiscal crisis of the 1970s. His book, “Drop Dead: How a Coterie of Corrupt Politicians, Bankers, Lawyers, Spinmeisters, and Mobsters Bankrupted New York, Got Bailed Out, Blamed the … as Usual,” should be required reading for people in government.
Farley tells me the logical recourse would be short-term borrowing, selling debt that expires in less than a year, known as tax or revenue anticipation notes. But “they don’t want to tap the anticipation notes markets because the high interest rates will make news,” he adds.
“They are low on cash because they underestimated expenses to make an unbalanced budget look balanced.”