Detroit Casinos’ Tax Revenue Plummets Nearly 60% During COVID-19 Pandemic

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The current situation with Detroit casino revenue is such that when the biggest tax contributors of a city experience a decline of almost 60% year-over-year, it is inevitable for this depreciation to have lasting consequences.

Due to the ongoing COVID-19 pandemic, the three commercial casinos in the Motor City are on the verge of a four-month closure. This unfortunate circumstance will force the city to make challenging choices when it comes to managing its budget.

The latest numbers on Detroit casino revenue

Tax revenue from all three casinos has experienced a significant decline of 59.4% during the first half of this year, in comparison to the corresponding period in 2019.

Greektown, MGM Grand, and MotorCity have collectively paid a total of $35.6 million in tax payments to Detroit this year. In comparison, by the beginning of July last year, the three casinos had contributed over $87.5 million. Detroit receives 10.9% of the combined revenue generated by these casinos.

The individual casinos, MGM Grand, Greektown, and MotorCity, experienced a slight improvement in their revenue percentages. Compared to the previous year, MGM Grand’s revenue of $126.5 million decreased by 40%. Similarly, Greektown and MotorCity saw a downfall of 41% with revenues of $70.1 million and $102.6 million respectively.

The combined adjusted gross revenue (AGR) of all three casinos has decreased by 59.4% year-over-year, bringing in $735.4 million from January to June 2019. What is particularly concerning is that there is no apparent resolution in sight.

There is currently no set timeline for the reopening of commercial casinos, as Gov. Gretchen Whitmer has not made any announcements regarding this matter. The Michigan Gaming Control Board (MGCB) has prepared protocols for when the casinos can resume operations, but ultimately, the decision lies with Gov. Whitmer.

What might it look like when Detroit casinos do reopen?

Included in the MGCB plans are standard practices that are now common in casinos across the country, considering the “new normal.” Some of these practices include:

• Restricted access/egress points
• The fire code allows for a maximum capacity of 15%.
• Smoking and playing table games are prohibited.
• Indoor dining is not available.
• Employees and guests are required to wear face masks.
• Changes in gaming positions
• Temperature checks are required.

Whitmer’s decision-making will rely on the levels of positive tests and hospitalizations throughout the entire state, not solely confined to the Detroit metro area. The specific benchmarks that Whitmer deems satisfactory for proceeding are still undetermined.

The only thing that is definite is that the city’s finances would greatly benefit from a swift resolution. Detroit’s leaders have already faced the harsh consequences of inadequate funding.

Casino tax shortfall means budget cuts coming

In May, the city council projected a deficit of $348 million, in contrast to the city’s expectations for the ongoing year. In order to counterbalance this, the council implemented cuts amounting to $194 million.

The cuts primarily targeted summer recreation programs for the city’s youth and demolition projects. Additionally, the city has reduced both working hours and pay for numerous members of its extensive full-time staff, which consists of approximately 8,000 employees.

Detroit has managed to cover its expenses thus far by utilizing emergency funds and federal assistance. Nevertheless, with each passing day of the casino shutdown, the city is incurring a projected loss of approximately $600,000.

If the shutdown continues for more than four months, the council may need to make additional cuts or allocate more funds from other sources to maintain essential services. Ensuring the safety of Michiganders and visitors to Detroit’s casinos comes at a significant cost. However, risking lives could potentially result in an even greater expense.

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