What the muni world needs to know about NYC Mayor-elect Mamdani

New York City Mayor-elect Zohran Mamdani ran on eye-catching proposals, including offering free bus service, establishing city-owned grocery stores and building hundreds of thousands of affordable housing units. 

Mamdani’s vow to shake things up has some investors on edge, as New York City is home to some of the biggest municipal bond issuers in the country and has $46 billion of outstanding general obligation bonds. 

But city and state laws mean it’s unlikely that Mamdani will be able to enact the parts of his agenda that would have major impacts on the city’s credit. 

“What politicians say on the campaign trail doesn’t necessarily translate to public policy,” said Jeff Devine, director of municipal research at GW&K Investment Management. “In New York City’s case in particular there are quite a few fiscal guardrails in place that should alleviate any concerns about what sort of impact his policies would have on the creditworthiness of the city.”

One of Mamdani’s biggest proposals is issuing $70 billion of debt over the next 10 years to fund 200,000 units of affordable housing. 

New York City’s debt burden is already above average, Peter DeGroot wrote for J.P. Morgan after Mamdani won the primary. Debt service as a percentage of tax revenues is projected to climb to 14% in 2033, without adding any of Mamdani’s policies. 

But the city has a debt cap in the state constitution, DeGroot said. In fiscal year 2025, the city had only $41 billion of remaining borrowing capacity — $68.8 billion including the Transitional Finance Authority’s capacity — and already has plans to issue $8 billion in the next three years. 

Mamdani is aware of this limitation. 

“New York’s ability to issue municipal debt to fund public services is limited by arbitrary caps,” a policy brief from his campaign website said. “Zohran will advocate in Albany and Washington to reform these archaic measures so we can invest deeply in affordable housing.”

The state legislature could increase or remove the cap, Devine said, but it’s not likely. When the state has increased the TFA’s debt limit, it’s stuck to relatively modest increments. 

Many of Mamdani’s proposals require cooperation from the state.

His strategies for raising revenue include raising the state’s top corporate tax rate to 11.5% and adding a 2% wealth tax on all incomes over $1 million, both of which must be enacted at the state level. 

Although New York Gov. Kathy Hochul endorsed Mamdani, she has repeatedly shot down his wealth tax pitch. 

Mamdani’s other signature plan was eliminating the fare on Metropolitan Transportation Authority buses. The MTA is a state agency, and its chair, Janno Lieber, has expressed skepticism about the proposal. 

The MTA projects that revenue from bus fares will increase to nearly $1 billion annually in the coming years, Lieber told a local talk show, and if free buses lead to increases in ridership, that could create new costs for the MTA. 

Other proposals, such as opening five city-owned grocery stores, could create pressure on the city’s budget, according to Pat Luby, head of municipal strategy for CreditSights. 

Other issuers within New York, such as its Water Authority and the Port Authority of New York and New Jersey, have minimal exposure to mayoral policies, Luby wrote. The New York City Housing Development Corp. has the least insulation from mayoral influence, as all seven members of its board are appointed by the mayor. 

S&P’s analysts wrote they expect “modest changes in New York City’s day-to-day operations,” in which “potential policy and budgetary changes will gradually evolve over time, resulting in no near-term impact to [S&P’s] general obligation rating on the city.”

The city’s government will also be overseen by the New York State Fiscal Control Board and must adopt balanced budgets, Devine noted. 

“It really doesn’t matter too much about who is in power,” Devine said. “Their policies, their proposals, they still need to meet that balanced budget requirement.”

The reaction from the markets, however, may not reflect these opinions. 

“We’ve fielded quite a few questions about the prospect of a Mamdani administration over New York City,” Devine said. “I think there’s quite a bit of people out there who don’t necessarily understand the impact that he realistically could have on the city’s credit quality.”

Ahead of the election, Luby wrote, “investors need not take immediate action” when the results come in, but “should be prepared for increased volatility.”

In January, Mamdani’s first budget cycle will offer more clarity on his priorities, Luby said. 

“Until then, investors should monitor official communications and if the market overreacts to post-election headlines, increased volatility and wider spreads could present a good buying opportunity,” Luby wrote.