Casino tax revenue belongs to the city of Detroit, and cannot be accessed by bond insurer Syncora Guarantee Inc. while the city is in bankruptcy, U.S. District Court Judge Bernard Friedman recently ruled. Friedman upheld U.S. Bankruptcy Judge Steve Rhodes’ ruling of August 28, 2013, giving Detroit access to – million a month in casino tax revenue from the city’s three casinos that Syncora, which insures some of the city’s bonds and interest-rate swaps, had attempted to block. James H. M. Sprayregen, Syncora’s attorney, said the company will appeal the ruling.
Syncora has been among the few remaining creditors that have not yet reached a settlement with Detroit, which filed the biggest municipal bankruptcy in U.S. history. Syncora claims it has a lien on the casino tax revenues which had been used as collateral to secure the swap agreements that Detroit entered into in 2009, to hedge interest-rate risk on pension funds representing civil retirees and police and fire retirees. Earlier this year the city agreed to a settlement in which it would pay $85 million to the swap providers.
Syncora has said because it was “a participant in every facet” of the pension debt, it would suffer “massive” losses, which could exceed $270 million according to court records, if it did not have access to casino tax revenues.
Meanwhile, Detroit’s three casinos– MGM Grand Detroit, MotorCity Casino Hotel and Greektown Casino-Hotel—generated $109 million in June, up 5 percent over the same period last year, according to Michigan Gaming Control Board numbers. It was the first year-to-year improvement in 2014.
MGM Grand, which leads the trio with a 46 percent market share, posted June revenues of $49.7 million, up 19 percent over June 2013, which was unusually slow. For the quarter, the property reported revenues of $144 million, up 3.5 percent year-to-year. Gambling revenues at the other two casinos were down slightly compared to June 2013, Greektown posted a drop of 7.1 percent and MotorCity reported a 3 percent decline compared to June 2013.
Compared to 2013, Detroit casino revenues have dropped every month this year. Analysts blame extreme winter weather, less disposable income and new competition from Ohio and tribal casinos.
In recent years, Detroit gambling revenues have been declining, with a drop of 4.7 percent to $1.35 billion in 2013 compared with 2012.
Detroit gambling revenues impact state school districts and the city government, with 8.1 percent going to the Michigan school aid fund and 12 percent going to the city.
