The NYC Council's economic and tax revenue forecast shows the city's economy is stable, but slowing growth is creating budget pressures

Despite expectations that the city will see a very rare drop in tax revenue in fiscal year 2024, the council forecast is for $1.2 billion more revenue than the mayor's budget office

City Hall, NY – Today, the New York City Council released its economic and tax revenue forecast for the November plan for fiscal year 2024. While the national and local economies continue to be resilient and stable, the Council expects the City to enter a period of slower economic and tax revenue growth over the next two years as inflation and the higher interest rates that drive them down aimed at slowing economic growth. While the fiscal year 2024 forecast anticipates a decline in tax revenues, a phenomenon that has only occurred three times in the last four decades, fiscal year 2024 is still estimated to generate $1.2 billion more in tax revenues than that The Mayor's Office of Management and Budget (OMB) predicted .

The council forecast projects the city to have a budget surplus of $2.6 billion for fiscal year 2024, with year-over-year budget gaps remaining above $5.3 billion in fiscal year 2025, $3.65 billion -dollars in fiscal year 2026 and $2.49 billion in fiscal year 2027 if the city were to use this. Currently, each fiscal year has $1.45 billion in annual reserves budgeted to be expended within that same year. The Council expects the Federal Reserve to begin cutting interest rates in fiscal year 2025, leading to healthier growth and tax revenue levels the following year, although remaining uncertainties in the economy suggest caution.

The Council's full report is available here.

“Despite the resilience and resilience of our economy, signs of expected slower growth will present a fiscal challenge to plug gaps in budget plans in the coming years,” he said Speaker Adrienne Adams and Finance Chairman Justin Brannan. “Council economists, who have consistently provided realistic forecasts, still forecast fiscal year 2024 revenues of $1.2 billion more than the Mayor's Budget Office, which is coupled with the $1.45 billion “In order to close budget gaps in the coming years, it is imperative that the city adopts a different approach that prioritizes its investments in essential services rather than making overly sweeping cuts, and seeks additional revenue to protect critical programs that support the health of New Yorkers. Our city’s economy will recover from this difficult period, but it will take strategic and responsible management to ensure New Yorkers persevere without being harmed.”

The U.S. economy posted robust gross domestic product (GDP) growth in the third quarter, beating expectations as consumer spending came in stronger than expected. However, economic activity in October showed signs of weakening in several areas, such as retail sales and the labor market. While easing supply chain pressures have helped lower inflation, the decline is expected to be gradual due to a tighter labor market creating upward pressure on wages.

The City Council's forecast shows that despite a smaller city population, New York City's economy will be strong and employment will return to pre-pandemic levels. However, certain sectors – such as retail, leisure and hospitality – have not yet fully recovered. The city's employment forecast is better than in May, but there are early signs of weakening labor demand and wage growth, pointing to a slowdown in job growth that is not expected to recover until 2026. Additionally, commercial property vacancies and weaker residential sales continue to be a concern as a result of high mortgage interest rates. Additionally, unstable federal fiscal policy, unexpected changes in consumer sentiment, and other external factors remain prominent risks that could have negative or positive impacts on the economy.

This latest council forecast provides higher revenue estimates than OMB, but also an economic growth outlook that puts additional pressure on the city budget, which already included year-over-year gaps from expiring federal stimulus funds.

###