City of Detroit Presents Updated Revenue Estimates and Economic Forecast for Fiscal Years 2022-2026
City of Detroit Presents Updated Revenue Estimates and Economic Forecast for Fiscal Years 2022-2026
- UM continues to predict a faster economic recovery for Detroit than the State overall
- City-led efforts to bring good-paying jobs to Detroiters are driving economic recovery and growth
- City’s revenue outlook continues to improve in line with the economy and led by growing income taxes
On February 18, as part of the City of Detroit’s regular biannual Revenue Estimating Conference process, the City and its partners presented an update on the Detroit Economic Outlook for 2021-2026 and revised economic and revenue forecasts for the remainder of fiscal year 2022 and for fiscal year 2023 through fiscal year 2026. State law requires the City to hold independent revenue conferences in September and February each fiscal year to set the total amount available to be budgeted for the next four years. Following today’s presentations, the Revenue Estimating Conference will convene next Friday, February 25, for discussion and action on the proposed forecast.
Detroit Economic Recovery Faster than the State Overall
The Detroit Economic Outlook for 2021-2026, reports that “Detroit’s economy continues to recover from the COVID-19 recession despite the resurgence in new caseloads.” The forecast predicts a faster recovery for Detroit than the State overall. Resident employment will recover to pre-pandemic levels by the end of 2022. Meanwhile, jobs at establishments within the city boundaries will recover by early 2023. The City’s economy continues to grow through 2026 with blue-collar jobs leading the way. These job gains are driven by major City-led projects, such as the Stellantis and General Motors automotive plant expansions and Amazon’s new distribution center. The forecast is prepared by the City of Detroit University Economic Analysis Partnership, which is a collaboration of economic researchers at the City, Wayne State University, Michigan State University, and the Research Seminar in Quantitative Economics (RSQE) at the University of Michigan.
Revenue Outlook Continues to Improve
The City’s revenue outlook continues to improve following two challenging fiscal years of revenue losses driven by the pandemic. Recurring City revenues are forecasted to exceed pre-pandemic levels in the current fiscal year ending June 30, primarily due to stronger income tax collections and the implementation of internet gaming and sports betting last year. Income taxes continue to drive revenue growth in future years, in line with the City’s economic recovery and despite an ongoing loss from nonresidents expected to continue working remotely through hybrid work models. All other revenues are expected to see stable but more modest growth.
The ongoing pandemic and supply chain issues remain substantial risks to the economic and revenue forecasts presented today. Future gaming behavior, and potential substitution effects, remain a risk as well. However, the City’s ongoing efforts to attract major employers and provide Detroiters with opportunities for good-paying jobs provide potential revenue upside to the forecast. Proposed increases in State Revenue Sharing and other funding in the State Budget provide potential upside as well.
“Our economy is continuing to recover from job losses related to the pandemic as we’ve seen 80% of resident employment return in 2021 with steady growth projected and we’re beginning to see more fruit from economic development in the City of Detroit. Blue collar jobs are leading the recovery and in fact, exceeding pre-pandemic levels as we see growth in all jobs particularly related to development efforts by Amazon, GM’s Factory Zero and Stellantis’ Mack Assembly complex. Still, as we anticipate modest revenue growth in future years, we will maintain fiscal responsibility in our budget to ensure we achieve a balanced four-year financial plan,” said City of Detroit Chief Financial Officer, Jay Rising.
Revenue Estimating Conference Results
The City presented FY2022 General Fund recurring revenues projected at $1.087 billion for the current fiscal year ending June 30, up $23.8 million (2.2%) from the previous conference estimate in September 2021. The increase is driven by stronger income tax collections and State Revenue Sharing from sales taxes. New internet gaming and sports betting taxes were already added to the forecast in September 2021. In addition, the City is projecting nearly $50 million in non-recurring revenues this year. General Fund recurring revenues for FY2023, which begins July 1, are now forecasted at $1.147 billion, an increase of $60 million (5.5%) over the revised FY2022 estimates. The projected increase is driven by income and wagering taxes, as the local economy continues to recover and as on-site gaming activity returns to pre-pandemic levels. The conservative General Fund revenue forecasts for FY2024 through FY2026 show continued, but modest, revenue growth of around 2% per year on average. Once approved next week, the estimates presented today will set the revenues for the City’s FY2023 Budget and FY2023 through FY2026 Four-Year Financial Plan. The voting conference principals are Jay B. Rising, the City’s Chief Financial Officer; Eric Bussis, Chief Economist, Director, Office of Revenue and Tax Analysis, Michigan Department of Treasury; and George A. Fulton, PhD, Director Emeritus, Research Professor Emeritus, Research Seminar in Quantitative Economics (RSQE), Department of Economics, University of Michigan.
https://news.umich.edu/u-m-forecast-detroit-economy-showing-resilience-…
Please see link of the recorded Revenue Estimating Conference and PDFs of slide presentations below.