Casinos: Commercial Casinos - Michigan

Pari-mutuel horse racing was legalized in 1933 in Michigan. During the 1970s, the state lottery was legalized, and a concerted effort began to bring casino gambling to Detroit. These efforts were unsuccessful until 1994, when the Windsor Casino opened just across the river from Detroit in Windsor, Canada. By this time, more than a dozen tribal casinos were operating around the state of Michigan, and Detroit was in an economic downturn. Attitudes toward casino gaming changed, and in November 1996 Michigan voters narrowly approved ballot Proposal E, authorizing the operation of up to three casinos in any city that met the following conditions:

• A population of 800,000 people or more
• Located within 100 miles of any other state or country in which gaming is permitted
• Casino gaming is approved by a majority of voters in the city

Proposal E was approved by a 51.5% majority of voters and subsequently modified and signed into law as the Michigan Gaming Control & Revenue Act (Public Act 69 of 1997; MCL 432.201). The Michigan Gaming Control Board was given authority to license, regulate, and control the casinos and to enforce the act. Eleven casino proposals were submitted, which were narrowed to three in 1997: Atwater/Circus Circus Casino (later called MotorCity Casino), owned by Detroit Entertainment; Greektown Casino, owned by the Sault Ste. Marie Tribe of Chippewa Indians; and the MGM Grand, owned by MGM Grand Detroit Casino. The casinos were granted permission to open at temporary locations while an upscale casino district was developed along the downtown Detroit waterfront.

The first casino, the MGM Grand, opened in July 1999 in a former IRS building. The MotorCity Casino opened in December 1999 in a former bread factory. The Greektown Casino opened in November 2000 in the heart of the city, becoming the first tribally owned casino to open off of a reservation. Detroit became the largest city in the country to allow casino gambling.

Plans for permanent Detroit casino locations incorporating large hotel complexes have faltered again and again. Although the casino companies began purchasing land along the waterfront, rising costs and local opposition forced them to abandon the idea of a casino district there. Hotel plans were scaled back after marketing studies showed that many casino customers were regional and did not need overnight lodging. The mayor and city council have bickered over permanent arrangements for the casinos, although city leaders and tourism officials are very eager for the casino/hotel complexes to be open by January 2006, when Detroit hosts the National Football League's Super Bowl.

In August 2002 the Detroit City Council approved agreements negotiated by Mayor Kwame Kilpatrick for permanent locations for the three casinos. Each of the permanent casinos is to have four hundred hotel rooms.

However, the fate of Detroit casinos remained uncertain as of 2004. The Lac Vieux Desert Band of Lake Superior Chippewa Indians filed a lawsuit against the casinos in 1997, alleging that preferential treatment was given to Atwater/Circus Circus (now MotorCity) and Greektown during the casino selection process, because the two campaigned heavily in the original statewide election on bringing casinos to Detroit. The suit has dragged on for years. The Sixth U.S. Circuit Court of Appeals in Cincinnati ruled in January 2002 that the selection process was unconstitutional. The city of Detroit tried to appeal to the U.S. Supreme Court, but the court refused to hear the appeal. In July 2002 U.S. District Judge Robert Bell denied the tribe's request for a halt to permanent casino development agreements and for reopening of the bidding process, saying "the egg cannot be unscrambled at this late date." However, only two months later, a U.S. appeals court ruled that the city must delay issuing building permits for the permanent casinos until the tribe's suit is completely reviewed.

In April 2004 the Lac Vieux tribe accepted a $79 million settlement with two of the casinos, MotorCity and Greektown. As of August 2004 the lawsuit against the MGM Grand has not been resolved, meaning that plans for permanent casinos in Detroit are still on hold. In addition, Michigan's legislature and senate approved separate measures during 2004 that would allow slot machines at racetracks, creating so-called racinos. A final compromise on the legislation still has to be worked out.

According to the Michigan Gaming and Control Board Annual Report to the Governor: Calendar Year 2003, the Detroit casinos together grossed $1.130 billion in calendar year 2003 (see Figure 4.5), up very slightly from 2002. For 2003 each casino paid 8.1% of adjusted gross receipts as a state wagering tax. The entire amount went into a statewide School Aid Fund for K–12. More than $91 million was paid into the fund during 2003. During that same year, the casinos paid an additional 9.9% of adjusted gross receipts as a local wagering tax to the city of Detroit. This money was used for public safety, anti-gang and youth development programs, taxpayer relief, capital and road improvements, and other programs designed to improve the quality of life in the city. In total, adjusted gross receipts were taxed at 18%.

In addition, each of the three casinos pays an annual state services fee equal to one-third of $25 million adjusted by the Detroit consumer price index and a yearly licensing fee of $25,000. The casinos together pay an additional $4 million annually as a municipal services fee. The Compulsive Gaming Prevention Fund receives $2 million each year from the state services fee for treatment, prevention, education, training, research, and evaluation of pathological gamblers and their families under the Michigan Department of Community Health.

In 2004 the Michigan House of Representatives passed a bill that would have doubled the casino wagering tax rate to 36%. Detroit's casino industry was vigorously opposed to the increase and warned that it could force them to lay off personnel and prevent them from building the new permanent casinos. An editorial in the Detroit News suggested the proposed tax hike was a "back-door ploy" to encourage the casinos to drop their opposition to slot machines at the racetracks. However, the state's senate voted to raise the tax rate to 24%, and in August 2004, the Michigan legislature voted to approve the gaming revenue taxes at 24%, which took effect September 1, 2004. The breakdown of the new tax rate allocated 12.1% of revenue to the State Casino Gambling Fund and 12.1% to the city of Detroit. According to the Michigan Gaming Law Web site, the Greektown Casino cut 182 casino jobs that August, and the MGM Grand laid off 150 employees in September.

Unlike casinos in some other states, Detroit casinos are not permitted under the Michigan Liquor Control Code (Public Act 58 of 1998; MCL 436.2025) to provide free alcoholic drinks.

FIGURE 4.5