Michael tries to dissuade the Mayor from a relationship with Jennifer, a much younger woman. However, as Mike deals with his own relationship troubles, Jennifer makes a pass at him. Meanwhile, Paul is acting as Michael's assistant, and enjoying it so much that he can't bring himself to hire the best candidate for the job, Stacy Paterno.

Mike struggles to make the children of New York believe again after the Mayor tells them that there is no Santa.

A female magician performs at City Hall and Mike asks her out. Stuart and Carter purchase a bar. After sleeping together and telling him she's not interested in a long-term relationship, the magician says ""I love you"" to Mike. Stuart wants to make the bar a gay bar. Mike has trouble breaking up with his girlfriend. The bar is closed because it was missing a permit, leaving Stuart and Carter penniless. Mike finally tells his girlfriend how he feels and they break up.

The Mayor brings an abandoned baby to City Hall. Mike's old girlfriends voice opinions about him. The Mayor sends James to see a psychiatrist for him, concerning his sexual problems. Mike wants to adopt the baby. The Mayor takes Viagra to help him out. Mike's interview with the social worker doesn't go very well. Nikki prepares to tell Mike about her crush on him, but can't quite get the words out.

Mike and Nikki struggle with taking their relationship to the next level, i.e. sex. Stacy runs a phony psychic hotline on Paul. And the rest of the staff participates in a stakeout to demonstrate the city's new police technology.

Mike makes the staff work on Oscar Sunday due to a screw-up of Paul's. The staff reminisces about their favorite movie moments to pass the time.