On February 13, the City of Detroit held its regular biannual Revenue Estimating Conference to receive an update on the Detroit economic outlook and approve revised economic and revenue forecasts for the remainder of fiscal year 2023 and for fiscal years 2024 through 2027. State law requires the City to hold independent revenue conferences in September and February each fiscal year to set the total amount available for its annual budget and four-year financial plan.
Revenue Outlook Remains Resilient
The Detroit Economic Outlook for 2022-2027, previously released earlier in February, predicted that Detroit’s economy will continue growing at a steady pace, despite projections of a mild national recession in late 2023 to early 2024. Demand for good-paying blue-collar jobs, spurred by City-led efforts driving economic opportunity and growth for Detroiters, prove to be a major factor in the City’s economic resilience. Consequently, the City’s revenue outlook continues to improve despite economic challenges at the national level.
In line with the economic outlook, the Revenue Conference has approved higher revenue estimates based on stronger projected income and utility tax collections. Updated forecasts show employment stability in key sectors, boosting income tax collections as wages continue to catch up to prices. Stronger than expected internet gaming collections and elevated natural gas prices have offset weaker on-site gaming collections, increasing revenue expectations. All other revenues are expected to see stable but more modest growth.
As with any economic and revenue forecast, there are potential risks to the estimates agreed to today, the largest being slower employment and wage growth should national economic trends and the monetary policy response prove more adverse. Future gaming behavior at Detroit’s casinos, such as larger than projected internet gaming substitution effects, remain a risk as well. Conversely, additional development projects and labor force gains would help bolster revenue growth. Proposed increases in State Revenue Sharing and other funding in the State Budget provide potential upside to the forecast too.
“Despite projections of a mild national recession, the Detroit economy has proven to be more resilient today supported by the administration’s growth and opportunity strategies. The revenue estimates are in part a direct reflection of that resiliency. As we navigate economic risks ahead, we will continue to provide fiscal stability through conservatively balanced budgets that protect Detroit’s ability to fund its obligations while improving the quality of life for Detroiters,” said Jay Rising, Chief Financial Officer, City of Detroit.
**Revenue Estimating Conference Results **
The City presented FY2023 General Fund recurring revenues projected at $1.226 billion for the current fiscal year ending June 30, up $39.1 million (3.3%) from the previous FY2023 conference estimate in September 2022. The increase is driven by stronger anticipated income tax collections and utility users tax collections. In addition, the City is projecting $3.1 million in non-recurring revenues this year. General Fund recurring revenues for FY2024, which begins July 1, are now forecasted at over $1.253 billion, an increase of $39.2 million (3.2%) from the previous FY2024 conference estimate in September 2022. The projected increase is driven by income taxes, as the local economy stabilizes and adjusts to a tight labor market. The conservative General Fund revenue forecasts for FY2025 through FY2027 show continued, but modest, revenue growth of around 2% per year on average, led by income tax growth.
The estimates approved today will set the revenues for the City’s FY2024 Budget and FY2024 through FY2027 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.
Please see links of the recorded Revenue Estimating Conference and PDFs of slide presentations below.
To review past Revenue Estimating Conference Reports visit Financial Reports under Revenue Estimating Conference Reports section.