Exclusive | Its not just Florida and Texas threatening NYCs sputtering tax base another big worry is coming

Mayor Zohran Mamdani’s plan to tax his way out of the Big Apple’s self-imposed fiscal crisis is facing a fresh and little-discussed threat, according to well-placed financiers – and it’s coming from artificial intelligence.As I reported earlier this week, investors lately have begun to shun city debt – either selling it in the secondary market or balking at buying its newly issued bonds – over concerns that Mamdani’s numbers aren’t adding up.The worry is that his $127 billion budget still faces a $5.4 billion deficit and that his solutions – like raising taxes on anyone who works – will make the situation even worse by forcing more people to leave New York City, already one of the highest taxed locales in the country.Even if Mamdani does manage to balance his upcoming fiscal 2027 budget, some prospective investors in the city’s current and future debt note that he’s got at least three more years of budget to balance, and there will likely be less of a population to tax.While a stampede of high earners to lower-tax venues down south like Florida continues to be a major concern, there’s another, less-talked-about issue that’s worrying investors in the city’s municipal bonds: the threat of AI job elimination.  Richard Farley is a veteran corporate finance lawyer for Herbert Smith Freehills Kramer, and author of a terrific book published last year on the New York City’s financial crisis of the 1970s: “Drop Dead: How a Coterie of Corrupt Politicians, Bankers, Lawyers, Spinmeisters, and Mobsters Bankrupted New York, Got Bailed Out, Blamed the President, and Went Back to Business as Usual (And It Might Be Happening Again).”Farley says AI job losses in software development, financial services and legal services will only accelerate, and those industries “account for a huge percentage of the high-paying jobs in NYC’s tax base.”“The AI-based layoffs and hiring freezes are already happening albeit quietly and they will decimate the...