Albany’s finances are increasingly showing signs of a broader municipal drift (muni drift), as structural imbalances and repeated revenue shortfalls continue to erode fiscal flexibility and strain near-term liquidity.

Muni drift pattern emerging

A week removed from the 13 May Common Council discussion, Albany’s situation continues to reflect what we refer to at Debtwire Municipals as a muni drift pattern rather than a single-year disruption. Muni drift refers to the gradual deterioration of a municipality’s financial position over multiple fiscal cycles, typically driven by structurally unbalanced budgets, consistently overestimated revenues, and a growing reliance on one-time measures or external funding that fail to materialize. Unlike an acute fiscal shock, this dynamic unfolds incrementally, often becoming fully visible only once liquidity tightens and reserves are depleted.

Speaking during that meeting, Treasurer Darius Shahinfar (D) detailed some of the ways the city’s finances faltered during FY25 (ended 31 December 2025) based on the results of an unaudited annual financial report that he said was filed on 7 May.

The city’s current structural imbalance was not evident in the FY24 audit, Shahinfar said, but FY25’s overestimated revenue figures became much clearer during the latest review. In many other years, revenue shortfalls were offset by savings, but “that just didn’t happen in 2025,” Shahinfar told the panel.

He said that FY25 was also punctuated, in large part, by “spending off grants that never materialized,” something Mayor Dorcey Applyrs (D) also mentioned in a recent statement regarding stabilization efforts. Shahinfar also pointed to real property taxes that he said usually come in on budget but because of reassessment ended up about USD 500,000 under in FY25. Sales and use taxes, payments in lieu of taxes, intergovernmental revenues and real property taxes also underperformed as compared to budget, he added.

Growing deficit, negative fund balance paint grim picture

Mayor Applyrs recently revealed an estimated USD 19.6m deficit for FY25, up from the original forecast of USD 15m. However, data gathered by Debtwire Municipals via Open Book New York—a transparency website created by the Office of the New York State Comptroller—suggests a chance that figure could rise even higher. Albany is reporting unaudited general fund revenue of USD 208.4m for FY25, against general fund expenditures of USD 233.3m, which could result in a potential unaudited shortfall of USD 24.9m (see Table).

Table: Multi-year comparison report

Meanwhile, during the 13 May meeting, Shahinfar also mentioned that the city has exhausted its remaining fund balances and is projecting entering FY26 with a negative USD 2m fund balance, which, he said, “is not where you want to be.”

The city has also pulled consecutive general fund net deficits, according to historical unaudited data on the Open Book site, for the last five fiscal years. A USD 4.7m net deficit was posted in FY24, a USD 200,000 deficit in FY23, a USD 2.7m shortfall in FY22, a USD 1.4m deficit in FY21 and a USD 11.5m net deficit in FY20, the data showed.

Taken together, those trends underscore how Albany’s current position reflects a cumulative weakening rather than a one-off shortfall. The loss of reserves, repeated operating deficits and reliance on uncertain revenue streams point to a narrowing margin for error, with constrained cash flow increasing the likelihood that officials may need to turn to short-term borrowing to manage liquidity.

Governance friction among long-term officials

Discussions involving the city’s finances have been fraught with tension among the leading government players, with many accusations suggesting the prior administration’s oversight was lacking. Current Mayor Applyrs has repeatedly pointed the finger at former Mayor Kathy Sheehan’s (D) administration, while Sheehan, in turn, has said she didn’t learn about the actual size of the city’s budget deficit until after leaving office.

Applyrs took office on 1 January after serving as Albany’s chief auditor from 1 January 2020 until assuming the mayoral role. Likewise, Sheehan had served as Albany’s treasurer from 2010 through 2013, before taking the mayor’s seat on 1 January 2014.

Recent trading activity

Electronic Municipal Market Access disclosures show recent odd-lot trading in the city’s general obligation bonds and bond anticipation notes. As reported, Albany’s long-term debt is rated AA from S&P Global Ratings. The city had about USD 80m of general obligation debt outstanding at the close of FY24, which is the latest available audited figures.

The Red Flag Report is used by Debtwire Municipals to identify emerging threats within the municipal market.