Three weeks ago, I reported that the City of Albany’s total outstanding debt had jumped by $86 million over the last two years, to $187 million as of December 31, 2025. This figure for general-obligation debt, revealed in connection with a March 19 borrowing, is a troubling indicator of budget challenges that may create pressure for tax increases while limiting the city’s ability to fund capital improvements such as street repaving and building repairs.
The rising level of debt and Albany’s significant cash-flow challenges may also drive a downgrade in the city’s bond rating and increase the cost of borrowing. During a discussion with the Common Council’s Finance Committee on May 13, Treasurer Darius Shahinfar estimated that the city’s interest rate may rise by an extra .25% to 1% the next time Albany seeks to borrow in the public debt markets. The city issued $143 million in one-year bond anticipation notes on March 19 at a 2.78 percent interest rate. Long-term bonds typically require higher interest than short-term bonds. Over a borrowing period of 10 years or more, the extra interest cited by the Treasurer could mean additional millions of dollars in taxpayer costs.
But the long-term fiscal challenge for Albany goes significantly beyond the level of general-obligation debt1 and the annual cost of debt service. Among other long-term liabilities recognized in the city’s audited financial statements, three factors stand out: the city’s obligations for employee pensions; the ongoing cost of retiree health-care benefits; and accrued costs related to closing the city’s landfill. Just like the long-term bonds and short-term notes that are traditionally described as “debt,” these other costs that have developed over many years may increasingly crowd out spending on current services and/or force higher taxes in the years ahead.
Pension borrowing
Like other municipalities and New York State, Albany provides statutorily required pension benefits for retirees, funded by annual payments to the State and Local Retirement System overseen by Comptroller Thomas P. DiNapoli. After the 2008 financial crisis, the State began allowing municipalities to defer a share of each year’s annual payments to the pension system. Albany has taken advantage of this option, often referred to as amortization, every year since 2012. While this obligation is not included in the $187 million figure that the city reports as “outstanding debt,” it effectively constitutes borrowing in the same way as municipal bonds and is an equally iron-clad commitment of future dollars.
In 2011, the first year Albany used the amortization option, it deferred $1.7 million, about 13% of that year’s bill. In 2025, the city deferred payment of $5.1 million, around 19% of what was owed — the highest percentage in more than a decade. Deferrals of the pension obligation continued even during recent years when cash balances were at historic highs due to receipt of $80 million in extraordinary aid from the federal government’s post-COVID American Rescue Plan.
Deferral of pension bills imposes interest that has ranged from 1.6% to 5.1% annually, depending on prevailing market rates. The bottom line after more than a decade of deferrals, partial repayments and interest costs: As of December 31, 2024, Albany owed the pension system $12.3 million due to such borrowing.2 The end-of-2025 figure should be published in the city’s audited 2025 financial statements, likely coming sometime this summer. As E.J. McMahon has written on his Ever Upward Substack, overall pension costs for New York’s local governments have risen in recent years. The 2026-27 State budget now being finalized by Governor Hochul and the Legislature appears likely to enhance benefits, and increase taxpayer costs, still further.
Landfill closure
For more than two decades, Albany has generated millions of dollars each year by accepting waste from other municipalities at its Rapp Road landfill. This year’s budget assumes $4.5 million in such revenue, which will disappear when the landfill closes. The state permit for the landfill expires in 2028. State and federal rules require the city to cap the landfill and perform certain maintenance and monitoring for 30 years after the closure. The city projected $11.8 million in such required costs as of December 31, 2024.3
Retiree health care benefits
In addition to legally required pension benefits, Albany provides health care coverage for retirees, their dependents and certain survivors of deceased retirees. According to the city’s 2024 audited financial statements, 1,169 inactive employees or beneficiaries were receiving such benefits as of December 31, 2024. This figure was almost exactly the same as the 1,174 active employees receiving benefits.
Accounting rules require Albany and other governmental entities to estimate the long-term future cost of retiree health benefits annually. As of December 31, 2024, the city’s auditors calculated that cost at $308.7 million.4
Unlike the liabilities for outstanding debt pensions and landfill closure, current retiree health benefits are not legally binding on the city (hence the asterisk in the above table). The estimate cited above represents auditors’ calculations of costs over multiple decades based on employees’ and retirees’ life expectancy, the current structure of health care benefits and other factors. Estimates of these future costs fluctuate significantly each year due to projections of medical costs, mortality rates, prevailing interest rates and other factors, but have consistently been in the hundreds of millions of dollars.5
Mayor Applyrs’ weekly updates
Mayor Dr. Dorcey Applyrs has been issuing updates to the news media on the fiscal crisis that she inherited on January 1 and her administration’s fiscal stabilization efforts. In her May 12 update, the Mayor commented that the end-of-2025 financial report recently issued by Treasurer Shahinfar “details pressure from rising overtime expenses and personnel-related costs, such as retirement and health insurance.” (More discussion of the Treasurer’s report appears below in this post.)
With the Treasurer’s end-of-2025 report completed, Mayor Applyrs said, her administration continues to manage this year’s budget and looks ahead to creating the 2027 budget, adding that she has instituted spending controls such as a hiring freeze and stronger financial oversight while identifying $5.3 million in savings through “Phase One of our spending reduction plan.”
The May 12 update also provided answers to numerous questions the Common Council has submitted regarding the fiscal crisis. The questions and answers get at individual budget line items where revenue did not materialize or fell short of projections in 2025 — detailed work by both the Council and the Mayor’s office to better understand and explain a wide range of specific revenue shortfalls last year. The back-and-forth between the legislative and executive branches also covers important spending topics such as vacancies in budgeted positions, police overtime, and the recently imposed hiring freeze.
The financial picture as of 12/31/25
Treasurer Shahinfar’s interim report for the final quarter of 2025 includes expanded data presentations and discussion of key issues compared to previous reports, a good step forward in more robust financial reporting. Key points included:
General Fund revenues totaled $203.2 million last year, $27.4 million below budget. Spending was $222.4 million, $8.2 million less than budgeted, for an operating deficit of $19.2 million.
“The City has exhausted remaining unrestricted fund balance” as a result of that deficit. Recurring spending growth and structural budget imbalance “will likely require additional corrective actions, including expenditure reductions, additional recurring revenues, and/or increased state assistance.”
The city may be forced to issue short-term notes “to maintain adequate operating liquidity” this year. Such new borrowing would apparently be the first since 20096 and would, of course, add to the already large amounts of debt and other obligations described above.
The Common Council’s action
At the Common Council’s Finance Committee meeting, Council President Pro Tem Ginnie Farrell announced that a proposed resolution requesting Council access to the city’s digital financial management platforms would not be brought to a vote, after agreement with the Mayor’s administration that Council representatives would be provided such access.
Committee Chair Meghan Keegan told committee members she will draft a letter to the State Comptroller’s office with a request for its review of Albany’s fiscal condition and will invite Council members to sign on to that request. Councilmember Keegan reported that she has had an initial discussion with staff at State Comptroller DiNapoli’s office, and that the Comptroller’s staff indicated they are “evaluating what type of action they are going to take” — such as a limited budget review, broader review or an in-depth audit.
Albany’s general obligation debt includes $65.5 million in long-term bonds that all mature by 2034, and $121.2 million in bond anticipation notes. The latter must be repaid or converted to long-term bonds within five years. GO debt can also include revenue anticipation notes (RANs) or tax anticipation notes (TANs), which typically mature in a year or less and are used only in cases of abnormally severe cash-flow problems. According to the City Treasurer’s office, Albany has not used such short-term notes since 2016 but may need to do so this year.
See City of Albany Financial Statements and Reports Required Under the Uniform Guidance (final audited statements) for December 31, 2024, page 46.
Ibid., page 48.
Ibid., page 50.
The audited financial statements for 2024 also list several other liabilities, the largest of which are vacation and sick pay, $23.2 million; and litigation and contingent liabilities, $26.8 million (page 44 of the document linked above).
The Electronic Municipal Market Access website lists historical public borrowings by Albany and other governmental entities. Its most recent listing of revenue anticipation notes issued by Albany is for this $12.5 million borrowing in 2009.
Thank you for pulling these details together, much appreciated!
Your posts along with the coverage in the Times Union are the sole sources of inscrutable information. Please keep digging and sharing.