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Council members who support the rebates say the checks were approved for the 2009 fiscal year and should have gone out in October.

“We were happy with the judge, that he saw this was not only a serious matter, but a matter of law that would need to be decided upon, and we’re happy with that,” said Republican Staten Island Councilman Vincent Ignizio. “However, we are disappointed that the corporation counsel, quite frankly, didn’t do their homework, and what ended up being a delay tactic kicked the can down the road, costing the taxpayers their $400 for yet another week.”

“It’s shocking that the mayor would continue to press this issue and so blatantly violate his legal mandates,” said attorney Randy Maestro. “And in a Scrooge-like fashion, deny people the rebate checks to which they’re entitled. That’s their money.”

Council Speaker Christine Quinn, normally a strong supporter of the mayor, also agreed that distributing rebate checks are nonnegotiable.

"It's clear to me the city is legally required to send them out and they should get sent out immediately," she said.

But the mayor has argued that distribution of the checks – during these tough economic times – could instead force the city to raise taxes.

At the close of the hearing, the judge said that while a compromise between the mayor and the council was ideal, the court was prepared to resolve the issue on its own.

The mayor has ordered all city agencies to slash their budgets, as he attempts to close a rapidly growing budget gap.

"We have cut to the bone and the next move is going to be very painful," said Bloomberg.

If the City Council does not vote to raise property taxes and the state Legislature does not give more money to the city, the mayor said more city employees will lose their jobs and services will be scaled back.

"Maybe the hours will be fewer, maybe the locations you go to will be fewer. Maybe class sizes will be bigger," said Bloomberg. "The next cut is fire houses. There's just no other place to do it."

Fire Commissioner Nicholas Scoppetta, who is already forced to not hire more recruits, is facing difficult decisions.

"I'm hoping that we don't have layoffs, but $95 million is a huge additional budget cut, so everything will have to be on the table and we'll just see," said Scoppetta.

As for the rebate checks, Quinn said that if the city government agrees to send them out, they will not reach mailboxes in time for Christmas.