Detroit Regains $40.5M In Tax Revenue With ‘Hold Harmless’ Internet Gaming Fund Payment

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The inclusion of a provision in Michigan’s Lawful Internet Gaming Act, aimed at safeguarding tax revenue from Detroit casinos, has proven to be highly beneficial for the city, yielding over $40 million in returns.

On Tuesday, the Michigan Gaming Control Board disclosed that it had disbursed a $40.5 million “hold harmless” payment to the city. This payment follows the legal obligation dictated by Michigan law to compensate the city for the decline in wagering tax revenue during the 2021 fiscal year.

“In a statement, Henry Williams, the executive director of MGCB, stated that the 2019 Lawful Internet Gaming Act includes a provision that mandates a ‘hold harmless’ payment to the city in the event that the wagering tax revenue falls below the prescribed minimum of $183 million for any reason during the previous city fiscal year.”

Pandemic cut deep into Detroit’s 2020 casino revenue

Inevitably, 2020 became a kind of perfect storm for Detroit as its three downtown casinos, Greektown Casino, MGM Grand Detroit, and MotorCity Casino, remained closed for a significant portion of the year due to the COVID-19 pandemic. Initially shutting down in March, they reopened in early August only to close again for the majority of December.

In calendar year 2019, the casinos contributed $184.2 million to the city’s tax revenue. However, the amount generated in 2020 was significantly lower, with only $73.8 million. The city’s fiscal year, which commences on July 1, experienced the most severe impact from this decline.

In the meantime, the payment of $40.5 million was successfully covered by the state’s internet gaming fund. This fund has benefited from the revenue generated by Michigan online casinos and online poker sites since their launch on January 22, amounting to $139.0 million in state tax revenue. Furthermore, an additional $38.5 million has been collected in city taxes and municipal service fees for the city of Detroit, while $15.2 million has been allocated to the governing bodies of tribal jurisdictions.

What else comes out of Michigan’s internet gaming fund?

Additional yearly expenses from the fund encompass $2 million allocated to the state’s first responder presumed coverage fund, designed to provide medical assistance to firefighters suffering from specific types of cancers. Moreover, $500,000 is allocated to the compulsive gambling prevention fund. Furthermore, the state’s internet sports betting fund contributes an additional $500,000 to the compulsive gambling prevention fund.

If the MGCB had not made the payment to Detroit, the state’s school aid fund would have received over $40 million instead. However, the fund is expected to collect a larger sum than projected regardless.

Williams stated that the Detroit casinos saw a decline in revenue due to shutdowns and capacity restrictions caused by COVID-19. As a result, there was a decrease in wagering tax and development agreement payments. Internet casino gaming and online sports betting began on January 22, which was around seven months into the city’s fiscal year ending on June 30. This provision was implemented due to the unusual circumstances brought about by the closures and reduced capacity of the casinos as a result of COVID-19 health concerns.

According to the MGCB, the payment mandated by law was made earlier this month.

In September, Michigan achieved a remarkable milestone by generating a staggering $102.4 million in internet gaming revenue, setting a new record. This significant amount also contributed to a record-breaking $18.9 million in state taxes.

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