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On February 19, 2020, the voting principals of the City’s Revenue Estimating Conference approved economic and revenue forecasts for the remainder of fiscal year 2020 and for fiscal year 2021 through fiscal year 2024. 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 Revenue Conference reports recurring General Fund revenue projected at $1.073 billion for the fiscal year ending June 30, up $15 million (1.4%) from the FY 2020 Adopted Budget. The increase is driven by a larger than expected Income Tax base following the final FY 2019 results and by increases in State Revenue Sharing.

Recurring General Fund revenue for FY 2021, which begins July 1, is now forecasted at $1.085 billion, an increase of $12 million (1.1%) over FY 2020. The Income Tax forecast, which accounts for most of the increase, assumes national economic growth slows in FY 2021 and FY 2022, consistent with independent economic forecasts. Overall, modest increases are projected from FY 2021 through FY 2024 across the City’s major taxes and other revenues.

Earlier this month, the City of Detroit, in partnership with the University of Michigan, released its first economic forecast for Detroit, which showed ongoing gains in household income, employment, and labor force participation through 2024.

The Detroit economic outlook is strong and property values are rising. Income Taxes are showing growth, but other major taxes are more restrained. Property Taxes are limited by the State Constitution, which protects homeowners by capping increases at inflation. Detroit’s State Revenue Sharing is largely set by the annual State Budget. Wagering Taxes show steady but only modest annual growth.

The conservative revenue estimates approved require the City to focus on controlling costs over the next four years to keep the four-year plan balanced and fund legacy pension contributions that resume in FY 2024.

“While it’s great that the economy continues to grow over the next four years, the City has to do more with less,” says Chief Financial Officer David Massaron. “Economic growth in the City does not directly translate to growth in City revenues. Our relatively flat revenue growth means that the Mayor and City Council must budget responsibly to ensure a balanced four year plan.”

“Now that revenues have been determined, I look forward to working with the Administration and City Council on the approval of our budget and four year financial plan,” says Deputy Chief Financial Officer and Budget Director Tanya Stoudemire.

The estimates approved set the revenues for the City’s FY 2021 Budget and FY 2021 through FY 2024 Four-Year Financial Plan. The voting conference principals included David Massaron, City’s Chief Financial Officer; Eric Bussis, Chief Economist, Michigan Department of Treasury; and George Fulton, PhD, Director Emeritus, Research Seminar in Quantitative Economics, University of Michigan.

As with any economic and revenue forecasts, there are potential risks to the estimates agreed to today, including national economic trends, international economic issues, and significant changes in federal and state policy.

Today, the City of Detroit in partnership with the University of Michigan released its first forecast for Detroit, which showed ongoing gains in household income, employment and labor force participation through 2024. The forecast reports a 1.7% growth rate in employment for 2019, exceeding the 1.0% growth rate of household employment in Michigan overall in that time.

University of Michigan economist Donald Grimes said that labor force participation is expected to rise from 47.3% to 48.5% between 2018 and 2024 as new job opportunities are created from developments such as the FCA Mack Avenue plant and Gordie Howe
International Bridge.

“Bringing new jobs to Detroit and filling them with Detroiters has been a cornerstone of the Mayor’s economic development strategy,” said David Massaron, Chief Financial Officer for the City of Detroit. “This independent forecast validates that strategy as we work to ensure Detroiters have opportunities for good jobs.”

According to the forecast, the city's unemployment rate will continue to fall from 18.7% in July 2013, when the City filed for bankruptcy, to 8.6% in 2019, and to 7.9% by 2023 and 2024, improving faster than the statewide measure.

The forecast was produced by economists at the University of Michigan's Research Seminar in Quantitative Economics, who are part of the partnership with the City of Detroit and economists at Michigan State and Wayne State universities.

While the economic forecast supports positive trends for the City’s income tax revenue, many of the City’s major revenue streams, including property tax and state revenue
sharing, will have constrained growth due to state laws.

"We expect Detroit's ongoing recovery to form a key component of Michigan's economic growth through 2024," said Gabriel Ehrlich, director of RSQE.

"This difference in untapped labor should allow the city to benefit more than the state as
labor markets continue to tighten," said U-M economist Aditi Thapar.

By developing Detroit-specific data, the city government and community stakeholders can quantify local economic conditions and to plan, design, finance and evaluate programs to improve economic opportunities for Detroiters.

"Detroit has vastly improved its financial position and prepared for any future financial hiccups by doubling its rainy day fund," said U-M economist Daniil Manaenkov.

"Despite that progress, Detroit's economy continues to face well-known challenges, including an elevated poverty rate and relatively low educational attainment among its residents."

Among the forecast highlights:

• Employment to expand by about 6,700 jobs through 2024 with most gains coming from service sector jobs such as financial, professional and business services; leisure and hospitality; and education and health care. Major new construction projects will also add considerably to city resident employment.
• Manufacturing is projected to remain Detroit's second-largest sector, behind education and health services, making up 16% of overall employment.
• Total resident income is expected to rise by 4-4.7% per year from 2020 to 2024, outpacing statewide income growth.

Most of the public economic data used in the first Detroit forecast is only available at the county or regional level. The city’s Office of the Chief Financial Officer and its University Economic Analysis Partnership are working with the State of Michigan’s Bureau of Labor Market Information and Strategic Initiatives to produce detailed payroll employment and wage estimates for the city of Detroit. This effort will provide new insights into the local economy not previously available for use in future forecasts.

City announces partnership with state's top universities to provide economic forecasting specific to Detroit