This piece was originally published at Money on the Left. After I wrote it, I posted it in on the NYC Public Servants subreddit, asking what people thought of my proposals.

I got a fascinating response where the writer thinking with me about the jump in debt service I point out. They said at first it was likely due to borough-based jail construction peaking at the time the payments jump, resulting from the closure of Riker’s Island.

But then they asked me to look at the switch from quarter three to quarter four debt service going back to 2020. They noticed that every year since 2020, but not before, the city’s debt service is projected to double over the next two years during the switch between two quarters. The first time it happens is actually Q2 FY2021, remains down in Q3, jumps up against in Q4. Strangely, there’s no data on the comptroller’s website for Q3 and Q4 2020. The pandemic just made it wonky I guess? Something to ask Lander’s office alum perhaps.

Anyway, this is an ongoing question to which I, and apparently knowledgeable NYC public servants, don’t know the answer. If you know, let me know!

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I’m a professor of education policy and teach classes on public finance. I make it my business to know the government’s business, and I live in Brooklyn, so I’ve been paying close attention to the city’s finances as the new Mamdani administration takes power. In my work, like my recent book on school finance, I try to make the otherwise arcane and hard-to-understand world of municipal finance more comprehensible to the people impacted by it.

Zohran Mamdani recently (and admirably) announced a $12.2 billion city deficit left by the Adams administration, which, in the barbed choreography of the New York City budget dance with New York State, Mamdani revised down to around $6 billion. In the manic moves of that dance numerous dirty details are coming out about the booby traps Adams left Zohran, and the treacherous terrain of the city budget generally. 

I think I found another obstacle-feature of that terrain that I haven’t seen reported elsewhere. Untangling it helps to zoom in on the complexity of this budget process, which everyone cares about and no one understands, with an eye towards transforming the whole nasty apparatus (which, by the way, is why we need participatory budgeting on a mass scale). 

The thing I’m seeing is a big jump in city debt service payments next fiscal year, FY27 and FY28. 

In Andrew Perry’s excellent piece on Mamdani’s first budget, it’s notable that debt service—what the city forks over in its yearly repayments to creditors—is the fourth largest broken out category of NYC public finance:

It’s not a huge expense in raw numbers, but it’s relatively big one in the overall scheme of city budgets because debt service comes to bear on the city’s capability to pay back its creditors, and thus can impact its credit rating, fiscal stability, and ultimately the patina of fiscal responsibility of whoever’s in charge at the moment. So even though it’s 6% of the budget, it’s a big 6%.

When I was reading one of Brad Lander’s last comptroller reports, along with updated data on the city’s debt profile, a graph caught my attention.

On the left side of this graph, you’ve got the debt service the city owes. On the bottom, you have the year it’ll owe that amount. It goes from this year to 2060, when many long term bond obligations get “paid off” (though of course they never really get paid off because US municipal finance has a debt wish). 

But the colors are important too. In blue you’ve got the principal, which is the amount of the city borrowed, and in red you’ve got the interest, which is what the city pays to borrow that money. It’s the price of credit. 

First, before anything else, look at all that red interest we have to pay. Municipal bond interest payments are basically a huge tax that New Yorkers and everyone else in the country don’t really know they’re paying. For every dollar we give the city, using Perry’s chart above, we pay six cents on the city’s debt service. When we look at the red section, we see about three of those cents just go towards the interest on our loans. A lot of rich people make bank on lending to us so we can have a city. 

But that’s not even the pressing issue here.

Second, look at the huge jump in debt service obligations through 2028. It more than doubles from $2 billion to $4.5 billion. What’s happening here? 

According to municipal finance researcher Tom Sgouros, who I talked to about this situation, there could be a number of explanations here, none of which we know because we weren’t putting this debt service schedule together. All those interest payments come on debt with different interest rates, so maybe the comptroller’s office, which, in this case, was under Brad Lander, they prioritized paying higher interest debt first. There could have been a plan to defease (moving it into a separate fund, sort of like refinancing and reinvesting to get rid of it before paying it off) some debt earlier rather than later. 

What we know is that there’ll be a period of lower payments, according to this debt service schedule, after which those payments will jump up again by double. And its not just another city expense, it’s the repayment of loans taken out to finance everything else in the city. 

One conspiratorial interpretation: Perry notes a practice called “surplus roll” where “the City dispenses its surplus by prepaying subsequent year expenses… In fiscal year 2025, for instance, the City accrued a $3.8 billion surplus. It booked this as 2025 spending in the form of prepaying spending liabilities in fiscal year 2026.”

So one theory is that the Adams administration scheduled a certain amount of 2026’s debt on Zohran’s behalf without asking him first, shouldering Zohran with the payments with a big jump in 2028, threatening Mamdani’s spending power. It could be the surplus roll because these numbers above are in the Q1 2026 debt profile. When we look at the Q4 2025 we don’t see that same jump.

And yet, it might not be a surplus roll. It might be the non-malign planning to pay certain debt off at certain times, innocent defeasing. It might not be political at all. To everyone except the people working for Mark Levine, the new Comptroller, and maybe a handful of others, the process is opaque. 

All this gives you a sense of what the Mamdani administration will actually be dealing with in terms of its debt needs. It looks to me like the debt service will jump up dramatically whether that’s due to a possible surplus roll by the Adams administration or other maneuvers. As it stands, Mamdani will have to pay more in debt service during two years of his time in office to get less revenue to the diverse working class he’s promised to serve. 

All this also broaches the question of what to do about this issue of nagging debt service. There’s the short-term process of the city’s Tin Cup Day where the mayor goes to ask for money. But we know that Mamdani and company want to challenge these old dynamics. Why not take up some medium-term measures, and maybe champion longer-term transformations, that make this arcane debt service stuff a relic of the past?

The Mamdani administration, drawing from this publication’s framework of Democratic Public Finance, could use this as an opportunity to spell out a radical alternative to the present system. They could, for example, renew support for a city-owned non-profit public bank which, like the Bank of North Dakota (built by prairie socialists in the early 20th century), can buy NYC munis and deposit the interest back into the city’s general fund. 

The result would begin to drastically decrease the amount the city owes in interest payments. Along the way, Mamdani could call for a permanent MLF at the Fed that provides zero (or next-to-zero) interest rate financing. More radically still, he can also argue that Congress should extend credit creation powers directly to states and municipalities, a long term goal that would force the public to debate and think differently about municipal finance. 

These are broad, sweeping proposals. Are there things that the administration and their allied coalitions can put in place in the next couple years to achieve local versions of the same interventions, working towards transformation? I’ve been keeping a running list of fun brainstormy revenue ideas and, by way of open-ended conclusion, offer them here for readers’ perusal. My specialty is education finance, so the proposals are skewed towards education, but they could be adapted for other arenas of municipal finance as well.

1. Issue taxable bonds to friendly foreign government entities with our values (the governments Bernie always mentions): reaching deals with Canadian pension funds, Scandinavian sovereign wealth funds, etc.

2. Strengthening and integrating the Education Construction Fund to borrow for combined housing and schools financing, synthesizing borrowing capacity of the New York City Transitional Finance Authority with the ECF. There could be savings when staggering borrowing between both of them. (Combine this option with (1) to issue the taxable bonds through here.) The last bond ECF issued was in 2021 and apparently there isn’t good coordination between the Panel for Education Policy and ECF.

3. A municipal minibond program that reaches out to communities to invest in their specific schools, matching monies with citizen participation. This would be a more socialist version of Berkeley’s proposal.

4. Call NYC’s Build America Bonds on the grounds of extreme circumstances like the University of California system and the Maryland Transit Authority and potentially save hundreds of millions.

5. Create a city bank, a nonprofit corporate entity specifically, and restrict public monies to deposits in non-profit cooperative entities, such as the bevy of diverse community development financing institutions (CDFIs) throughout the city, put the city’s deposits there, create public bank accounts where the residents are voting members and create a public lender (hat tip to Whitney Toussaint for this idea). Save on borrowing costs to big banks. Then create investment funds for middle income supporters to move their savings/retirement, get in on the dash for retirement investment with a public option.

6. Design an online game for NYC that is very low cost and super fun, less than a dollar. Use message boards and DMs for announcements and citywide municipal discussion (towards mass participatory budgeting potentially).

7. Permit Community Education Councils to create public digital currencies that residents of CECs can purchase and sell for educational services, whose revenues go directly to the CEC budgets, managed by a rotating committee of school community members. 

8. Penny sales tax for specific projects through referendum vote (ESPLOST), like they do in Georgia. It’s a good political move: pay a penny more for your kids’ schools, eg.

9. Create a regional borrowing authority where districts around NYC deposit reserves and lend to one another at lower rates.

10. Pool pre-k afterschool tuition revenues in a single municipal account, invest the funds, and supplement the program’s funding with interest thrown off by the account. Ask pre-k centers to deposit with the county which then invests the funds.

11. A city-run secondary market for used stuff that you’d put out in the street: like a public Facebook marketplace that takes a few cents from transactions or posting fees that go right into specified city programs.

12. Allow wealthy residents to participate in auctions where they bid to pay one-time amounts to delete debt outstanding from certain funds instead of regular tax filings, like Building Aid Revenue Bond debt, thereby paying down that debt and creating borrowing capacity, while putting the rich in a weird position. Make it public and fun, like a kind of date auction, but it’s a debt auction. This wouldn’t be a secondary market trading on the debt itself but rather a traditional auction, with the rich outbidding one another to pay off city debt. (Maybe via some kind of low cost fun items of city lore, like subway tokens.)

13. Create a municipal digital currency for the city that every resident receives a certain amount of, pegged at being worth more than the dollar (a Knick or Met could be the name). For activities the federal government undertakes in the city that threatens the city’s home rule charter, the Feds must pay a tax or purchase the currency. Locally owned and worker-owned businesses receive exemptions from the currency’s tax.

14. Create a Parent-Teacher Association account where all PTA money is deposited and invested. The interest on the account is used to finance schools whose PTAs don’t have as much money as other PTAs.

15. Politicize the discount rate set for city pension contributions, holding listening sessions and public events about whether to set the rate higher (which could save hundreds of millions of dollars, even if raised by 25 basis points). Make this about the people’s investment rather than investors. Then politicize the discount rates used to set repayment terms on city issued bonds, deliberating publicly on whether there’s savings there.

16. Work with the New York Green Bank to package up green projects around the city, standardize their contracts, and mobilize private investment towards the projects further. Have them create a special instrument for city pension funds to purchase in large sizes. 

17. Work with the NYCEEC (the New York City Green Bank) to expand investment projects across state lines, particularly to cities in red states suffering from Trump-induced disinvestment in green projects (try to work with rural communities too to build solidarity there). To avoid the risk of NYC profiting off of others’ misery, the city could follow the lead of the Yugoslavian approach to international development as per the Non-aligned Movement and structure the loans across state lines with solidarity as a framework for the loan terms.

18. Pass a law through city council that gives city pensions first bidding rights in competitive sales of city bonds, even before private banks, lowering the underwriters discount cost to the city.

19. Sell taxable bonds with the explicit purpose of arbitraging revenues.

20. Coordinate school district bond sales around the state and pool them together into a loan product for the green banks to sell for green projects. Provide technical services through the School Construction Authority for districts around New York State to green their infrastructure.

21. Do a deal with a dollar pizza network. Designate certain spots as health areas and provide city subsidies for taking care of unhoused sick and hungry people. The contract has to stipulate that the city gets a percentage of the returns, like a big investor, then leak that info to private equity funds to push investment in the dollar pizza network. Flush with more cash, get the network to build bigger spaces. Make the dollar pizza network a meme stock that takes on the financial elite on Reddit to flood it with cash.

22. Make every road a toll road for federal agents driving in the city using license image cameras.