New York City is facing a financial crisis in 2024 of a scope not seen since the 1970s. The underlying cause of this crisis is 100,000-plus undocumented migrants now located in New York City and the additional migrants anticipated to be coming to the city demanding shelter, food and other necessities. Mayor Eric Adams has asserted that, at the current pace of undocumented migrant arrivals, the cost of the migrant influx is $4 billion per year for three years ending in mid-2025.
In response, the city has cut the budget by 5% across the board to fund migrant programs. To date, the budget impacts have been hitting after-school programs, recycling efforts, library hours, classroom size, staffing for police and fire departments and more. The across-the-board cuts are expected to increase to 15% and be accompanied by a hiring freeze and a prohibition on paid overtime.
Doubtless, middle-class New Yorkers will flee. Over the last few years, the people most likely to leave New York City are not high-income earners but middle-income earners who are squeezed by taxes and reduced services. To date, higher-income earners seem less concerned with increased taxes and reductions in services, as stated by the New York Times.
The city’s political leadership is exchanging productive tax-paying residents for migrants who are costing billions of dollars. This is a formula for a negative outcome. This also presents a conundrum. Some believe that undocumented migrants are good for the economy; others maintain that undocumented migrants are harmful to the economy. On balance, research has shown that migrants are a net positive for the economy. However, the current situation in the city suggests that prior research and modeling may be flawed.
Practically, the city has two options — increase revenues or find structural budget reductions that do not impact services to the middle class.
Ending sanctuary status for the City and allowing the federal au- thorities to start deportations is one obvious solution. So-called “sanctuary” status is not consistent with the laws of the United States. No municipality should be interfering with the work of the United States Citizenship and Immigration Services (USCIS). Holding hearings and deporting economic refugees is part of the solution. Deporting economic refugees would materially reduce the current burdens on the city.
The city should not expect the federal government to allow undocumented migrants to have work permits. That will only serve to drive down wages and job opportunities for citizens and legal residents. This is counter to the strategies and plans of the Biden Administration. It would also make the city less attractive to middle-class workers by driving down their wages and opportunities.
The option of seeking more revenue from city residents is risky. Increasing local taxes, whether sales, property or income, may continue to drive out middle-class families. At some point, the tax inequities, particularly the reality that prop- erty taxes for cooperative and condominium owners are four to five times that of comparably valued one- to three-family homes will be so untenable as to start to drive out wealthier families. Without the SALT deductions, increasing local in- come taxes is also problematic.
Cooperative and condominium buildings need to resist all efforts to increase local taxes, regardless of the type of tax to preserve the existing tax base. Also, raising property taxes on commercial property increases them on cooperatives and con- dominium buildings so that the disparate treatment of property taxes grows larger.
There is one other option available for the city and that is more assistance from the federal government. That would partly come if USCIS was more involved in handling the undocumented migrants flooding into the city and partly because once the city cooper- ates with the USCIS, the federal government would have to, in effect, “reward” the city for cooperating.
The ultimate solution, meaningful reform of the U.S. immigration laws, seems to be too much for Congress to tackle.
There are no good solutions for cooperative and condominium buildings and residents given the conflicting policies at all levels of government. Holding the line on local taxes may be the only constructive approach open to cooperative and condominium buildings to protect their property values.
This column presents a general discussion. This column does not provide legal advice. Please consult your attorney for specific legal advice.
Carol A. Sigmond
Partner
Greenspoon Marder LLP
590 Madison Avenue, Suite 1800
New York, NY 10022
carol.sigmond@gmlaw.com
(212)524-5074
