Notes from the Desk

The Guardrails of Governance: Why Mamdani’s Spending Push Faces Limits

November 17, 2025 By Sage Advisory

Zohran Mamdani’s recent victory in the New York City mayoral election has drawn significant attention from municipal investors. The mayor-elect has outlined ambitious plans to increase spending through a range of initiatives, funded by higher taxes and expanded bond issuance. Despite these proposals, New York City bond spreads have remained largely stable both before and after the election — a sign of the strong checks and balances that help safeguard the city against unsustainable spending and excessive debt issuance. In this piece, we examine which of Mamdani’s policy priorities are most likely to gain traction and which may face greater implementation challenges.

Initiatives Likely to Face Challenges

Free Bus Rides

  • Estimated $650M annual revenue loss for the MTA.
  • Bond covenants restrict changes to fare structure.
  • MTA is state-controlled; fare decisions fall under governor’s jurisdiction.
  • Governor Hochul has publicly opposed eliminating bus fares.

Construction of 200,000 Affordable Housing Units

  • Estimated $100B cost, with $70B expected from municipal bonds.
  • NYC’s current debt capacity capped at $42B under state limits.
  • Unlikely state will approve significant increase in bonding authority.

Initiatives More Likely to Gain Traction

Free Childcare

  • Full universal program ($5B) is likely too costly.
  • Targeted relief for lower-income families is more realistic and fiscally sustainable.
  • Expected to gain governor’s support in a scaled-back form.

City-Run Grocery Stores

  • Plan for one store per borough at $60M total cost.
  • Modest scope and cost make implementation feasible.

Initiatives we believe are less likely to be implemented:

Free Bus Rides

The elimination of bus fares was a central theme of Mamdani’s campaign, a move that would likely result in more than $650 million in lost annual revenue for the Metropolitan Transportation Authority (MTA). From the outset, we viewed this proposal as highly challenging to implement, given that the MTA’s bond covenants restrict changes to its funding structure that could impair its ability to operate and meet obligations to bondholders — bus fares are a key revenue source for the MTA. As we wrote about in September, mass transit operators across the nation have been struggling to balance their budgets, with riders being heavily subsidized already. Moving further away from ridership fees could create additional unanticipated fiscal challenges down the road.

It is also important to note that the MTA is a state-controlled public authority, meaning decisions on fare collection fall under the governor’s jurisdiction — not the mayor’s. Following Mamdani’s victory, Governor Hochul publicly affirmed that she has no intention of eliminating bus fares, a view that will make the implementation of the mayor-elect’s plan virtually impossible.

Construction of Thousands of Affordable Housing Units

The mayor-elect’s proposal calls for the creation of 200,000 new affordable housing units over the next decade at an estimated cost of $100 billion, with $70 billion expected to be financed through municipal bonds. This would come on top of tens of billions in additional debt already planned to fund the city’s broader capital improvement program. However, under current state-imposed limits, New York City has the capacity to issue just $42 billion in additional debt. We do not anticipate the state granting a significant increase in bonding capacity, which likely makes Mamdani’s affordable housing plan difficult to execute.

Initiatives we believe are more likely to be implemented:

Free Childcare

We believe the mayor-elect will succeed in expanding access to free childcare, though the program will likely be more limited than initially proposed. At an estimated cost of $5 billion, universal free childcare would place considerable strain on the city’s finances. A more realistic outcome would be targeted relief — such as free or reduced childcare costs for families within certain income brackets — an approach that is more fiscally sustainable and likely to gain support from the governor’s office.

City-Run Grocery Stores

Mamdani plans to open at least one city-run grocery store in each borough, with an estimated total cost of $60 million. Compared to the larger-scale initiatives outlined above, this proposal is more modest in scope and cost, making it appear more realistic and potentially easier to implement.

We Are a Far Cry from the 1970s

In the 1970s, New York City narrowly avoided bankruptcy after years of fiscal mismanagement. To safeguard against a repeat crisis, the state established the New York State Financial Control Board, chaired by the governor. The board regularly reviews the city’s revenues, expenditures, and financial plans to ensure long-term stability. In the event of a fiscal emergency, it has the authority to assume control of the city’s finances and guide it back to sound footing. Thus, while we do believe that Mamdani will successfully implement measurable change, we do not anticipate a significant deterioration of the city’s finances, assuming the current system of checks and balances holds.

 

 

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