Costs Keep Rising: How Will the City Pay for Our Expensive Government?
The City’s Teamsters — mostly sanitation workers, maintenance workers, and mechanics — are getting a raise: 10% over five years. The salary hike will cost the City an additional $4.2 million over the first three years, and a total of $13.4 million over the full five years.
The City Council approved the Teamster contract Dec. 9. The agreement includes two years of retroactive increases to be paid in a lump sum in the current budget year. The contract runs from 2024 through 2028.
At a time when the City faces mounting budgetary stress, the Teamster’s agreement sets a precedent for other union contracts, including for police and firefighters. If the other unions get the same deal as the Teamsters, it will cost $160 million over the next three years, according to the City budget director.
Finance Commissioner John Liszewski called the contract fair to both the Teamsters and the taxpayers. Speaking at a hearing of the City Council Budget Committee, he acknowledged that finalizing next year’s budget will be a challenge because of rising costs and the loss of Covid-era relief funds. Nonetheless, he promised that the city will adopt a balanced budget next year. (The video of the budget committee hearing is available at https://www.yonkersny.gov/718/City-Hall-TV )
70% of City Workforce Earns Six Figures
Even a “reasonable” 2% annual raise for the City’s workforce has a big impact on the budget because City employees, especially police and firefighters, are highly paid. In 2024, the last year data are available, 29 employees earned over $300,000 (this includes overtime and payouts for accrued sick and vacation days); 290 made more than $200,000, and 1,466 earned over $100,000.
Approximately 70% of the total workforce earns more than six figures.
Although the City has money in this year’s budget for the Teamsters, it is not clear how the City intends to pay the expected salary increases for the other union employees, along with other rapidly rising expenses next year and beyond, and still meet the goal of a balanced budget.
Compounding the problem, at the end of the fiscal year, the City will also have to pay down this year’s deficit, created because the costs of running the government are certain to exceed total revenues. Last year the City used $20 million dollars from the rainy-day fund for this purpose. It is not yet known how large this year’s deficit will be.
Given the financial challenges, it would appear that the City will have to make tough choices regarding how high to raise property taxes and how much rainy-day funds will have to be used.
The Spano administration is already bracing for a rough budget next year, The Mayor has ordered a hiring freeze, an 8% reduction of non-salary related expenses, and now, most recently, has requested that department heads reduce their budget requests for next year by 5%. These steps should create savings in this year’s budget that can be added to the rainy-day fund and used to fill future deficits.
Here is a closer look at some of the factors that will influence the decision as to how high the property tax will be raised next year.
Many other cost pressures
In addition to the salary increases, employee benefits are also rising sharply, and the City is also taking on new debt:
– The City currently pays $44,000 a year for employee family healthcare coverage. That figure is scheduled to increase by 9% next year to over $47,000.
– The City also must contribute to current employee’s future pensions. These costs are computed annually by the State Comptroller, and for police and firefighters, the cost is typically 30% – 40% of their salaries. As salaries rise, so does the amount the City must contribute to employee pensions.
– Next year the city must also begin paying for a new Lincoln Park library branch, which was originally projected to be covered by payments from the MGM casino deal. In the aftermath of MGM’s surprise withdrawal of its application for a full casino license, the City now plans to issue $10 million in bonds to cover the costs, which will increase the City’s annual debt service by $1 million per year.
Overall, cost increases are putting pressure on the City to find new revenue streams that match the amount of the increases. However, it appears that revenues are falling, not rising, and other than hoped for growth in the economy and additional monies from the State of New York, there are no new funding sources that the City can rely on.
Revenue is Falling
In the post-Covid era, the City and the Yonkers Public Schools received a total of approximately $200 million in federal relief funding, which was used mostly to pay ongoing operating expenses. This injection of additional funds has ended. Now the City needs to replace that money in the budget with other revenues combined with the use of rainy-day savings, or otherwise cut the budget.
The City has typically looked to the State to help address expected budget gaps. We are now waiting to see what, if any, additional money the State will send our way. The Governor’s budget is due in January. That’s when our revenue picture for the next budget year will become clearer.
Contingency Fund Balance is Decreasing
Also at the budget committee hearing, the City’s independent outside auditor zeroed in on the City’s use of its rainy-day fund to address the structural budget deficit. In last year’s budget the City used approximately $20 million, which reduced fund balance to $120 million. Use of the fund balance has risen over the past few years. The outside auditor said that going forward, the City had to “watch” this practice.
Although not exactly a warning, the auditor implied that depleting the City’s contingency fund balance would weaken the City’s overall fiscal health. His concern is consistent with the yearly warning that the State Comptroller has sent to the City regarding the use of fund balance to pay for structural budget deficits.
Mayor’s Cuts May Help
The steps the Mayor has taken to save money this year will help ameliorate the problem to some extent. However, we will not specifically know how impactful they will have been until the Mayor releases his proposed budget for 2026/27 in the spring.
What it all Means
As a matter of law, the City must adopt a balanced budget that is approved by the New York State Comptroller. In recent years, the City has done this, in part, by raising property taxes and using the contingency fund balance. Balancing next year’s budget will be challenging because revenues have not kept up with rising costs.
It seems likely that the city’s budgetary strategy will involve some combination of contingency fund drawdowns and tax hikes.
The $64,000 question for taxpayers is how much the property tax will increase, and whether the City will also have to lay off staff and cut services..
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This is the third article in a series on the Yonkers upcoming 2026/27 budget. We hope you’ll keep up with future installments. To get caught up, read the first two articles in the series:
