A provision written into Michigan’s Lawful Internet Gaming Act to protect tax revenue from Detroit casinos has paid off for the city in the amount of more than $40 million.
The Michigan Gaming Control Board announced Tuesday that it recently made a $40.5 million “hold harmless” payment to the city. The payment is required under Michigan law to reimburse the city for a wagering tax revenue drop during its 2021 fiscal year.
“A provision in the 2019 Lawful Internet Gaming Act calls for a ‘hold harmless’ payment to the city if wagering tax revenue drops below the statutory minimum of $183 million for any reason during the preceding city fiscal year,” said Henry Williams, MGCB executive director, in a statement.
Pandemic cut deep into Detroit’s 2020 casino revenue
Of course, 2020 turned into a perfect storm, of sorts, with Detroit’s three downtown casinos closed for much of the year because of the COVID-19 pandemic. Greektown Casino, MGM Grand Detroit and MotorCity Casino closed in March, reopened in early August, then closed again for most of December.
After the casinos raised $184.2 million in city tax revenue in calendar year 2019, only $73.8 million was generated in 2020. The city’s fiscal year, which opens only July 1, took the brunt of the downturn.
Meanwhile, the state’s internet gaming fund was able to fund the $40.5 million payment, as Michigan online casinos and online poker sites have raised $139.0 million in state tax revenue since launching this past Jan. 22. In addition, $38.5 million has been raised in city taxes and municipal service fees to Detroit, and $15.2 million has been given to governing bodies of tribal jurisdictions.
What else comes out of Michigan’s internet gaming fund?
Other annual expenditures from the fund include $2 million to the state’s first responder presumed coverage fund, which was developed to help firefighters get medical care for certain types of cancers; and $500,000 to the compulsive gambling prevention fund. The state’s internet sports betting fund kicks in another $500,000 to the compulsive gambling prevention fund.
Had the MGCB not made the payment to Detroit, the more than $40 million would have gone to the state’s school aid fund, which should still collect a larger-than-projected sum, regardless.
“The Detroit casinos experienced a revenue drop during 2020 and early 2021 because of COVID-19-related shutdowns and capacity limits, which reduced wagering tax and development agreement payments,” Williams said. “Wagering taxes from internet casino gaming and online sports betting did not begin until both gaming forms launched on Jan. 22. This was about seven months into the city’s fiscal year, which ended June 30. The provision took effect because of an unusual set of circumstances caused by the casinos’ closings and reduced capacity due to COVID-19 health concerns.”
The payment required by statute was made earlier this month, according to the MGCB.
Michigan set a record for internet gaming revenue in September with $102.4 million. That total resulted in a record $18.9 million in state taxes.