NEW YORK — New York City could see a significant property tax increase if state lawmakers decline to approve new taxes on high earners and corporations, Mayor Zohran Mamdani said Tuesday while outlining his first preliminary budget.

Presenting a $127 billion spending plan, the mayor warned that the city faces a projected $5.4 billion gap over the next two years. To legally balance the budget, his proposal assumes a 9.5% property tax increase unless additional revenue is secured from Albany.

Mamdani described the potential increase as a measure of last resort.

“This is about numbers, not ideology,” he said, calling the city’s fiscal outlook a serious challenge that demands difficult choices.

The proposed tax hike would impact millions of residential property owners as well as commercial landlords. In addition, the budget plan calls for using roughly $1 billion from city reserves and hundreds of millions more from funds designated for retiree health benefits. City reserves reached record levels last year.

The mayor’s comments intensify pressure on Gov. Kathy Hochul, who would need to approve any changes to state income tax laws. Hochul has consistently opposed raising taxes and indicated she does not believe higher property taxes are necessary to resolve the city’s shortfall.

The two leaders appeared aligned earlier this week when the state pledged $1.5 billion in additional aid to help stabilize city finances. But differences remain over how to close the remaining gap.

City Council leaders expressed concern about placing additional burdens on homeowners and small businesses during a period when many residents are struggling with housing costs and inflation. Council Speaker Julie Menin said lawmakers would explore spending reductions and alternative revenue sources before considering higher property taxes.

City Comptroller Mark Levine echoed those concerns, cautioning against depleting reserve funds intended to cushion future economic downturns. He also noted longstanding criticism of the city’s property tax system, which many argue disproportionately affects certain homeowners.

The preliminary budget also reflects policy changes. Mamdani is canceling a previously planned expansion of the police force initiated under former Mayor Eric Adams. The plan trims tens of millions of dollars from the police department’s multi-billion-dollar budget next year.

Funding for a proposed Department of Community Safety — a key campaign promise aimed at sending mental health professionals to certain emergency calls — was not included in the initial proposal. The mayor said that initiative would be addressed in a later budget submission.

The City Council must pass a final budget before the start of the next fiscal year on July 1. Public hearings and negotiations are expected in the coming months as city officials debate whether spending cuts, tax increases, or state assistance will ultimately close the gap.