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It has been three months since a legal bet was placed at a Detroit casino, and Tuesday commemorates this milestone.
Without a doubt, the closures of Greektown Casino-Hotel, MGM Grand Detroit, and MotorCity Casino have had a significant impact on Detroit and the state of Michigan.
Gov. Gretchen Whitmer expressed optimism during her interview with WWJ-950 AM on Tuesday, stating that there is a possibility of good news arriving soon. She indicated that Detroit casinos might reopen within the next week or two, and she remains hopeful that they will be operational by the Fourth of July.
However, with the ongoing COVID-19 shutdown, the absence of Detroit casino revenue for the past three months and continuing, one must question the extent to which public coffers will be affected.
Revenue stream drying up for casinos
For the second year in a row, Detroit casinos achieved a remarkable milestone by generating a record-breaking revenue of $1.45 billion in 2019.
March has consistently been the highest-grossing month, with an average revenue of $136.7 million over the past three years. Additionally, April and May have also ranked among the top months in terms of revenue, along with the taxes collected by the city and state.
Playinmichigan has estimated that due to the closure of casinos for three months, along with a typically slow June, the total revenue loss amounts to approximately $375 million. This calculation is based on the three-year averages of those months, suggesting that each month of closure resulted in a $125 million revenue loss for the casinos.
Detroit casinos fund city, state heavily
Michigan schools are losing $30.4 million due to the 8.1% state tax on Detroit’s casinos.
Furthermore, the casinos are obligated to contribute a 10.9% rate to Detroit, along with development agreements that progressively raise taxes.
Based on the average data from March to June over a span of three years, our projection indicates that Detroit experienced a monthly tax revenue loss of $14.9 million. Consequently, the total revenue loss over a three-month period amounts to $44.6 million.
As the Michigan Gaming Control Board has issued reopening guidelines for Detroit’s casinos, which entail a 15% capacity limit and a prohibition on smoking within the casino floor, the decline in revenue should gradually diminish.
The projected financial loss for Detroit next summer is estimated to be $112 million due to the closures and consequences resulting from a slow restart.
Tribal casinos fund state, local governments
Michigan’s 23 tribal casinos, located outside of Detroit, serve as crucial economic engines for the 12 federally recognized tribes. Although some of these casinos have recently reopened, they are still grappling with capacity limitations and other restrictions that will inevitably affect their revenue streams.
As per the compacts established with the state, tribes are obligated to contribute 2% of their net casino win to local governments for revenue sharing. Additionally, according to newer compacts, tribes are also required to make payments ranging from 2% to 12% to either the Michigan Strategic Fund or Michigan Economic Development Corporation.
Based on an average of three years of data, Playinmichigan projects a monthly loss of $2.5 million in local payments due to closures. The total estimated loss over a three-month period amounts to $7.5 million.
In terms of state payments, the loss amounts to $4.6 million per month, accumulating to $13.8 million over a period of three months.
Casinos miss out on March Madness
On March 11, just before the sports world began its shutdown, the Detroit casinos commenced accepting sports bets.
After a span of five days, the coronavirus pandemic led to the closure of the casinos. Surprisingly, within the initial six days, the sportsbooks of all three Detroit casinos had only received a meager sum of less than $600,000 in sports bets.
Comparing the initial months of retail sports betting, it is difficult to find a direct comparison with other states. However, Indiana achieved $8.6 million in revenue in September 2019, whereas New Jersey earned $2,279,166 in June 2018 and Pennsylvania generated $508,997 in November 2018 during their respective first months.
There could have been various reasons for the discrepancy in numbers between Michigan. College basketball’s March Madness should have been a good beginning, but traditionally, April and May are slow months for sports betting.
In addition, prior to COVID-19, Michigan had only implemented live retail sports betting at Detroit’s three casinos. The tribal casinos had plans to launch their own operations in the future.
Nevertheless, it is not difficult to imagine that Detroit casinos would have experienced a successful spring, particularly due to the excitement surrounding the introduction of sports betting.
Ugly casino totals for COVID-19 closures
Governmental budgets have suffered greatly due to the closure of casinos during the COVID-19 pandemic, as revealed by extensive data analysis.
The closures of Detroit and tribal casinos in the spring resulted in a loss of approximately $44.2 million in tax revenue for the state of Michigan.
Every day, the city of Detroit’s tax revenue continues to rise, resulting in a staggering loss of $44.6 million.
Furthermore, the closures of tribal casinos have resulted in local governments losing $7.5 million due to a reduction in revenue sharing payments, which account for 2% of their income.
Not to mention the tribes, whose casinos serve as a major source of income for services and governments, adding up to nearly $100 million.
The journey towards recovery will be arduous and filled with pain.
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