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September 13, 2022

Press Release
City of Detroit Reports Revised Revenue Estimates for Fiscal Years 2023-2027

City of Detroit Reports Revised Revenue Estimates for Fiscal Years 2023-2027

  • City’s revenue outlook continues to improve, thanks to strength of income tax and continuing efforts driving economic opportunity and growth for Detroiters

  • Economic effects from the pandemic and future gaming behavior remain risks to the revenue forecast

  • Additional development projects throughout Detroit could bolster more robust levels of revenue growth.

DETROIT - On September 12, the City of Detroit held its regular biannual Revenue Estimating Conference to receive an update to the Detroit Economic Outlook for 2021-2027 and approve revised economic and revenue forecasts for the remainder of fiscal year 2023 and for fiscal year 2024 through fiscal year 2027. 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 2021-2027, which was previously released in August, shows the City’s economy holding up in the face of national economic headwinds, as development projects in Detroit and pent-up demand in the auto industry prove to be major drivers in the City’s ongoing economic recovery. The forecast is prepared by the City of Detroit University Economic Analysis Partnership, which is a collaboration of economic researchers between 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, thanks to the strength of our income tax and our continuing efforts driving economic opportunity and growth for Detroiters. The Revenue Conference has once again approved higher revenue estimates based on our stronger collections concluding the previous fiscal year, Detroit's continued economic growth and stability, and revenue sharing increases provided in the State Budget enacted in July. Income taxes continue to drive revenue growth in future years as well, in line with the City’s economic forecast and despite an ongoing loss from nonresidents expected to continue working remotely through hybrid work models. Economic effects from the pandemic and future gaming behavior remain risks to the revenue forecast. However, the City’s efforts to attract major employers and provide Detroiters with opportunities for good-paying jobs provide potential revenue upside to the forecast. Additional increases in revenue sharing from the State of Michigan could provide potential upside as well.

“The improved revenue outlook is further indication that the City’s efforts to spur economic growth-by attracting new businesses, creating opportunities for Detroiters, improving public safety and beautifying neighborhoods are working despite the pandemic and its lingering consequences,” said, Jay Rising, Chief Financial Officer, City of Detroit.

Revenue Estimating Conference Results

The Revenue Conference reported FY2023 General Fund recurring revenues projected at $1.187 billion for the current fiscal year ending June 30, up $41 million (3.6%) from the previous conference estimate in February 2022. The increase is driven by our growing income and property tax base and revenue sharing increases provided by the State of Michigan. Internet gaming continues to provide additional revenue stability in the face of weaker on-site gaming activity.

General Fund recurring revenues for FY2024, which begins July 1, are now forecasted at $1.214 billion, an increase of $27 million (2.3%) over the revised FY2023 estimates. The projected increase is driven by income taxes, as the local economy continues to recover and grow. The conservative General Fund revenue forecasts for FY2025 through FY2027 show continued, but more modest, revenue growth of less than 2% per year. Additional development projects throughout Detroit could bolster more robust levels of revenue growth.

The City will use the estimates approved today to begin developing the City’s FY2024 Budget and FY2024 through FY2027 Four-Year Financial Plan. The conference will meet again to approve revised revenue estimates in February 2023. 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.

· September 2022 Revenue Conference – Detroit Economic Outlook Slides

· September 2022 Revenue Conference – Revenue Estimates Slides

· Link to Zoom recording of September 2022 Revenue Conference 

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

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March 15, 2022

Press Release
S&P Upgrades Detroit’s Rating, Marking Second Upgrade in a Week and Highlighting Strengthening Credit
  • S&P upgrades Detroit Unlimited Tax General Obligation debt to BB from BB- and upgrades Priority-Lien debt rating to BBB- from BB+, both with positive outlooks 
  • The upgrade reflects Detroit’s growing revenues and improved budget position, sustained reserves, and overall increasing flexibility with substantial federal funds and a bolstered retiree protection fund (RPF) 
  • The S&P rating upgrade follows last week’s equivalent upgrade from Moody’s to Ba2 with a positive outlook, highlighting Detroit’s strong trajectory

S&P Global Ratings has raised Detroit’s General Obligation (GO) debt to a BB rating, noting the City’s improving economic outlook and strong fiscal management. At the same time, S&P upgraded its rating on Detroit’s Public Lighting Authority and Income Tax backed debt issued through the Michigan Finance Authority (considered Priority-Lien debt because of their pledge of specific tax revenues) to BBB- from BB+, marking a return to investment grade on certain bonds secured by pledged revenues. 

Additionally, S&P assigned a positive outlook to both GO and Priority-Lien debt: “Detroit remains, in our view, on a trajectory to meet increasing pension costs in the near and long term within a balanced budget framework, and if it does so, we could raise the rating. We feel the city has fiscal discipline and flexibility that can keep it on track should it experience economic slowdowns or higher-than-forecasted pension increases.”  

S&P’s credit action follows an equivalent rating upgrade to Ba2 from Ba3 issued by Moody’s last Wednesday, also with a positive outlook. The back-to-back announcements highlight not only strong fiscal management and budgetary performance, but also the rating agencies’ positive assessment of the administration’s strategy for Detroit. Both S&P and Moody’s indicated that the reasoning behind rating upgrades included the City’s investments in workforce training, economic development, blight removal, and beautification.  

The S&P credit opinion emphasizes improving fundamentals in Detroit’s economy. The report notes, “Successes to date are reflected in increasing property values, improved public safety metrics, and reduced poverty rates; and substantial new job creation within the city likely reflects the private sector’s recognition of an increasingly skilled labor force.” 

The City’s strategic use of American Rescue Plan Act (ARPA) stimulus will bolster future growth, in S&P’s opinion. Their report states, “Detroit continues to prioritize investing in its residents and ARPA funds will accelerate this. The focus is on continued blight and abandoned building removal, streetscaping, and beautification projects, all of which have proven to increase home values and public safety, along with people projects such as paying for job training and degree attainment, improving internet access, and facilitating record expungements, which help better position residents for jobs.” 

S&P further indicated the potential upside scenario for Detroit: “We could raise the rating over the next one-to-two years if the city sustains budgetary balance, including increasing pension contributions and not relying on reserves, and if we feel it is likely to continue to do so without deferring expenses or depleting the RPF at a rate that puts future budgets at increased risk.” 

Detroit last saw an upgrade on its GO debt from S&P in February 2019, when the rating agency raised the City to a BB- from a B+. The last time Detroit held a rating as high as BB from S&P was a decade ago in March 2012. Improved bond ratings are indicative of a city’s finances and financial profile, and higher ratings mean lower costs for governments when they borrow funds to pay for various capital improvements. 

Detroit Chief Financial Officer Jay Rising noted that “this S&P upgrade is a double dose of good news; affirming the efforts taken to improve the City’s general obligation credit and returning an important segment of our portfolio to investment grade.  The upgrade is the product of the strategy of rebuilding the City’s credit through creating economic opportunities, improving security and restoring the beauty of the City for Detroiters.” 

The Priority-Lien rating relates to the 2014 Income Tax Bonds which are secured by municipal income taxes, and the 2014 Public Lighting Authority (PLA) bonds which are secured by utility users taxes (UUT).

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March 9, 2022

Press Release
Detroit’s Credit Rating is Upgraded by Moody’s Citing City’s Strong Management of Challenges
  • Moody’s upgrades Detroit to Ba2 from Ba3 with a positive outlook
  • Moody’s noted Detroit’s healthy financial position supported by strong management that has successfully navigated challenges through the pandemic
  • The positive outlook reflects the likelihood that the rating will move upward if financial operations and reserves continue to strengthen, positioning the city well to address growing pension costs and future revenue downturns

Moody’s Investors Service has upgraded the City of Detroit’s credit rating to Ba2 with a “positive” outlook in a report issued Wednesday, a move the ratings agency said reflects the improving and strengthening of the city’s financial position. The announcement comes days after Mayor Mike Duggan presented his recommended 8th consecutive balanced budget to City Council.

Detroit last saw an upgrade from Moody’s in May 2018. This is the first time since 2009 that the City has received a Ba2 rating. Improved bond ratings are indicative of a city’s finances and financial profile, and higher ratings mean lower costs for governments when they borrow funds to pay for various capital improvements.

“Detroit's revenue base was exposed to the pandemic driven economic disruptions. Income taxes dropped because of nonresidents working remotely and wagering taxes were halted as casinos closed,” the Moody’s report said. “Despite those pressures, Detroit posted its sixth consecutive operating surplus in fiscal 2021 and is on pace for another strong year in fiscal 2022.”

The report also highlights the City’s diversifying economic base and strengthening job growth. “Detroit is poised to further expand its employment base with General Motors Company, Ford Motor Company, Stellantis N.V. and a number of auto suppliers making major investments in the city that are creating thousands of jobs. Detroit is also a logistics hub, a position that will be bolstered by a second international crossing that is being constructed, the Gordie Howe International Bridge. Huntington Bank, which recently absorbed Chemical Bank and TCF bank, is making Detroit its commercial banking headquarters with a new 20-story building that is under construction.”

Moody’s indicated several key factors that led to the rating upgrade:

  • Despite disruptions, the trajectory of the city’s job base and income tax receipts is positive
  • Reserve position is quite healthy and growing
  • Very strong financial planning practices include annual conference to estimate revenues, long-range financial planning, and conservative budgetary assumptions

The Moody’s report also cited the City’s early management response that mitigated pandemic losses and Detroit’s favorable revenue trajectory, noting that, “The city is well poised to further strengthen its finances over the next two fiscal years.”

Moody’s indicated that factors which could lead to a future upgrade include:

  • Robust revenue growth that makes rising fixed costs easier to accommodate
  • Strengthening of full value per capita, median family income and population trends
  • Accumulation of additional resources in an irrevocable trust to reduce budgetary risk of rising pension costs

City of Detroit Chief Financial Officer, Jay Rising says “Moody’s upgrade is an acknowledgement of the hard work done to restore the City from bankruptcy.”  “We know we have more work ahead of us and we are confident we will overcome the challenges to the City’s credit posed by risks with future pension funding,” said Rising.

Moody’s rating is based on economic and demographics measures, as well as possible notching factors as defined by the US Local Government General Obligation Debt methodology. The full report can be found below.

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February 18, 2022

Press Release
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-in-face-of-pandemic-downturn-though-challenges-persist/

Please see link of the recorded Revenue Estimating Conference and PDFs of slide presentations below.

https://cityofdetroit.zoom.us/rec/share/VjE-5kW3xmgbEYqR5KzRgZ1OFZvtMtiXk5HyRJo5kK4m5PYE6RF4rF_oiiO_9qaM.UTAg1MI7JSnF3ZjX?startTime=1645200510000

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November 16, 2021

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

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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.

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September 15, 2021

Press Release
City of Detroit Reports Revised Revenue Estimates for Fiscal Years 2022-2026
  • 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.

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

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February 19, 2021

Press Release
City of Detroit Reports Revised Revenue Estimates for Fiscal Years 2021-2025
  • 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.

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

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February 5, 2021

Press Release
Proposal N neighborhood improvement project gets final green light with sale of first $175 million in bonds

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  • Investor interest in Detroit bonds so strong they could have been sold 20x over
  • City leverages intense interest to achieve low 3.36% interest rate
  • Sale comes on the heels of S&P boosting Detroit’s rating outlook to “Stable”

The City of Detroit’s ambitious project to rehab 8,000 vacant homes and demolish another 8,000 got its first infusion of funds today as the City of Detroit sold the first $175 million in bonds of a planned $250 million neighborhood improvement effort. In November, more than 70% of Detroit voters approved letting the city sell the bonds.   

The bond funds will allow the city to begin the process of stabilizing and securing thousands of vacant Land Bank properties until they can be sold for rehab and demolishing houses that can’t be saved. The city plans to go to the market again next year to sell additional Prop N bonds.   

Interest among investors was so strong in this series of Detroit Prop N bonds that they could have been sold 20 times over. Specifically, for this $175 million bond sale, there were over $3.4 billion in orders.  

“The incredibly strong interest in these bonds is a direct reflection of investor’s confidence in Detroit’s strong financial management and that starts with our Office of Chief Financial Officer,” said Mayor Mike Duggan. “CFO Jay Rising, Chief Deputy CFOs Tanya Stoudemire and John Naglick, and their entire team have done a tremendous job managing the city’s finances to put us in a strong position, now and for the future.”    

Currently, contracts for the first 1,380 demolition properties are before City Council awaiting approval.  All seven companies selected through the city’s procurement process to perform the work are Detroit headquartered and five of those companies are black owned.  More than 51% of the employees doing the demolition work for all seven companies will be verified residents of the city of Detroit.    

Strong demand means lower interest rate

The City issued a mix of taxable and tax-exempt bonds that will be immediately spent as the first installment on Proposal N programs.  More than 60 institutional investors placed orders on the bonds on Thursday, many of which were repeat investors that purchased the City’s 2020 and 2018 bonds demonstrating their continued support and interest in the City, according to CFO Rising.   

That overwhelming level of interest allowed the City to achieve a much lower interest rate than it had initially expected and will translate to much lower repayment costs over time for Detroit taxpayers.   

“Investors took notice of Detroit’s steady progress in building financial strength and swiftly responding to the pandemic driven revenue shortfalls. They saw that while the COVID-19 crisis may have slowed this positive trend, it did not reverse it,” said Rising. 

The strong market and demand for Detroit bonds allowed the City to secure a 3.36% interest rate, significantly less than city officials had initially anticipated and 1.28 percentage points less than the interest rate received by the City on its last general obligation bond issue in October, 2020.  Detroit marketed these bonds with the “Social Bond” designation to attract Environmental, Social, and Governance (ESG) focused investors that are interested in financing socially beneficial projects. 

Recent S&P Upgrade set the stage

In bringing Detroit’s outlook to “Stable” two weeks ago, Standard & Poors referenced the City’s strong fiscal management and the vision behind Proposal N:  “We view the passage [of the $250 million Proposal N] as significant in that it will further a key component of the administration's long-term vision for strengthening the tax base and do so with a dedicated debt millage as opposed to funding through reserves or the operating budget.”  

This is the third time since 2018 that Detroit sold municipal bonds backed solely on the City’s ability to repay. During the prior 20 years, the City could only sell bonds that were either backed by the state of Michigan or with insurance to the bondholder, which greatly added to the cost for the City.

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February 26, 2020

Press Release
Detroit Receives Credit Rating Upgrade from Stable to Positive by Moody's
  • Moody’s rating outlook revised from stable to positive
  • Moody’s credited Detroit for its robust reserves, strong financial planning practice, and its ability to meet and exceed its budget demands

Moody’s has raised the City of Detroit’s credit outlook to ‘positive’ in a report issued today, a move the ratings agency said reflects the improving and strengthening of the city’s financial position.

Detroit last saw an upgrade from Moody’s in 2018, when Detroit was upgraded to Ba3 with an outlook of ‘stable’. Today, the new outlook of ‘positive’, represents that the City has continued moving in the right direction towards financial stability.

“The city's conservative budgeting practices, growing revenues and reduced fixed costs achieved through bankruptcy have led to a rapid rise in financial reserves,” The Moody’s report said, while noting that “social considerations are also material. The city has been able to improve its provision of basic city services to a population that is primarily low income.”

The report also highlights the City’s strengthening job growth and its positive impact on the City’s thriving economy. “The employment trajectory of Detroit is fundamentally improved,” the report noted. “Even before the 2007-09 recession, both Detroit and the State of Michigan continued to lose jobs while the rest of the nation expanded. The story has been different during the current economic expansion, with Detroit and Michigan initially growing jobs at faster paces than the nation.”

Some factors that led to the rating improvement, according to Moody’s:

  • Very strong financial planning practices include annual revenue setting conference, long-range financial planning and conservative budgetary assumptions
  • A favorable trend in job growth and its impact on the city’s tax base and tax collections
  • Improvements in the City’s budget to finance service improvements, capital investments and accommodate a large spike in pension contributions
  • Robust operating performance has resulted in the accumulation of very healthy reserves while also enhancing the capacity of the city to provide services and prepare for rising fixed costs

The Moody’s report also cited the City’s recurring expenses in comparison to revenue over the next six years. “The city projects that recurring expenses will begin to exceed recurring revenue in fiscal 2026. However, we recognize that long-range forecasts typically produce budget gaps and we expect the city can close these gaps with moderate budgetary adjustments,” the report noted.

“It’s gratifying to see Moody’s recognize the fiscal responsibility of City Council and the administration,” said Chief Financial Officer David Massaron. “While we’re making extensive progress, we have to continue to plan for financial contractions and set-aside funds for our pension obligations while making investments that improve quality of life in the City.”

As referenced in the report, “Continuation of positive revenue trends and maintenance of ample reserves will be critical in improving the city's capacity to absorb a scheduled spike in pension contributions in fiscal 2024 and to finance needed capital investments.”

Moody’s rating is based upon economic and demographics measures, as well as possible notching factors as defined by the US Local Government General Obligation Debt methodology. The full report can be found below.

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February 20, 2020

Press Release
The City Reports Revenue Estimates for Fiscal Years 2020-2024

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.

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February 10, 2020

Press Release
First City of Detroit Forecast Projects Faster Job Growth than State of Michigan

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.

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July 15, 2019

Press Release
City Partners With State's Top Universities

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

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Press Release
The Next Step: Detroit Aims to be Free of Residential Blight by 2024

The Next Step: Detroit Aims to be Free of Residential Blight by 2024

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Press Release
S&P Upgrades Detroit GO Rating to BB- as Finances Stablize; Priority-Lien Ratings Lowered to BB+ On Criteria Application

Detroit GO Rating Raised to 'BB-' As Finances Stabilize; Priority-Lien Ratings Lowered To 'BB+' on Criteria Application

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Press Release
Moody's upgrades Detroit, MI's issuer rating to Ba3; outlook stable

New York, May 22, 2018 -- Moody's Investors Service has upgraded the City of Detroit, MI's issuer rating to Ba3 from B1. Concurrently, Moody's has revised the outlook to stable from positive in light of the upgrade. This issuer rating is equivalent to the general obligation unlimited tax (GOULT) rating we would assign to GOULT debt of the issuer, but does not apply to any of the city's $1.9 billion of debt outstanding.

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Press Release
Michigan Finance Authority Revenue Sharing, Local Project Bond Ratings Revised To 'A+'; Outlook Positive

CHICAGO (S&P Global Ratings) April 25, 2018--S&P Global Ratings has resolved its CreditWatch on various Michigan Finance Authority revenue sharing bonds, and on one series of Authority local project bonds (issued for Dearborn Heights), by raising the ratings to 'A+' from 'A'. The outlook is positive. The bonds were all issued on behalf of one or multiple local governments (LGs).

The 'A+' ratings are based on our State Credit Enhancement (SCE) criteria, and reflect the benefit each LG receives from strong Authority (and state of Michigan) oversight as well as the strength and availability of distributable state aid (DSA), which would be diverted to the Authority if a LG cannot make its full and timely debt service payment.

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