Detroit is broke. Where is all that casino money?

Anyone remember the 90's? Detroiters were taking the bridge and tunnel to Windsor to gamble and some folks were calling for legalizing casino gambling in Detroit. After Engler said no, Detroiters got mad and pushed for Proposal E because those dollars going to Canada could stay in Detroit. [[anyone remember that Gil Hill commercial showing "Detroiters" going through the tunnel pushing for a "yes" vote on Prop E?)

We heard quotes like this:

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Supporters, including Detroit Mayor Dennis Archer, say Detroit casinos would create thousands of jobs and pump $1.2 million daily into the city economy. --11.7.96

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and this

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Supporters say that casinos would help Detroit's economy and that the benefits of casinos outweigh the negatives. The proposal calls for an 18% tax on casino revenue, with 45% going to public schools statewide and 55% to fund anti-crime and other programs in Detroit --Ludington Daily News 10.31.96

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and the proposal passed and Detroit got its casinos.

Fifteen years later, Detroit is broke and we have to wonder if it was all worth it? Did the the daily deposit of $1.2 million ever flowed in the city economy? Did Detroiters get the thousands of jobs that the mayor claimed? Did public schools benefit from the 45% that the state would give from its 18% of casino revenues? Did Detroit benefit from the 55% from the state. One has to wonder....

Casinos put an extra burden on the police force, this is a cost.

In terms of what happened lets see:

As part of the deal to get the casinos, City income tax was reduced. Originally it was to drop from 3 to 2 percent for residents. Kilpatrick and Granholm agreed that it would be best to stop this at 2.5 percent. Many of the hold-outs said enough of these empty promises and left.

300,000 people left, taking thier city income tax with them.

When 1/3 your population leaves, it leaves a glut of housing. This means taxable value goes down so property tax revenues go down.

As the city shrinks the cost per person to take care of infrastructure, rip down burned up homes, provide firefighters goes up.

In short the city has lost far more revenues from other sources than it recieves from the casinos. Factor in inflation over 10 years, the cost of maintaining aging infastructure, the need to tear down more burned out dangerous houses, provide more police services as looters run rampant and you have quite a pickle.

To be fair, in reference to the thousands of jobs that Archer claimed, a number of Detroiters were ineligible to work in the casinos because they weren't able to pass the background check given by the state. Because of things like criminal records and drug use they are "X" out. Funny how the very thing you root for have no place for you.

Still for those Detroiters who did get to work in the casinos, some found their way to the unemployment line when places like Motor City got rid of people like the girls who used to give you change for the slots.

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Originally Posted by R8RBOB

Still for those Detroiters who did get to work in the casinos, some found their way to the unemployment line when places like Motor City got rid of people like the girls who used to give you change for the slots.

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To be fair... wasn't it always easier to just stick a $5, $10 or $20 into the slot on the side of the machine?? :confused: I can't image there were ever too many of those girls there....And as to the criteria for jobs at the casinos... not a city responsibility... thanks to the state Gaming Commission.... who set the bar high to keep out the riff-raff....

Without casino revenues, Detroit would have been under emergency manager oversight 6-7 years ago.

The state backed off of revenue sharing "guarantees" that were part of the originally forecasted budget planning when permanent casinos were approved.

For some reason, none of the casino tax revenue forecasts planned for the little recession that caused a few problems around here either.

Not all the results and consequences of the casinos have been good, but there's been more good than bad.

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Originally Posted by swingline

Without casino revenues, Detroit would have been under emergency manager oversight 6-7 years ago.

The state backed off of revenue sharing "guarantees" that were part of the originally forecasted budget planning when permanent casinos were approved.

For some reason, none of the casino tax revenue forecasts planned for the little recession that caused a few problems around here either.

Not all the results and consequences of the casinos have been good, but there's been more good than bad.

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Now this is good. Without the casinos, Detroit would have drown in red ink so they had to be the band-aid for the "D". I don't dispute that but imagine from 1999 [[when MGM opened) until 2008 [[financial collapse) Detroit had maintained its population. In fact, the number of people increased and there were business grown in the city. As a result, the city could use some of that casino money for a rainy-day fund. Detroit could be better than it is right now. IMO

1. Submitting Report on Gaming Tax Revenue activitythrough August, 2011 and prior fiscal years. [[The city collected $17.7 million in gaming tax revenue for the secondmonth of the new fiscal year, which was 23% grater than the prior year August2010. Chart 2 “Monthly Detroit Gaming Tax Collections” through atwelve-month average trend line shows positive growth, approximately 4.3% sincelast August, among the combined casino receipts, etc. Based on the existingdata, we are currently projecting a deficit of $19.47 million for the fiscalyear.) [[AWAITING RESPONSE TO THEMEMORANDUM OF B.F.A. CHAIR COCKREL, BROUGHT BACK AS DIRECTED BY THE BUDGET,FINANCE AND AUDIT STANDINGCOMMITTEE ON 09-27-11)

I pulled this from a Detroit City Council agenda just for you guys;)

Where is all that casino money?

Vegas. Don't buy into the lies about it staying local.

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Originally Posted by Meddle

Where is all that casino money?

Vegas. Don't buy into the lies about it staying local.

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Nobody expected the profits to stay local beyond the hotels the casinos were committed to build. The money questioned here is the city's cut the casinos are required to pay.

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Originally Posted by R8RBOB

Now this is good. Without the casinos, Detroit would have drown in red ink so they had to be the band-aid for the "D". I don't dispute that but imagine from 1999 [[when MGM opened) until 2008 [[financial collapse) Detroit had maintained its population. In fact, the number of people increased and there were business grown in the city. As a result, the city could use some of that casino money for a rainy-day fund. Detroit could be better than it is right now. IMO

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Ummmm.... when did Detroit stop bleeding residents or businesses? Certainly not between 1999-2008.... downtown may have seen some upticks... but not the majority of the city.Meddle... stop spreading disinformation... MGM yeah the money went to Vegas.... Greektown... maybe it went to St. Sault Marie to the Indian Tribe [[although more than likely it went to banks and creditors)... and MotorCity... it too went to banks [[to pay off Marion Ilitch's loan to buy the rest of the casino)... and any leftovers went to Bingham Farms [[her residence).

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Originally Posted by Gistok

Ummmm.... when did Detroit stop bleeding residents or businesses? Certainly not between 1999-2008.... downtown may have seen some upticks... but not the majority of the city.Meddle... stop spreading disinformation... MGM yeah the money went to Vegas.... Greektown... maybe it went to St. Sault Marie to the Indian Tribe [[although more than likely it went to banks and creditors)... and MotorCity... it too went to banks [[to pay off Marion Ilitch's loan to buy the rest of the casino)... and any leftovers went to Bingham Farms [[her residence).

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Not really sure how to respond to this. I need a little help.

Everyone seems pleased when people from outside the city come downtown to spend money on hotels, theaters, restaurants etc. It seems the casinos generate far more tax revenues than most other venues. Granted, some of that discretionary income might have been spent in the city but not most of it.

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Originally Posted by Meddle

Where is all that casino money?

Vegas. Don't buy into the lies about it staying local.

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Macau, China?

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Originally Posted by 401don

Everyone seems pleased when people from outside the city come downtown to spend money on hotels, theaters, restaurants etc. It seems the casinos generate far more tax revenues than most other venues. Granted, some of that discretionary income might have been spent in the city but not most of it.

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Good posts being posted. Something that people need to remember. Back in the 90's, Detroit was of course having its money issues like now and then Casino Windsor opened in 1993. There was always someone wanting to get casinos in Detroit but Detroiters would always vote them down. [[Anyone remember when Papas and Gatzaros got Babbitt to declare a part of the International Center Building as "Indian land")

After the opening of Casino Windsor, it was a must that Detroit had to have a casino but someone believed if Detroit had more than one casino then the city coffers would be overflowing with cash. Hence the sell job to get casinos by claiming that we need to keep the money in Detroit.

I am neither a casino lover or hater. They didn't cause Detroit's problems, and were never going to be a major factor in fixing them. With the exception of the closure of riverfront area businesses when the casinos were going to be built on a "campus" there [[a city proposal), I think they've been more beneficial than harmful.


They do employ thousands of people; while they may not employ as many city residents as they promised, they do employee a much higher percentage than say, GM or Quicken Loans or Blue Cross. They also do pay a fixed tax on wagers at the casinos; their employees do pay city income tax; the hotel guests pay both sales tax and room occupancy tax. That is all money the city did not have beforehand. I do not have the numbers, but I suspect that those revenues vastly exceed the additional costs brought on by their operation.

The city's shortage of funds has 2 big reasons:

First: vastly overspending for decades, including issuance of unsustainable levels of debt. This year the city is spending more than $74M to pay off the minimum amount of debt they can legally. The $500M bond issue for new schools a few years back was the worst possible trick on Detroit kids. Better buildings, while nice, will crowd out police, street lights, and clean parks for the next several decades. Hope you like your shiney school, kids! Decaying buildings, while not ideal, were never even slightly a reason for high dropout and illiteracy rates. The better buildings might make kids feel good; they will not make them think good.

The second reason: except for downtown and midtown, everyone with money is emptying out of the city. Those residents are enjoying not paying local income tax in Canton and Southfield and Troy and... All that human flight has caused property values to plummet. The low values and high default rate has led property tax revenues to plummet. The current revenue collection- or lack of revenue collection- is the result of years of anti-business planning [[sometimes on purpose, but frequently out of ignorance) by the city's politicians.

There is no revenue way out of this dilemma. No substantial city tax could be levied that wouldn't be more destructive than helpful. Even a slight income tax increase would undo every last bit of the efforts the big companies and WSU have tried, with some success, to lure people downtown/ midtown. A sales tax increase would end any progress in bringing retail downtown. Residential property taxes are increasingly uncollectable now. You can't squeeze blood out of a stone. Detroit just needs to slash spending and payroll, regardless of how much it hurts. In the long run, economic growth is the only path to more revenue. It will take a while, though. Detroit will be paying off the damn city debt for the NEXT THIRTY YEARS because of the irresponsible fools that were elected in the LAST THIRTY YEARS. I think a song says, "it's a long, long road."

"Where is all that casino money?" I get tired of hearing that old, silly chestnut. It's in the buget; that's where it is. What you should be asking is where the property and income tax money is, which is also a stupid questions, because it's lost with the plummeting property values and with the 2,000-a-month outmigration of the population.

No city's tax base the size of Detroit can survive losing nearly 2,000 every month for a straight decade. It's nearly completely impossible to plan a city around losing that many people on top of not knowing exactly from which neighborhoods the loss is coming from since it's pretty much all of them. Detroit is overspending...just like every other city. The difference is that they could stop all services tomorrow, and they still wouldn't be in shape to do anything with the crushing level of population loss the city sustains.

Casinos are proof the human race is stupid.

It's common knowledge the house always wins in the end, yet the casinos are packed. What is fun about feeding these places money and buying overpriced drinks? Just walk through any one of our casinos and you will see depressed pathetic fat drunken slobs pumping money into the slots all day and all night. It really is sad.

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Originally Posted by Occurrence

Casinos are proof the human race is stupid.

It's common knowledge the house always wins in the end, yet the casinos are packed. What is fun about feeding these places money and buying overpriced drinks? Just walk through any one of our casinos and you will see depressed pathetic fat drunken slobs pumping money into the slots all day and all night. It really is sad.

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Talk about blatant sterotyping.... can your comments get any more ridiculous?? :eek:

People of all walks of life visit Casinos.... retires who come in by the busloads on any given day from Ohio and Indiana and other points within Michigan... suburbanites, out-of-towners, whites, Chaldeans, Arab-American, Mexican-American, African-American, lower & middle class city residents and suburbanites, millionaires,sports and movie stars, politicians and business owners... young, middle age and old... blue and white collar, skinny, middle weight, morbidly obese... you name it, the list is endless... all walks of life...

To somehow be able to recognize or pigeonhole folks who go to casinos as overweight drunken slobs is just plain ignorant...

The drinks are dirt cheap at casinos. I can drink all the Pepsi or Coffee I want for free!

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Originally Posted by Dexlin

"Where is all that casino money?" I get tired of hearing that old, silly chestnut. It's in the buget; that's where it is. ...

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That's right. Just like the lottery money to 'improve' schools. Just part of the budget.

What you should be asking yourself is has any political promise of riches ever turned true?

Stop electing on the basis of promises of 'quick fixes' and elect good managers of resources. Snyder may be conservative, but he's more likely to conserve your money than anyone else. And that'll help the poor much more than 5,000 programs to distribute money -- which you can watch be pillaged daily.

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Originally Posted by Wesley Mouch

What you should be asking yourself is has any political promise of riches ever turned true?

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I believe you got the spirit of what I was getting to which was politicians promising "pie in the sky" and then come back to the people crying broke.

My question of "where is all that casino money?" was not meant to really be answered because the casino money was "pie in the sky" that was sold to the people back in the 90's to get casinos into the city. We knew the casinos would provide jobs. We knew the casinos would build hotels. We knew the casinos would pay a tax. We knew all this things which is why they was voted down time and time again because Detroiters did not want casinos in Detroit despite the jobs, the tax, the hotels, etc... The reason why Detroiters agreed to have casinos in the city [[this includes the churches) is because the city leaders like Archer was telling the citizens that casinos in Detroit would generate much needed money to improve services, lower taxes, make life in Detroit better. Detroiters were more than happy to travel to Windsor or Saint Ste. Marie but we told that that money could make Detroit better.

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Originally Posted by Gistok

Talk about blatant sterotyping.... can your comments get any more ridiculous?? :eek:

People of all walks of life visit Casinos.... retires who come in by the busloads on any given day from Ohio and Indiana and other points within Michigan... suburbanites, out-of-towners, whites, Chaldeans, Arab-American, Mexican-American, African-American, lower & middle class city residents and suburbanites, millionaires,sports and movie stars, politicians and business owners... young, middle age and old... blue and white collar, skinny, middle weight, morbidly obese... you name it, the list is endless... all walks of life...

To somehow be able to recognize or pigeonhole folks who go to casinos as overweight drunken slobs is just plain ignorant...

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Well of course I didn't mean EVERYONE who visits a casino is that way, but there is a large amount of people that are.

Maybe it's just because I'm a people watcher, but every time I have been dragged to the casino with others, I just sit and watch people. There are some depressing looking folks in there slipping money into those slots. I hope they find what they are looking for.

Oh, you've got it right, I completely agree. It's depressing to see, especially when most shouldn't be there, financially or emotionally. But hey, it's a free country. You won't be catching me spending my hard earned money at these places. Especially when there's a strip bar right down the street. Just kidding. :)

Well I wouldn't really say it's a free country. Apparently it's morally acceptable to get liquored up and blow your kids college money in a casino, but people still give me crap because I'm a medical marijuana patient.

Where the caSINo money! Gone to greed corporations who robbed from the poor! Good thing that I have voted NO on the three casinos. What a doomed city we living in.

Considering the Casinos are one of the largest employers in the city, one of the largest property owners in the city in terms of assessed value, and pay city gaming taxes of well over $150 million per year....it is pretty reasonable to say that things would be, relatively speaking, much worse without them. Hence they've had the "positive" benefit that was predicted/promised.

I see the point you're trying to make, but I disagree with the historical analysis regarding passing of casino gambling. What tipped the balance in my opinion was Windsor opening their casino and all of the people and dollars going across the border. There was even a flyer showing cars heading over to Canada during the casino referendum. The main point was we now had gambling in Detroit once Windsor opened their casino. And we were getting all the social problems associated with gaming without any of the benefits.

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Originally Posted by R8RBOB

I believe you got the spirit of what I was getting to which was politicians promising "pie in the sky" and then come back to the people crying broke.

My question of "where is all that casino money?" was not meant to really be answered because the casino money was "pie in the sky" that was sold to the people back in the 90's to get casinos into the city. We knew the casinos would provide jobs. We knew the casinos would build hotels. We knew the casinos would pay a tax. We knew all this things which is why they was voted down time and time again because Detroiters did not want casinos in Detroit despite the jobs, the tax, the hotels, etc... The reason why Detroiters agreed to have casinos in the city [[this includes the churches) is because the city leaders like Archer was telling the citizens that casinos in Detroit would generate much needed money to improve services, lower taxes, make life in Detroit better. Detroiters were more than happy to travel to Windsor or Saint Ste. Marie but we told that that money could make Detroit better.

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#1. I don't get 'liquored up' when I visit a casino.
#2. Drinks are not really free. If you don't tip the cocktail waitress for her service, you're a cheap bastard.
#3. Kids are 51 and 53. If I'm spending their college money, they blew their chance long ago.
#4. People living on a shoestring should NOT visit a casino. I'm retired and have a comfortable degree of spendable income, and I have fun at the tables and slots. Therefore, I go.
#5. As a local and regular patron, I get many comps to shows, dinners, etc., that add to my enjoyment. I also get free slot play nearly every day of the week at varous casinos.
#6. Just got back. Here's my best hit today. I have fun in my old age. I hopw somehow all of you do, too.

#6.

The casinos aren't the issue. Our lack of any other major private industry within city limits, along with endemic corruption in educational and civic institutions, is the real problem.

Now, my mom believes the casinos are responsible for Detroiters losing their homes long before the bubble burst. I loved the Express Mortgage jingle of the late 90s/early 00s: "if you own a home, and you need a loan/Express Mortgage, get your cash in a flash/Money from your home fast/Call 321-CASH." My mom called those "hock your house" ads, and she said people all over metro Detroit would lose their homes in order to feed a gambling addiction.

Casinos are like alcohol, in my view. If you don't have an addiction, they're kind of nice. I [[and many others) haven't play a slot of zillions of years, but we use the casino's free parking, grab cheap eats, or even catch a show. It's just a place to hang out, especially with the girls. I have to be honest and say that I'll meet friends the casino and leave late at night solo to go home because you can easily valet park instead of walking several blocks alone to a lot or a street parking space. It's different when you're with a guy or a group of friends, but when you're all meeting up at a place? It can be handy.

But there are folks with real addictions to gambling. Of course, those people would go to Windsor or up North, but when it's in your backyard, you'll frequent it. My sister's ex's mom was like that. Sweet lady, but never met a casino or bingo hall she didn't like [[in fact, our first forays into the casinos were because of her).

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Originally Posted by detbest

Considering the Casinos are one of the largest employers in the city, one of the largest property owners in the city in terms of assessed value, and pay city gaming taxes of well over $150 million per year....it is pretty reasonable to say that things would be, relatively speaking, much worse without them. Hence they've had the "positive" benefit that was predicted/promised.

I see the point you're trying to make, but I disagree with the historical analysis regarding passing of casino gambling. What tipped the balance in my opinion was Windsor opening their casino and all of the people and dollars going across the border. There was even a flyer showing cars heading over to Canada during the casino referendum. The main point was we now had gambling in Detroit once Windsor opened their casino. And we were getting all the social problems associated with gaming without any of the benefits.

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I will come back at your first statement but in regards to your comment to Windsor opening tipping the scales for Detroit getting casinos, I agree. In fact, I posted about it yesterday.

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Originally Posted by R8RBOB

Good posts being posted. Something that people need to remember. Back in the 90's, Detroit was of course having its money issues like now and then Casino Windsor opened in 1993. There was always someone wanting to get casinos in Detroit but Detroiters would always vote them down. [[Anyone remember when Papas and Gatzaros got Babbitt to declare a part of the International Center Building as "Indian land")

After the opening of Casino Windsor, it was a must that Detroit had to have a casino but someone believed if Detroit had more than one casino then the city coffers would be overflowing with cash. Hence the sell job to get casinos by claiming that we need to keep the money in Detroit.

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As to your first point, yes the casinos pay a large tax to Detroit, this is true. It does provide jobs, this is also true but so do General Motors. The point that I was making was that years ago Detroiters was told that if we voted to approve casinos which was voted down three times under Coleman Young then the city would have a windfall of cash flowing in. Years later Dave Bing is crying broke which validates that casinos were more or less a band-aid to the city.

In regards to older folks, going to the casino is like going to the club when you're younger.

Have your fun Ray, nobodys judging you.

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Originally Posted by detroitsgwenivere

In regards to older folks, going to the casino is like going to the club when you're younger.

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You couldn't have said it any better, d!

Casinos hire more people than they need at frist. Then when they see a steady number the layoffs start. Cheap pay rotten jobs they aren't worth your time or money. Mostly minumin wage for workers.

"Where is all that casino money?", you ask?

The answer is that since 2009 it has been pledged as collateral, the result of the city's habitually late audits that triggered a downgrade of Detroit's debt by the ratings agencies.

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Swaps Deal Will Save Detroit From Insolvency-Mayor
CHICAGO, April 13, 2009 [[Reuters) - Detroit Mayor Kenneth Cockrel Jr called on the city council on Monday to approve a deal that will allow the city to avoid paying a financially crippling $400 million in termination payments for interest rate swaps.

Cockrel said the agreement in principle reached last month saves Detroit, which is already facing a projected $300 million accumulated deficit, from financial insolvency and from likely intervention by the state of Michigan.

Joseph Harris, Detroit's chief financial officer, said the agreement, which should be presented to the council in a few weeks, requires the city to appropriate payments annually on the swaps and to post collateral for those payments from its wagering tax....... [source].

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What this means is that Detroit's wagering tax revenues for each month in a quarter are deposited in a trust fund and released to the General Fund only after the City of Detroit and the DWSD make their Swap Agreement payments for that quarter. In any given month somewhere between approximately $12 and $36 million dollars of wagering tax revenue are locked up in that trust fund instead of being available to pay for General Fund expenditures.

While that may seem like a small price to pay for avoiding $400 million worth of unbudgeted termination payments, more importantly, the wagering tax collateral agreement means that none of Detroit's approximately $150 million in annual wagering tax revenues are available to pledge as collateral for short-term borrowing to avoid Detroit's worsening cash flow problems:

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City of Detroit's Cash Flow Challenges
.......casino wagering taxes are now pledged as collateral for Pension Obligation Certificate payments under the interest rate swap agreements and are not available for other debt restructuring or negotiations to reduce liabilities. [source]

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This collateralization of the wagering tax revenue got very little attention when then-Mayor Cockrel and the City Council used it to dodge the $400 million bullet. They may have dodged the bullet then but they handcuffed the current Council by taking away a valuable tool for staving off the impending cash flow crisis.

Read the first three pages of the Oct. 2009 memo to City Council at the second link and it will make your stomach churn.

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Originally Posted by Mikeg

"Where is all that casino money?", you ask?

The answer is that since 2009 it has been pledged as collateral, the result of the city's habitually late audits that triggered a downgrade of Detroit's debt by the ratings agencies.




What this means is that Detroit's wagering tax revenues for each month in a quarter are deposited in a trust fund and released to the General Fund only after the City of Detroit and the DWSD make their Swap Agreement payments for that quarter. In any given month somewhere between approximately $12 and $36 million dollars of wagering tax revenue are locked up in that trust fund instead of being available to pay for General Fund expenditures.

While that may seem like a small price to pay for avoiding $400 million worth of unbudgeted termination payments, more importantly, the wagering tax collateral agreement means that none of Detroit's approximately $150 million in annual wagering tax revenues are available to pledge as collateral for short-term borrowing to avoid Detroit's worsening cash flow problems:



This collateralization of the wagering tax revenue got very little attention when then-Mayor Cockrel and the City Council used it to dodge the $400 million bullet. They may have dodged the bullet then but they handcuffed the current Council by taking away a valuable tool for staving off the impending cash flow crisis.

Read the first three pages of the Oct. 2009 memo to City Council at the second link and it will make your stomach churn.

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I just read the first three pages and my stomach is churning. Fuckin' WOW

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Originally Posted by Mikeg

"Where is all that casino money?", you ask?

The answer is that since 2009 it has been pledged as collateral, the result of the city's habitually late audits that triggered a downgrade of Detroit's debt by the ratings agencies.

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Wow is right!! Well that answers what happened to the casino money.

MikeG - thanks for looking up the source. Besides the interest payment on the RANs and TANs the City of Detroit also paid nearly $1.0 Million in "Issuance Fees" to sell/place these notes.

This short-term borrowing from Peter to pay Paul gets expensive fast.

Selling debt to pay debt. If there were investors instead of taxpayers, it would be called a Ponzi sheme and people would be going to jail. But why make hard choices today when you can just create a much worse situation for the next guy?