Bankrupt Detroit banking on Casinos to stay Afloat

Last summer, Detroit filed the largest municipal bankruptcy in U.S. history. Their $18 billion debt dwarfs the next largest, Jefferson County, Alabama, which filed for bankruptcy in 2011 with $4 billion in debt. This being said, cash-strapped Detroit will be heavily relying on their three casinos to continue generating money.

The city’s Emergency Manager, Kevyn Orr, believes that the casinos should remain a steady source of revenue until at least 2023. Orr projects that Detroit’s three casinos will bring in $168 million in 2015, a 3.8% drop from 2013, when gambling generated $174.6 million. However, he foresees a 1% increase every year from 2016 to 2023 – leaving the city at the $181.4 million revenue peak it hit in 2012.

Plenty of Doubters

While Orr’s predictions offer hope for the recovery of Detroit, there are plenty of people who don’t share his vision. Many analysts point to the fact that casino markets across the United States are becoming saturated, including Detroit’s since nearby Toledo, Ohio and Windsor, Ontario offer casino gaming. Another problem is that many people in the Motor City are seeing their wages decline amid a citywide bankruptcy and declining industry.

As for Orr’s prediction of a 1% growth rate in the casino sector, this is quite optimistic when looking across the board. New Jersey, Nevada and Ohio all continue to see dropping gaming revenue. New Jersey has had it particularly bad because Atlantic City’s casino earnings have been nearly halved since a peak in 2006.

The Positives

Obviously there is a lot working against Detroit as they look towards gaming to provide funds. However, there are some reasons to believe in Orr’s projections too. For starters, this is the prime gambling destination for those living in southeast Michigan, northwest Ohio and northeast Indiana. Detroit has three casinos in close proximity to each other, which is something that many area gamblers can’t resist.

Another bonus is that the Motor City’s gaming market has a fairly profitable history. And this is something that the city’s casino operators are banking on. “We are optimistic for things to return to previous levels – and then some,” said Jennifer Kulczycki, a spokeswoman for Greektown Casino. “The Detroit market is 14 years old and it has been very resistant.”

Only time will tell how much revenue the Detroit casinos contribute. But for a city that desperately needs money, many people will be hoping that casino gaming can help spark a turnaround.