An Early Look at Yonkers’ 2026/27 Budget – Can the City Avoid Large Property Tax Increases and Cutbacks?

Will Yonkers have to cut the budget and significantly raise taxes next year? If the proposed Westchester County budget is a predictor, the answer may very well be “yes.”

The County budget for 2026 includes a 5.27% property tax increase, 8% cuts to all County departments and 180 eliminated positions. This is not a pretty picture and comes as a surprise because the County has not raised property taxes in six years, let alone laid off County workers.

I recently spoke with Yonkers Mayor Mike Spano about the City’s finances, with a focus on whether Yonkers will be able to escape the crunch that’s hit the County. Although the Mayor sees “red flags all over the place” and has already ordered a hiring freeze and curtailed spending, he’s not ready to order more belt tightening until he sees Governor Hochul’s proposed New York State budget for 2026. He wants to know how much additional State aid the City will receive to help balance next year’s budget. The state releases its budget in January. https://yonkersledger.creativeopen.net/news/interview-are-yonkers-city-governments-finances-on-the-rocks-mayor-spano-is-not-ready-to-throw-in-the-towel/55837/

Before we take a closer look at the City’s current budget, let’s take a slight detour for a brief tutorial about the budget and the City’s budget adoption process.

How the Yonkers Budget Works

The City of Yonkers adopts an annual operating budget that pays for all municipal services and the public school system. The Mayor submits a proposed budget each year by April 15, and it is then reviewed by both the New York State Comptroller and the Yonkers City Council. After public hearings, the Council adopts the final budget by June 1, and it goes into effect June 30, (Yonkers has been under the enhanced fiscal oversight of the Comptroller since a budget debacle here in the late 1970s.)

The City and the school district share one tax levy. Police, fire, DPW, libraries, parks and City Hall operations are funded in the same tax levy that pays for Yonkers Public Schools.

The budget is financed mainly through property taxes and sales taxes, plus State aid, fees, permits, and federal grants. In strong economic years, transactional revenues like the mortgage recording tax, the real property transfer tax, and casino revenue help. In weak years, those funding streams can decrease significantly.

Since my conversation with the Mayor, I have reviewed the City’s budgets from the past seven years. Here’s my main takeaway: the costs are going up faster than recurring revenue. Yonkers has a growing structural budget deficit.

To fix the deficit and balance the budget as required by the State, the City has repeatedly relied on “one-shots”—temporary revenue sources like federal COVID aid, State relief, and the Yonkers rainy-day fund (known as the general fund balance) to plug holes. The State Comptroller, who must certify the budget each year, has warned that this is risky. If one-shot money dries up or the fund balance is depleted, the City will be forced to choose between raising taxes, cutting services, or both.

The Yonkers Budget for 2025/26, which ends on June 30, 2026, totals $1.55 billion.

Budget Analysis

Although there are red flags as the Mayor points out, it’s too early to predict what next year’s budget will ultimately look like. It will depend on answers to questions such as:

• How much the City will be required to pay to cover employee health insurance and retiree pensions.
• Does the City meet or exceed revenue projections for this year.
• How much additional aid, if any, the City receives from New York State.
• How much of the City’s rainy-day fund balance can the City tap to cover the projected budget deficit.

To get some more perspective, I spoke to the City’s Finance Commissioner – John Liszewski, and the Budget Director – John Jacobson. They also believe it is too early to say that the City will need budget cuts and tax hikes next year. The Commissioner was careful to state that he’s “sure that the City will adopt a balanced budget that is responsibly conservative and fair to the taxpayers and City employees.”

Budget Q&A

Here’s a Q&A that helps explain what’s going on with the City’s budget, and sheds light on what might be in store for us next year.

How do the City’s Finance Commissioner and the Budget Director currently view the prospects for next year’s budget?

Finance Commissioner Liszewski acknowledges that balancing the budget for next year will be more challenging than in any year during Mayor Spano’s 13-year tenure. He cited the end of federal Covid relief money, the rising cost of employees’ health insurance (a family plan for employees now costs $44,000 annually) and required City contributions to police and firefighter pensions. (The City now pays approximately 38% of retirees’ pensions.) Both health insurance and pension costs have risen dramatically in the past five years, and the Commissioner is expecting more increases for next year. He says inflation has impacted overall City costs. At the same time, the City’s sales tax revenues have come in lighter than expected this year.

The Commissioner acknowledges the City has a structural budget deficit but says that a manageable deficit has existed in the budget for decades. The Comptroller has always certified the City’s budget despite the deficits. The State’s authority over the budget dates back to the Fiscal Agent Act of 1976 — a special law that applies only to Yonkers. Under the Act, the City must “justify” the City’s annual budget estimates of income and expenses to the Comptroller. When satisfied, the Comptroller certifies that the City is in full compliance with the requirements of the Act.

According to Liszewski, the Fiscal Agent Act has instilled discipline in the City’s budget process and has led to very conservative budgeting. This has led, in part, to increases in the City’s rainy-day fund. Liszewski believes that Yonkers’ conservative approach may allow the City to avoid the sort of fiscal reckoning that has hit the County.

What is a structural budget deficit?

Simply put, a structural budget deficit occurs when, under normal circumstances, the government’s ongoing revenues don’t cover its ongoing, normal expenses. Yonkers has a growing structural deficit because the everyday cost of running City government each year is rising faster than the amount of money the City takes in annually. In the City’s Four Year Financial Plan, Fiscal Years 2026-2029, the City specifically projects that the structural deficit will continue to grow over the coming years.

What has been the amount of structural budget gap in each of the last seven years?

I reviewed the Comptroller’s annual budget analysis in each of the last seven years. I calculate that Yonkers has used one-shots and sometimes a portion of its rainy-day fund to plug projected deficits in the budget:

The first column indicates how many millions of dollars in one-shots the City included in its budget for a particular year. Much of this money came from New York State or the federal government.  In 2020/21 and 2021/22, the City received a total of $87.5 million from the federal Covid relief effort under the American Recovery Plan Act (ARPA), which explains the increase in one-shots in those years.

The second column indicates how much of its accrued fund balance or rainy-day fund the City used to balance the budget at the end of the fiscal year. Little or no rainy-day funds were used in 2021/22 because of the ARPA money.

The third column is the sum of the first two columns, representing a rough estimate of what the City’s structural deficit was for a particular year. The influx of ARPA money also likely explains the inflated $105.4 million of estimated structural deficit in 2022/23.

When the ARPA money is factored out of the equation, the general trend over the last seven years is that the amount of one-shot money that the City has received is diminishing, requiring the City to use more of its rainy-day fund balance to plug budget gaps. 

If the one-shots continue to dry up, Yonkers faces a tightening fiscal squeeze. Without new recurring revenue, the City may no longer be able to balance its budget as it has in the past without deeper reliance on rainy-day funds, or tax increases and spending cuts.

This is why the MGM casino application withdrawal was so disappointing. The Mayor hoped that in the future the City would receive approximately $56 million annually from the expanded casino operation. Now the City needs to find other sources of revenue to address future deficits.

What is the City’s accumulated fund balance and what is it used for?

The City’s accumulated fund balance grows when it spends less than it has budgeted in a given fiscal year or when revenues increase beyond what was expected. The fund balance serves as the City’s “rainy-day” savings—funds available to use at the city’s discretion for emergencies, unpredictable revenue shortfalls, or to maintain service levels without resorting to sudden tax hikes or heavy borrowing.

The following chart shows the rainy-day fund balance the City reported in each of the last seven years. During the pre-Covid years, the fund balance was low, but luckily there were no great budget shocks that required the City to utilize it. In the post-pandemic economic recovery, the fund balance has grown to a healthier level, in part because of the ARPA money, but it is now trending downward again.

The City has clearly relied on its fund balance to cover some of its annual structural deficit.  The problem with this strategy, however, is that as the structural deficit grows, without commensurate increases in revenue and/or cutbacks or property tax increases, a greater amount of the fund balance will be required to fill the gap. Although $105 million may appear to be a significant fund balance and enough to manage this year’s deficit, if revenues don’t grow, or worse, actually diminish during a recession, the fund balance can quickly be depleted, and the City will then have little choice but to increase taxes and or cut spending. In reality, the fund balance isn’t that large given the City’s annual budget of $1.5 billion.

Yonkers is growing and appears economically healthy, so why does it have a structural budget deficit in the first place?

On the surface, when I look around the City, it appears we have a strong economy. After emerging from the pandemic, the City has experienced considerable economic growth. There are relatively few vacancies on Central Avenue and new anchor stores, such as the supermarket chain Lidl. The MGM casino and Cross County Mall parking lots are often crowded. Costco, Home Depot and Stew Leonard’s are packed. We have significant new development on the Westside, fostering new jobs and population growth, and people continue to spend money in our City.

The economic vitality of Yonkers has driven up City revenues from sales taxes, and the City’s property tax has increased approximately 17% over the last seven years. The City’s income tax surcharge, the mortgage recording tax and the real property transfer taxes have all remained relatively strong. As most of us know, we have very high tax rates, higher than in comparable regional cities.

But unfortunately, the cost of government is rising even faster than the revenue the City receives from a strong economy, resulting in the structural budget deficit.

Yonkers has simply not lived within its means.

Conclusion: A reckoning may be coming 

Whether Yonkers can avoid the fiscal pain now hitting Westchester County will depend on forces the Mayor cannot fully control. The MGM withdrawal blew a hole in the City’s long-term plan to increase revenues. Inflation, rising borrowing costs, and the end of federal stimulus have all shifted the financial landscape; and the municipal unions are sure to want raises in upcoming contract negotiations. Although the State Comptroller’s pessimistic forecasts so far have not come to pass, it seems increasingly more likely that the City will face tough budgets in the coming year or two.

The Mayor told me that he wasn’t ready to take additional belt tightening steps now, reflecting a basic optimism that the City will be able to manage the budget without large tax increases or budget cuts. But optimism is not a budget plan. For years, Yonkers has survived by finding one-shot solutions and negotiating lifelines from Albany. The Mayor’s “tin cup” strategy has worked so far, but if the City’s financial position deteriorates further, another short-term fix may not be an option.

If State aid falls short, if the real estate market weakens, if labor demands harden, or if the economy dips, Yonkers will probably not have the luxury of kicking the problem to the next fiscal year. The choice may become unavoidable: raise property taxes sharply, cut services deeply, or both.