About

• City’s revenue outlook steadily improves as income tax growth continues along with City efforts to spur economic opportunity and growth for residents
• The September recurring General Fund revenue estimates total $1.38 billion in the 2024-2025 Fiscal Year, up $52.3 million from the February 2024 conference estimates 
• Forecast: payroll jobs, number of employed residents grow while growth in Detroit resident wages outpace the State’s

On September 9, the City of Detroit held its regular biannual Revenue Estimating Conference to receive an update on the Detroit economic outlook and to approve revised economic and revenue forecasts for the remainder of fiscal year 2025 and for fiscal years 2026 through 2029. 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 continues to improve

The Detroit Economic Outlook for 2023-2029, released Friday, predicts the City’s economy will continue to see steady growth, along with higher wages and a growing labor force. The forecast is prepared by the City of Detroit University Economic Analysis Partnership, which is a collaboration of economic researchers from the City, Wayne State University, Michigan State University, and the Research Seminar in Quantitative Economics (RSQE) at the University of Michigan.

The City’s revenue outlook is also steadily improving as income tax growth continues along with City efforts to spur economic opportunity and growth for Detroiters. For the September Revenue Conference, participants have revised revenue estimates for the recurring General Fund moderately upward to $52.3 million for the 2024 – 2025 fiscal year based on stronger internet gaming activity, continued economic growth, and State revenue sharing increases.  Sustained growth in income taxes continue to lead revenue growth in future years, in line with the Detroit economic forecast. 

“The moderate steady growth projected for Detroit’s economy is reflected in the growth in our revised revenue forecast. Our focus will continue, as in prior years, to assure fiscal stability through balanced budgets that protect Detroit’s ability to fund its obligations while further improving the quality of life for Detroiters,” said Jay Rising, Chief Financial Officer, City of Detroit.

Forecast: payroll jobs, number of employed residents grow while Detroit wages outpace the State

According to the outlook, the City’s economy will continue to improve with steady growth in payroll jobs, wages and the labor force. “We expect our forecast of continued employment growth, falling unemployment, and a return to growing real incomes to translate into ongoing, if gradual, progress toward more inclusive prosperity for Detroit residents over the next five years,” said Gabriel Ehrlich, Director, University of Michigan Research Seminar in Quantitative Economics and lead author of the forecast.

The RSQE report also stated “wage growth adjusted for Detroit CPI (Consumer Price Index) inflation averages 1.0 percent per year from 2024 to 2029 at Detroit establishments, while wage growth for employed Detroiters averages 1.4 percent per year. Both of those rates outpace the real wage growth we are forecasting statewide, which averages 0.6 percent per year in that time.”

Additional highlights in the forecast:

• Economic recovery for Detroit continued through late 2023 and early 2024 despite high interest rates and workers’ strikes in three major industries
• The City’s labor force is expected to include nearly 8,400 more people in 2024 than in 2022
• Despite a growing labor force, Detroit’s unemployment rate ticks down to 7.6 percent next year before falling to 6.9 percent by 2028–29.

The forecast predicted positive developments for Detroit households earning less than $55,301 noting “our analysis found that the economic fortunes of Detroit’s households improved from 2018 to 2022. The share of residents living in lower-income households edged down slightly, while the economic circumstances of Detroit’s children improved more quickly than nationwide.”

These improvements come after investments which the Duggan administration in partnership with City Council have made over the past several years, creating programs like Learn to Earn, Skills for Life and more recently JumpStart, all of which combined offer education, career and job training skills that lead to higher-wage jobs for Detroiters.  

Revenue Estimating Conference Results

The Revenue Conference reported FY2025 General Fund recurring revenues projected at $1.38 billion for the current fiscal year ending June 30, 2025, up nearly $53 million (3.9%) from the previous conference estimate in February 2024. The increase is driven by our growing income and property tax base and increases in internet gaming activity. The FY2025 revenue estimates also include an additional $30.7 million of non-recurring revenues, primarily from short-term investment earnings.

General Fund recurring revenues for FY2026, which begins July 1, 2025, are forecasted at $1.41 billion, an increase of $54 million (4%) over the previous conference estimate in February 2024. The projected increase is led by income taxes and wagering taxes.  The out-year forecasts for FY2027 through FY2029 show continued overall revenue growth of about 2% per year. 

The City will use the estimates approved today to begin developing the City’s FY2026 Budget and FY2026 through FY2029 Four-Year Financial Plan. The conference will meet again to approve revised revenue estimates in February 2025. 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.

• The $46.3 million issuance attracted 13 bidders with the award going to Wells Fargo Bank, National Association 
• Sale capitalizes on Detroit’s return to an investment-grade credit rating earlier this year, having received BBB and Baa2 ratings from S&P and Moody’s respectively  
• The City achieved substantially lower borrowing costs due to higher ratings: the deal priced more than 100 basis points (equal 1 percentage point)  tighter compared to the City’s 2023 UTGO bonds issuance 

Detroit, MI – The City of Detroit’s first bond sale under its new investment grade status was a huge success, generating strong investor demand and attracting 13 bidders. The issuance on Tuesday also marked the first deal post bankruptcy for the City using a competitive sale method, which is when bonds are awarded to the bidder that submits the lowest true interest cost bid. The City’s successful sale of $46.3 million in Unlimited Tax General Obligation (UTGO) bonds underscore confidence in Detroit's financial recovery and investment prospects.  

The bond issued represents the remaining voter-approved UTGO bonds which consisted of $22.0 million for Public Lighting, $11.6 million for Transportation, $9.0 million for Recreation, and $3.7 million for Public Safety and Economic Development. Wells Fargo Bank, National Association who submitted the lowest True Interest Cost bid for the bonds received the award. 

The bond sale success is a result of Detroit’s improving credit rating profile. The improved rating combined with the competitive sale method allowed the City to completely reset its credit spreads at significantly tighter levels with its 10-year bonds selling more than 100 basis points (1 full percentage point equals 100) tighter than the results of the City’s 2023 UTGO bonds that priced almost exactly a year ago.  The lower credit spreads translate to lower borrowing costs and will save the City over $4 million in debt service on these bonds. 

"Today marks another milestone for the City of Detroit as we successfully completed our first competitive bond issuance. This achievement highlights our commitment to fiscal responsibility and prudent financial management; seeking ways to benefit Detroit residents at the lowest possible cost The proceeds from this issuance will be instrumental in advancing key infrastructure projects and supporting essential services that enhance the quality of life for our residents. We are grateful for the confidence shown by investors, reflecting our continued progress and positive economic trajectory,” said, CFO Jay Rising.

The issuance remains aligned with the Mayor’s announcement of lowering the debt millage from 8 mills to 7 mills in 2024 and plans for an additional reduction to 6 mills in 2025. 

Leveraging Detroit’s fresh investment grade rating 

Earlier in 2024 the City of Detroit received rare double-double notch upgrades when Moody’s raised its rating from Ba1 to Baa2 on positive outlook in March and S&P followed with an upgrade from BB+ to BBB. These ratings returned Detroit to investment grade status for the first time since 2009 and marked an incredible financial turnaround from bankruptcy in less than ten years. 

Capitalizing on the strong rating news, the City decided to sell its 2024 bond issuance through a competitive sale process.  The City is very pleased by the number of bids received through the competitive sale process and the significant tightening of credit spreads that resulted in further reducing costs and creating savings for Detroit taxpayers. 

A key measure of success for the bond transaction is the final credit spread on the bonds: lower credit spreads mean lower interest rates and a better deal for the City. Detroit’s rating upgrade was likely the most important factor generating strong investor demand for the 2024 Bonds and delivered the best credit spreads in recent history. The credit spreads ranged from 36-76 basis points (bps) and were 70 bps on the 10-year maturity. By comparison, the 2023 transaction had spreads of 138 to 178 basis points with a spread of 178 bps on the 10-year. The City’s 2021 bond deal had previously been the City’s lowest credit spreads thanks to a particularly strong market. Even in 2021, the spread on the 10-year was 55 bps higher than the current sale at 125 bps. 

Christine Fay, Senior Manager Director at Public Resources Advisory Group, Inc, also added “rates received reflect not only the City’s improved credit ratings but also recognition of the City’s improved economic progress and trajectory,” said Fay.

Residents are the true winners today as the bond sales will allow the City to invest in key areas that improve the quality of life for Detroiters including investments in public lighting, transportation, public safety, recreation and economic development.

• S&P follows Moody’s and delivers Detroit’s second double-notch increase to investment grade capping a remarkable financial turnaround since exiting bankruptcy  
• S&P upgrades Detroit Unlimited Tax General Obligation debt to BBB from BB+ and upgrades Priority-Lien debt rating to A- from BBB  
• The “structural imbalance” adjustment, which depressed and limited Detroit’s rating is removed 
• The upgrade reflects Detroit’s ongoing efforts toward building financial resiliency, as well as its commitment to robust financial planning and budgetary management  
• This marks S&P’s third rating upgrade in three years and follows an equivalent upgrade earlier this month from Moody’s to Baa2 with a positive outlook, highlighting Detroit’s strong trajectory  

Detroit, MI – In ten years, Detroit has completed a remarkable financial turnaround on the journey from junk bond status to investment grade after receiving a double-notch rating increase from Standard and Poor’s Global Ratings on today, less than a month after Moody’s double-notch upgrade. 

S&P has raised Detroit’s General Obligation (GO) debt to a BBB rating, noting the City’s strong fiscal management, positive financial results and improvements to reserves and liquidity. 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 A- from BBB.   

S&P wrote: “Ten years on from its bankruptcy filing, Detroit's financial position and economic condition are the strongest they've been in decades. Liquidity and reserves are at record levels, the debt burden is manageable, population decline is flattening, the stock of blighted and vacant properties is down considerably thanks to extensive city-managed programs, assessed property values have increased in five consecutive years […], and taxable wages continue to grow.”   

 Mayor Duggan again praised the City’s Chief Financial Officers over the last decade:  John Hill, Dave Massaron, Jay Rising, as well as Chief Deputy CFOs Tanya Stoudemire and John Naglick.  The double-notch upgrade from both rating agencies stems from the hard choices, discipline and sound financial management they’ve made over the years,” Duggan said.  “No one in 2014 would have predicted Detroit returning to investment grade with both rating agencies in less than a decade.”

Double-Double: Two notch increases from two rating agencies 

S&P’s credit action follows an equivalent rating upgrade to Baa2 from Ba1 issued by Moody’s last month. Neither agency has rated Detroit investment grade since the beginning of 2009, and the back-to-back announcements highlight the incredible progress since the City exited bankruptcy just under 10 years ago.   

They noted “In our view, concerted management action and institutional support to not only recover from bankruptcy, but also to revitalize Detroit’s economy and finances, enabled the city to capitalize on its situation.”  

S&P also remarked that, “The rating action reflects Detroit’s strengthened financial position and our increased confidence in the city’s ability to sustain balance within the construct of its latest pension funding framework. Despite the pressures it faces, we feel the city is now well positioned to sustain a financial profile supportive of the ‘BBB’ rating given significant flexibility in the form of operating reserves, the Retiree Protection Fund (RPF), and stimulus funds, as well as a commitment to maintaining balanced operations. A very active management team with disciplined planning and budget oversight, a robust pipeline of ongoing economic development, and what we consider an achievable pension funding strategy further support the rating.”   

Marked return to structural balance 

Importantly, S&P notes that they have removed their “structural imbalance” adjustment, which depressed and limited Detroit’s rating. S&P has considered the City structurally imbalanced for years due to the pending fiscal cliff from paused legacy pension payments.   

Now with the City poised to comfortably resume legacy pension payments with support from the RPF, S&P reports, “We feel the path ahead is well-defined and that the city can likely remain in line with the funding plan, so we removed our consideration of this [structural imbalance] adjustment.”  

Moreover, S&P views the City’s acceleration of pension payments by switching from a level dollar to a level principal amortization as a credit positive: “Detroit shifted its pension funding policy this year, to a level principal amortization, instead of level dollar, which will result in higher contributions in the near-to-medium term. These will be funded with increased draws on the RPF and do not alter expected payments from the operating budget. We do not view the higher draws on the RPF, compared to previous expectations, as an indication of increased budget pressure, rather, this approach should reduce long-term risks by better funding the pension plans sooner, while still preserving flexibility with the RPF. We also view this as a reflection of an improved financial position, whereby the city can take on more volatility risks from higher contributions to increase long-term stability of the plan.” 

Overcoming doubts of Detroit’s resilience 

Prior to exiting Bankruptcy, a Plan of Adjustment (POA) was agreed upon that would put the City on track to restore basic services, though many doubted whether anything beyond “adequate” could be achieved. A feasibility study of the POA stated, “I do not need to envision that Detroit will become a best in class municipality to determine that the POA is feasible. For Detroit, emerging from essential services failure to adequate and reasonable service delivery will be a success.” 

However, the City has exceeded every major expectation of the Plan of Adjustment: 

• It was expected that resident employment would decline 0.4% annually, resulting in 8,000 jobs lost from 2014 to 2024. Instead, annual resident job growth has averaged 1.1% and Detroiters have gained 24,000 jobs. 
• The POA expected that property values would continue to decline. Instead, property values began rebounding in 2018 and are now 94% higher than 10 years ago. 
• The City had to meet a target of 2% growth in income tax revenues annually in order to achieve feasibility, a level that many feared was out of reach. In fact, Detroit’s income taxes have grown 5% annually and cumulatively generated nearly $400 million more than projected over the past 10 years. 
• Detroit ended 2013 with a budget deficit and no funds to pay pensions. Nine consecutive years of budget surpluses later, the City built up a $1.2 billion General Fund Balance including $479 million in the Retiree Protection Fund to support the legacy pension payments.  

Detroit Chief Financial Officer, Jay Rising noted:    

“It is a remarkable testament to the City’s efforts that both Moody’s and S&P now rate Detroit as an investment grade credit, made even more significant by the ‘double’-double-notch upgrades. This historic accomplishment belongs not only to the City’s leaders –the mayor, his staff and, City Council but to all the residents, businesses, philanthropic partners and other organizations who kept their faith and investment in Detroit. Most importantly, these upgrades are a validation that residents can be assured that their City is fiscally stable and able to preserve and maintain city services.”