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Prop N Neighborhood Improvement Bond Program Named Midwest Deal of the Year by Bond Buyer

• This recognition distinguishes the City of Detroit’s Neighborhood Improvement Bonds as an outstanding achievement in municipal finance in the Midwest Region

• The voter-approved $250 Million Proposal N Neighborhood Improvement Bond program designed to remove blight throughout the City has completed 780 demolitions and stabilized 232 salvageable homes

• The goal of the bond-funded program is to demolish 8,000 blighted homes and stabilize thousands of more homes

The City of Detroit’s 2021 Neighborhood Improvement Bonds have received the Bond Buyer’s Midwest Deal of the Year Award. Detroit’s 2021 Bonds were distinguished for the innovative financing of urban blight remediation projects and for their “Social Bond” label which attracts ESG (Environmental, Social and Governance) focused investors. This award comes a year after over 70% of Detroit voters approved Proposal N (Neighborhood), a $250 Million comprehensive plan to address vacant houses through preservation and demolition.

“This recognition by Bond Buyer is significant as we continue to transform the City by removing blight from neighborhoods. We appreciate the honor as it highlights the uniqueness of our Neighborhood Improvement Bond program and its tremendous impact that will be felt for years to come,” says Jay Rising, City of Detroit, Chief Financial Officer.

Detroit’s Neighborhood Improvement Bond program is groundbreaking because after completing the demolition of over 15,000 blighted properties with Federal Hardest Hit Fund (HHF) dollars, the City innovatively pursued municipal bonds to continue funding urban blight removal. This is one of the very few examples—if any—of municipal bonds being used for blight remediation. As a result, the City is now able to reach every neighborhood, whereas the HHF dollars could only be used within the HHF-defined boundaries.  The goal is to demolish an additional 8,000 blighted homes and stabilize thousands for future renovation and sale, improving the safety, value, and health of our neighborhoods.

Moreover, the City’s Neighborhood Bond projects are expected to benefit certain targeted populations including minorities and marginalized communities. Of $70 million of bond proceeds awarded thus far under the City’s procurement, 90 percent have gone to qualified Detroit-based companies and 50 percent to black-owned Detroit-based companies.

Since the passage of Proposal N, Detroit’s Demolition Department has completed 780 demolitions, has 2,200 more under contract, and more than 900 in the demolition pipeline.  Meanwhile, the stabilization of 232 salvageable homes has been completed, with another 1,800 under contract.

With this recognition, Detroit’s Bond program is among the 10 finalists for Bond Buyer’s “Deal of the Year Award” announced on December 16.  Bond Buyer is an independent municipal finance publication that features news, analysis, and data through its website, e-newsletters, alerts, and daily print edition.

• UM continues to predict Detroit’s economy is coming back faster than expected, and employment data suggests a growing labor force offers opportunities for acceleration in employment levels.
• The successful reopening of the casinos and the new internet gaming activity have helped stabilize the City’s four-year revenue forecast as employment recovers in the City.
• The forecast also shows the return on past efforts to create good-paying jobs in the City of Detroit; an effort which our plans for investing in the American Rescue Plan Act recovery funds will magnify.

DETROIT - On September 15, the City of Detroit held its regular biannual Revenue Estimating Conference to receive an update to the Detroit Economic Outlook for 2020-2026 and approve 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.

The Detroit Economic Outlook for 2020-2026, which was previously released in August, reports that Detroit’s employment recovery from COVID is exceeding expectations. The forecast is prepared by the City of Detroit University Economic Analysis Partnership, which is a collaboration of economic researchers at Wayne State University, Michigan State University, and the Research Seminar in Quantitative Economics (RSQE) at the University of Michigan. 

Revenue Outlook Improving

The City’s revenue outlook is improving following two challenging fiscal years of revenues losses driven by the economic impact of the pandemic, nonresidents working remotely, and casino closures and capacity restrictions.

The increase is significantly related to the addition of new internet gaming and sports betting taxes, which were launched in late January. These gains will help offset the expected continuation of reductions in City income tax revenues from nonresidents continuing to work remotely through hybrid work models or full-time remote work. Without the new gaming revenue, the City’s revenue forecast would still be below pre-pandemic levels.

The ongoing pandemic and its lasting effects remain substantial risks to the economic and revenue forecasts approved today. 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 as well.

"This increase in our revenue base is evidence of a resilient economy in Detroit. As we implement our plan to invest federal pandemic recovery funds to bolster Detroit’s future and as we maintain financial responsibility for our budget, the City will strengthen its structurally balanced four-year financial plan,” said City of Detroit Chief Financial Officer, Jay Rising.

Revenue Estimating Conference Results

The Revenue Conference reported FY2022 General Fund revenues projected at $1.106 billion for the current fiscal year ending June 30, up to $111 million (11.2%) from the previous conference estimate in February 2021 but up only $10.5 million (1.0%) from pre-pandemic estimates from February 2020.

General Fund revenues for FY2023, which begins next July 1, are now forecasted at $1.118 billion, an increase of $11.7 million (1.1%) over the revised FY2022 estimates. The conservative General Fund revenue forecasts for FY2024 through FY2026 show continued modest revenue growth of around 1.3% per year.

The City will use the estimates approved today to begin developing the City’s FY2023 Budget and FY2023 through FY2026 Four-Year Financial Plan. The conference will meet again to approve revised revenue estimates in February 2022. The voting conference principals included Jay B. Rising, the City’s Chief Financial Officer; Eric Bussis, Chief Economist, Michigan Department of Treasury; and George A. Fulton, PhD, Director Emeritus, Research Seminar in Quantitative Economics, University of Michigan.

• September 2021 Revenue Conference - Detroit Economic Outlook Slides
• September 2021 Revenue Conference - Revenue Estimates Slides

To review past Revenue Estimating Conference Reports visit Financial Reports under Revenue Estimating Conference Reports section.

• City budget faces larger crunch, but major development projects to spur Detroiter employment

On February 16, the City held its regular February Revenue Estimating Conference to receive an update to the Detroit Economic Outlook for 2020-2025 and approve economic and revenue forecasts for the remainder of fiscal year 2021 and for fiscal year 2022 through fiscal year 2025. 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.

The Detroit Economic Outlook Update for 2020-2025 was prepared by the City of Detroit University Economic Analysis Partnership, which is a collaboration of economic researchers at Wayne State University, Michigan State University, and the Research Seminar in Quantitative Economics (RSQE) at the University of Michigan.  The Update noted that “[t]he COVID-19 recession will have a deep and long-lasting impact on the city of Detroit.”

In its presentation, RSQE noted the dramatic economic impact of COVID-19 upon the City, which saw unemployment rates rise from 8.8% in 2019 to 20% in calendar year 2020.  RSQE also noted that this rate has declined in 2021 to a projected 14.3%, but that a return to pre-COVID levels could take until 2025. 

“The challenging revenue and economic outlook will require the City to focus on controlling costs, while making targeted one-time investments to protect City residents and support the City’s future,” said Acting CFO Jay Rising. “Detroit and its residents were disproportionately impacted by COVID-19, both personally and economically.  What we heard today underscores the need for fiscal relief from Washington to help our residents, businesses, and Detroit weather the remaining life of this pandemic.”

Faster Detroiter employment rebound expected

While unemployment rate recovery may be protracted, the City’s total payroll job count and the payroll jobs held by Detroit residents is projected to recover more quickly with pre-COVID 19 levels of total payroll employment returning by 2022 and of Detroit resident employment by 2023.

Despite the pandemic’s impact on Detroit’s economy, RSQE projects a stronger recovery for the city than the state overall because many long-term projects in the city remain underway. These include the Hudson’s Site downtown, Michigan Central Station in Corktown, the FCA assembly complex, the Amazon distribution center at the State Fairgrounds, and the Gordie Howe International Bridge. The City’s conservative revenue estimates exclude the new jobs and investment from these projects, which will provide revenue upside compared to the forecast.

Revenue Outlook Remains Challenging

The Revenue Conference reported FY2021 General Fund (GF) and GF-Impact revenues projected at $931.1 million for the fiscal year ending June 30, down $58.5 million (5.9%) from the FY2021 Adopted Budget in April 2020 and down $252.6 million (21.3%) from pre-pandemic estimates in February 2020. Revenue losses are driven by the economic impact of the pandemic, nonresidents working remotely, and casino closures and capacity restrictions imposed in response to COVID-19.

General Fund and GF-Impact revenue for FY2022, which begins July 1, is now forecasted at $1.092 billion, an increase of $161.2 million (17.3%) over the revised FY2021 but still down $103 million (8.6%) from pre-pandemic FY2022 estimates. This FY2022 forecast assumes nonresidents who work in the City will gradually begin returning to City workplaces and casino operations begin normalizing through this summer and fall.

The General Fund revenue forecast for FY2023 increases 5.1% over FY2022 as peak pandemic effects on nonresident remote work and casinos wear off. The conservative forecasts for FY2024 and FY2025 show modest revenue growth around 1.5%. In total, the City’s recurring revenues do not recover to FY2019 levels until FY2024.

The estimates approved today set the revenues for the City’s FY2022 Budget and FY2022 through FY2025 Four-Year Financial Plan. The voting conference principals included Jay B. Rising, the City’s Acting Chief Financial Officer; Eric Bussis, Chief Economist, Michigan Department of Treasury; and George A. Fulton, PhD, Director Emeritus, Research Seminar in Quantitative Economics, University of Michigan.

• February 2021 Revenue Conference - Detroit Economic Outlook Slides
• February 2021 Revenue Conference - Revenue Estimates Slides
• University of Michigan RSQE - Detroit Economic Outlook Reports

To review past Revenue Estimating Conference Reports visit Financial Reports under Revenue Estimating Conference Reports section.