• Property tax and sales tax proposals face approval hurdles
• Comptroller’s office warns of unrealistic revenue assumptions in previous budgets
• Albany (NY) faces USD 142.9m of BANs coming due and rising debt service

Albany’s reliance on unapproved tax increases to close its FY27 budget gap has raised concerns amid a USD 142.9m bond anticipation note (BAN) maturity, rising debt service costs and dwindling cash reserves.

“Budgets should be based on realistic revenue and spending estimates, recurring costs should be supported by sustainable recurring revenues and officials should closely monitor financial results and make timely adjustments when necessary,” Mark Johnson, press secretary for New York State Comptroller Thomas P. DiNapoli (D), told Debtwire Municipals.

Tax hikes and aid leave budget plan uncertain

Mayor Dorcey Applyrs’ (D) administration on 1 October proposed a USD 257.5m general fund budget to address a USD 35.3m FY27 deficit, up from the USD 33.3m gap projected in the city’s midyear budget update. More than half of the proposed solution, or USD 19.9m, would come from new revenue measures, including a 15% property-tax rate increase expected to generate USD 9.7m and a new 0.5% city sales tax projected to raise USD 5.25m.

Neither measure is assured. The property-tax increase requires approval from 60% of the 15-member common council, while the sales tax requires authorization from the state legislature and governor.

A New York public finance expert familiar with Albany’s finances told Debtwire Municipals that state lawmakers Senator Pat Fahy and Assemblymember Gabriella Romero, whom he identified as likely sponsors of the sales-tax legislation, issued a joint letter on 1 October indicating they would support the measure only if it included certain protections. That condition raises questions about whether the city can secure the projected revenue for FY27 and beyond.

“For these reasons, and many more, investors should carefully evaluate the city’s historic levels of fiscal stress and its proposed approaches to alleviating it,” the expert said.

The uncertainty follows a difficult FY26, when Albany initially projected a deficit of about USD 22m. The state subsequently provided roughly USD 20m in extraordinary assistance, and the administration identified approximately USD 8m in savings. Yet the city’s first midyear budget update still projected a USD 22.2m shortfall.

Comptroller DiNapoli’s office later projected the FY26 deficit at USD 26m, warning that previous budgets relied on unrealistic revenue assumptions and nonrecurring revenues. Although the office has not completed an official review of Albany’s proposed FY27 budget, Johnson said temporary assistance can provide short-term relief but cannot replace a long-term plan aligning recurring revenues with recurring expenses.

At a 6 October Finance, Assessment and Taxation Committee meeting, city leaders also revised the newly proposed budget, increasing projected expenses by USD 1.3m, which Times Union reported were offset by other downward revisions. But the change adds to questions about the plan’s assumptions and the city’s ability to achieve a sustainable recovery.

Debt and liquidity challenges

The budget uncertainty comes as Albany faces USD 142.9m in BANs coming due in March 2027, according to a 21 September city treasurer’s report. Debt service is projected to reach USD 27.8m in FY27, up from USD 16.6m in FY25. The public finance expert said the FY27 figure would exceed the city’s debt policy, which limits debt service to 10% of general fund revenue or expenditures and triggers exception procedures when the limit is breached.

The treasurer’s office appears to be pursuing a conversion of the BAN debt into longer-term bonds rather than rolling over the remaining USD 133m, the expert said. If successful and cost-effective, the strategy might not affect FY27 finances, but its impact on FY28 and beyond remains unclear because the plan was disclosed verbally to the Finance Committee on 6 October, he added.

Liquidity could pose a more immediate challenge. The city treasurer previously projected cash on hand falling below USD 1m on two dates in December. It remains unclear whether those estimates have been revised to reflect the comptroller’s higher FY26 deficit projection.

The expert pointed to Little Falls and Dunkirk, which recently obtained state authorization to issue debt to liquidate accumulated deficits, as examples of the extraordinary measures municipalities may need when financial pressures intensify. Whether Albany could require similar authority remains an open question, he said.

For bondholders, the central issue is whether Albany can move beyond temporary aid and uncertain tax proposals to a sustainable financial plan while meeting its debt obligations. Balancing the FY27 budget may offer only limited reassurance if recurring revenues cannot cover recurring expenses, cash reserves remain thin and short-term borrowing continues to be a key financing tool.