Detroit’s Budget and Gambling Revenue [TRANSCRIPT]

If sports betting is legalized in Michigan for casinos to operate, estimates start at $300 million for its industry potential. 

But what that would translate into for Detroit revenue from the wagering taxes the three city casinos pay is something city officials aren’t quite willing to bet on.

“Our policy is not to budget for any of those upsides until we see those revenues actually showing up in our coffers,” says Detroit’s Chief Deputy CFO and Finance Director John Naglick.

A bill introduced last year would allow Michigan casinos to run gambling on sporting events, and a recent U.S. Supreme Court decision cleared the way for states to adopt such measures.

Click here for the recent Detroit Today show on the topic.

Detroit’s Chief Deputy CFO and Finance Director John Naglick recently spoke with WDET’s Sandra Svoboda about what casino revenues mean to Detroit and how the city is “conservatively” projecting its future budgets. Casino taxes are the city’s third largest source of revenue behind income taxes and state revenue sharing.

Click on the audio player above to hear the full conversation. A full transcript appears below.

For more of WDET’s coverage of casino finances, click here.

In March, the three Detroit casinos posted their highest monthly revenues since they opened in 1998 and 1999.

Sandra Svoboda: Has the city examined what the Supreme Court ruling on sports betting could mean to the casinos and the casino revenue and the taxes paid to the city here?

John Naglick: We certainly know it could create an upside for the Detroit casinos if they were to add sports betting. We take a more conservative approach to forecasting revenues, mainly because we don’t want to have any chance that we’re going to run deficits. Twice a year we convene a revenue estimating conference and look at the historical receipts for wagering tax and then forecast on that basis. So while we’re always hopeful that we’ll get upsides, we never project that in until we actually see it.

Sandra Svoboda: What portions of the city’s revenues come from the taxes paid by the three casinos that are located in the city?

John Naglick: The city’s general fund budget is about $1 billion, and the revenue consensus is approximately $180 million a year from the casinos that would be about 18 percent of the city’s revenues coming from wagering tax. There really are third place in revenues. Income tax is clearly our No. 1 and has been growing quite nicely, the state revenue sharing about $200 million a year, then the wagering tax which amounts to about $180 million a year

Sandra Svoboda: The city is able to do a few things that influence the income tax collection rate, which you’ve done. State revenue sharing is maybe a little out of your hands at the Lansing level. What influence does the city have on casino tax returns?

John Naglick: No direct control, although I will tell you they’re heavily regulated and have really good controls. The Michigan Gaming Control Board goes in and audits the three casinos monthly and verifies that the amount of net gambling revenue that they’re paying us wagering tax on is what we’re receiving. The three casinos all wire transfer to us daily the portion of the wagering taxes due to the city, and the Gaming Control Board confirms that the amount that they earned is the amount that was transmitted to us. Really pretty tight controls from the standpoint of Gaming Control Board doing careful audits. The other thing that we get are quarterly, fully audited financial statements for all three of the casinos. It’s a very watched revenue source.  

Sandra Svoboda: As the Michigan Legislature considers the legislation to allow sports betting or maybe it happens in Ohio, how will you in doing city budget forecasting be keeping an eye on that and making projections about what might happen to casino revenue and the taxes that are paid to the city?

John Naglick: Our policy on any upsides is to only forecast them once we see them showing up. We would never, even if we knew that it was authorized by the legislature and coming, we wouldn’t try to put that into our budgeted revenues, we’d wait until we see it.  The same thing is true of all the economic development you see in town right now. We have a more detailed 10-year plan that is not part of our legal budget but it’s something our CFO created so that we’re looking out over a longer time horizon to make sure we can meet our legacy obligations that will grow in our future. While he wants our four-year budget plans to be very conservative, the 10-year plan actually does project in growth. We put it in our long-term forecast but our policy is not to budget for any of those upsides until we see those revenues actually showing up in our coffers.