Despite expectation that City will experience very rare decline in tax revenue for FY ‘24, Council projection estimates $1.2B more revenue than Mayor’s budget office

City Hall, NY – Today, the New York City Council released its Economic and Tax Revenue Forecast for the Fiscal Year (FY) 2024 November Plan. While the national and local economies have continued to be resilient and stable, the Council projects the City to be entering a period of slower economic and tax revenue growth in the next two years due to inflation and higher interest rates aimed at its reduction that are slowing economic growth. While the forecast anticipates tax revenue to decline in FY 2024, a phenomenon that has only occurred three times in the past four decades, it still estimates $1.2 billion more in tax revenue for FY 2024 than the Mayor’s Office of Management and Budget (OMB) projected.

The Council Forecast projects the City will have a budget surplus of $2.6 billion for FY 2024, with outyear budget gaps remaining over $5.3 billion in FY 2025, $3.65 billion in FY 2026, and $2.49 billion in FY 2027, if the City were to utilize the $1.45 billion of in-year reserves currently budgeted in each fiscal year that must be expended within the same year. The Council anticipates the Federal Reserve will begin to reduce interest rates in Fiscal 2025, leading to healthier growth and tax revenue levels the following year, though remaining uncertainties in the economy warrant caution.

The Council’s full report is available here.

“Despite the resilience and durability of our economy, signs of expected slower growth will present fiscal challenges to closing gaps in the coming years’ budgets,” said Speaker Adrienne Adams and Finance Chair Justin Brannan. “The Council’s economists, who have consistently provided realistic forecasts, still project $1.2 billion more in FY 2024 revenue than the Mayor’s budget office, leaving room for flexibility to avert some cuts when paired with the $1.45 billion of in-year reserves. To close budget gaps in the years ahead, it is imperative that the City takes a different approach that prioritizes its investments in essential services, rather than making overly broad cuts, and seeks additional revenue to protect critical programs that support the health of New Yorkers. Our city’s economy will rebound from this challenging period, but it will require strategic and responsible management to ensure New Yorkers persevere without being harmed.”

The U.S. economy experienced resilient gross domestic product (GDP) growth in the third quarter that exceeded expectations, due to greater than anticipated strength in consumer spending. However, economic activity began to show signs of moderation in October in various areas, such as retail sales and the labor market. While the easing of supply chain pressures has been helping lower inflation, the decline is expected to be gradual due to a tighter labor market creating upward pressures on wages.

The Council’s forecast shows New York City’s economy to be strong with employment reaching its pre-pandemic levels, despite a lower city population, but certain sectors – such as retail, leisure and hospitality – have not fully recovered. The city’s employment forecast is stronger than in May, but there are early signs of softening labor demand and wage growth that portend flattening employment growth, which is not expected to rebound until 2026. Additionally, commercial real estate vacancies remain a concern and weaker residential housing sales are resulting from high mortgage rates. Unstable Federal fiscal policy, unexpected changes in consumer sentiment, and other external factors also remain as outstanding risks, which could exert negative or positive impacts on the economy. 

This latest Council forecast provides higher revenue estimates than OMB, but also an economic growth outlook that is placing additional pressures on a city budget that already contained out-year gaps from expiring federal stimulus funds.