Feb 14, 2023 - Business

Remote work's effect on Detroit's coffers

Illustration of an overhead view of many different hands and computers on small round tables

Illustration: Annelise Capossela/Axios

As some companies decide to bring workers back to the office, Detroit expects it will lose less income tax revenue moving forward.

Why it matters: The pandemic continues to drive a lot of unknowns about the economy. Changing trends in where people work factor into how Detroit estimates how much tax money it's going to make so it can then decide how to spend on services for residents.

  • But making these predictions is exceptionally tricky nowadays, experts agreed at the city's biannual revenue estimating conference yesterday.

Catch up quick: People with jobs in Detroit proper who live elsewhere don't have to pay city income taxes for the hours they work outside the city, which led to big tax dollar losses for the commuter-heavy city starting in 2020.

  • That loss was estimated at $85 million for 2021, but ended up better than predicted: $55 million.

The latest: Over the next several years, annual losses are predicted at $25-$29 million, revised down from the $32-$45 million range predicted last year, per a city presentation.

  • A city like Detroit that relies heavily on income tax feels these losses more deeply, so the slightly rosier figures are a welcome change for officials.
  • But still, lower income tax revenue due to remote work is the permanent new normal, city financial officials said.

Yes, but: Other experts weighed in with some reservations about the figures, saying the "new normal" has not yet been established and more evidence is needed.

The big picture: Amid this age of uncertainty in revenue forecasting, the city is going to be under even more pressure to spend judiciously starting this coming fiscal year.

  • It's time for Detroit to resume making payments to its pension funds after a 10-year reprieve post-bankruptcy.
  • The estimated $135 million yearly payments represent 12% of the general fund. But the city prepared a Retiree Protection Fund to soften the blow to the budget.

What's next: Mayor Mike Duggan presents a budget for how to spend Detroit's dollars next year to City Council on March 3. Lawmakers will host hearings with various departments and agencies, propose changes to the budget and then vote on it from there.

  • Detroit's fiscal years run from July 1-June 30.

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