Shutdown Of Michigan Casinos Create $100M Budget Gap, So Far

Tuesday marks the three-month anniversary since a Detroit casino saw a legal bet.

There’s no doubt the closures of Greektown Casino-Hotel, MGM Grand Detroit and MotorCity Casino have cost Detroit and the state of Michigan in a profound way.

The good news could be coming soon. Gov. Gretchen Whitmer told WWJ-950 AM on Tuesday that Detroit casinos may reopen “in the coming week or two.” She’s hopeful that they will be open by the Fourth of July.

But, after three months and counting without any Detroit casino revenue, how much will public coffers be impacted by the COVID-19 shutdown?

Revenue stream drying up for casinos

Detroit casinos collected $1.45 billion in revenue in 2019, a record for the second consecutive year.

With an average of $136.7 million of revenue over the last three years, March was the highest-grossing month. April and May were also among the top months, in addition to taxes collected by the city and state.

Using the three-year averages of those months, along with a typically slow June, Playinmichigan estimates that the casinos missed out on $125 million of revenue for each month of closure, or about $375 million over three months.

Detroit casinos fund city, state heavily

Considering that the state taxes Detroit’s casinos at 8.1%, schools in Michigan are missing out on $30.4 million.

In addition, the casinos pay a 10.9% rate to Detroit, plus development agreements that increase taxes on a sliding scale.

Using the averages of March through June over three years, we project that Detroit lost $14.9 million of tax revenue per month or $44.6 million over three months.

The revenue loss should de-escalate as the Michigan Gaming Control Board has released reopening guidelines for Detroit’s casinos, which include a 15% capacity and a smoking ban on the casino floor.

City estimates project Detroit to be out $112 million by next summer because of the closures and fallout from a slow restart.

Tribal casinos fund state, local governments

Outside of Detroit, Michigan’s 23 tribal casinos are economic drivers for the 12 federally recognized tribes. Many have reopened recently but are facing capacity and other restrictions that will continue to impact revenue.

Tribes submit 2% of their net casino win to local governments for revenue sharing, per compacts with the state. Newer compacts also require payments to the Michigan Strategic Fund or Michigan Economic Development Corporation, ranging from 2%-12%.

Averaging three years of data, Playinmichigan estimates $2.5 million of monthly loss in local payments from closures with a three-month total of $7.5 million.

As for the state payments, $4.6 million is lost per month or $13.8 million over three months.

Casinos miss out on March Madness

The Detroit casinos started taking sports bets on March 11, the day before the sports world began to shut down.

Five days later, the casinos were closed because of the coronavirus pandemic. Less than $600,000 of sports bets were made in those first six days, despite all three Detroit casinos having brand-new sportsbooks.

It’s hard to find an apples-to-apples comparison with launches of other states, though Indiana had $8.6 million in its first month of retail sports betting in September 2019. New Jersey had $2,279,166 in sports betting revenue in June 2018 and Pennsylvania had $508,997 in November 2018 in their first months.

Those numbers could have differed from Michigan for a variety of reasons. College basketball’s March Madness should’ve been a nice start, though April and May are traditionally slow sports betting months.

Plus, without COVID-19, Michigan was only live for retail sports betting at Detroit’s three casinos. The tribal casinos were expecting to launch down the road.

Still, it’s easy to project Detroit casinos would’ve otherwise had a nice spring, especially considering the novelty of sports betting.

Ugly casino totals for COVID-19 closures

After crunching the numbers, COVID-19 casino closures have been disastrous for governmental budgets.

Detroit and tribal casino closures this spring cost the state of Michigan about $44.2 million in tax revenue.

The city of Detroit has lost $44.6 million in tax revenue, with that number increasing by the day.

In addition, tribal casino closures cost local governments $7.5 million from 2% revenue sharing payments.

That’s nearly $100 million without counting the tribes, whose casinos are a primary revenue generator for services and governments.

The roads to recovery will be long and painful.