Detroit Casino Revenue Drops 1.7% To $114.6m In MayJune 11, 2014 1:31 pm
The Michigan Gaming Control Board has released its casino figures for May, revealing a 1.7% decline in revenues to $114.6 million, compared with the same month last year. The state subsequently collected $9.3 million in gambling taxes for May.
All three of the state’s three casinos saw their revenues decline last month, with MGM Grand Detroit lower by 2% at $47.4 million, followed by MotorCity Casino Hotel down by 1.4% to $39.1 million, and Greektown Casino-Hotel also dropping by 1.9% to $28.1 million.
In 2012, Detroit casinos generated $1.42 billion in revenues with the $171 million it then received in taxes equating to around 14% of all the money collected by the city. By 2013, however, total gaming revenue had slipped by 4.7% to $1.35 billion, and currently Detroit casino revenues are lower by 5.2% for the first five months of 2014 compared to the same time period in 2013. At this rate the state gambling revenues are on track to decline for the third year in a row.
The city of Detroit filed for Chapter 9 bankruptcy in July 2013, and needless to say casino money has played a major part in funding the city’s recovery. Detroit Emergency Manager Kevyn Orr has even described casino revenues as the most stable source of money for Detroit and in April, Orr managed to broker a deal that halted casino revenues from being channeled to two creditor banks.
Nevertheless, Orr has come under some pressure recently on account of the optimistic casino revenue predictions he has used to explain how the city would fund its way out of its historic bankruptcy. If monthly revenues decline further then confidence in the viability of his plan is bound to be shaken anew, and as Richard Larkin, director of credit analysis at HJ Sims, explains:
“Obviously they are going to have to justify this projection at trial. Casino revenue is not a traditional, long-term revenue source.”
Keith Foley from Moody’s Investors Service also expressed similar worries about Detroit’s casinos industry, stating “What if Detroit has another 5 percent decline next year? Then their budget is already way off track.”
This scenario is not altogether improbable, either, as numerous other gambling states in the USA have also been suffering revenue declines in the past two years, including Illinois, Indiana, Iowa, Nevada, Pennsylvania, Missouri, Connecticut, Atlantic City and Ohio.