Detroit casino gaming has not led to any noticeable redevelopment downtown

9.30.07

A gamble on casinos seems to be paying off

BY JOHN GALLAGHER
FREE PRESS BUSINESS WRITER

As the MGM Grand Detroit, the first of Detroit's permanent casinos, prepares to open this week, supporters of gaming say Detroit's three casinos have fulfilled most of their early promises and disproved most of the early doubts.

On the positive side, casinos have proved themselves to be the municipal cash cows that state and local officials fervently hoped when MGM Grand opened the city's first temporary casino in 1999.

In another positive, it's now clear that the widely predicted problems of mob infiltration and street crime related to gaming never materialized.

On the negative side, social service agencies have had to help more people with gambling problems since the first casino opened.

And in another negative, hoped-for spin-off development near the casinos, in the form of restaurants and other amenities, did not occur.

Record mostly positive

Overall, the record remains mostly positive, said Larry Marantette, an economic development consultant from Detroit who was part of an early advisory task force on casinos.

"It's been substantially more positive than negative -- and don't forget the jobs," said Marantette, a partner in Taktix Solutions. "They have provided large numbers of jobs with benefits in a whole range of salaries."

Christopher Baum, senior vice president for sales and marketing of the Metro Detroit Convention and Visitors Bureau, said the casinos also have helped make Detroit a more attractive city for conventions and trade shows. That should prove even truer as the three new casino-hotels open and add 1,200 rooms to the downtown market.

"It's a major extra point of leverage for Detroit," Baum said.

Keeping the money here

Getting casinos in Detroit was not easy. Voters had repeatedly turned down casino gaming. But once a casino opened in Windsor in 1994, advocates of gaming in Detroit could play an unbeatable hand: why should all that money go to Canada?

"The No. 1 factor always was retention of the dollars," said Jake Miklojcik, an economic development consultant based in Lansing who works with casinos.

Once the Detroit casinos opened, money began to pour into government treasuries, thanks to a state law requiring the casinos to pay 24% of gross revenues to the city and state. As an incentive to invest in the larger venues, that amount drops to 21% once the permanent casinos open.

Since 1999, the three gaming houses have turned over slightly more than $1 billion in taxes and service fees to the City of Detroit, and almost that much to the State of Michigan.

The money has proved critical to both a city and a state struggling with chronic budget shortfalls.

Crime fears unfounded

During the casino debates of the 1990s, many people cited a fear of crime as a reason to keep casinos out of Detroit.

Opponents predicted that organized crime would infiltrate the casinos, and that pickpocketing and other petty crimes would flourish.

Neither happened, the Michigan Gaming Control Board said. There has never been a hint of mob infiltration. Street crime has proved less of a problem near the casinos than in the rest of the region, probably thanks to the large numbers of police who patrol inside and outside the gaming palaces.

Problem gamblers

But one predicted problem did happen: Opponents said casinos would create more problem gamblers in southeast Michigan.

Last year, some 33,000 people called the gambling help line of the Neighborhood Service Organization, a nonprofit human services agency based in Detroit.

Many calls dealt with lottery questions and issues not related to a gambling problem. But LaNeice Jones, the agency's vice president for programs, said thousands of the callers did report personal and financial problems stemming from gambling.

"The number of people who identified themselves as problem gamblers has certainly increased with three casinos in the city," she said.

Economic spin-offs lacking

The three temporary casinos hired several thousand of their own workers plus many outside vendors, creating as many as 6,000 spin-off jobs in the local service industry, Miklojcik said.

Many of the 6,400 direct casino jobs are unionized and pay health and other benefits.

But casino gaming has not led to any noticeable redevelopment downtown.

Two of the three gaming sites, MGM Grand and MotorCity Casino, stand as isolated islands. The third, Greektown Casino, is in the midst of one of the city's hottest tourist areas, but even there the economic spin-off has been limited.

MGM's planned opening Tuesday is the first of the permanent facilities with hotels.

MotorCity's opening is scheduled in November.

Greektown's expansion and hotel are to open next year.

Todd Stern, owner of the Small Plates restaurant on Broadway downtown, said casinos don't provide any business for him, mostly because gamblers enter a casino, eat and gamble there and then go home. Other nearby restaurant managers agreed.

Laurie Volk, an economic development consultant based in New Jersey, said casinos do little to attract the highly educated younger workers who are considered crucial to urban redevelopment. Those workers prefer more cultural amenities and meeting places such as coffee shops and casual restaurants.

"I don't know if casinos help at all, frankly," she said.

Downtown has, of course, seen a lot of loft residential development and some new retail in recent years, as well as the new Campus Martius Park, the RiverWalk, and other amenities. But planners say those happened independently of the casinos, and reflect a trend toward downtown revitalization rather than casino spin-offs.

The lack of spin-off benefits may stem from a failure in Detroit to cluster the three casinos, as occurred on the Las Vegas Strip and in some other casino cities. In Detroit, attempts to create a casino district, either along the east riverfront or in the downtown area, failed for a variety of reasons.

"The most positive street impact comes when casinos are clustered and the gamers go from one to the next and in between stop and shop and dine," Marantette said. "We just don't have that structure in Detroit."

Ann Lang, president of the civic group Downtown Detroit Partnership, is hopeful that downtown spin-offs may yet come as the permanent casinos open.

"It used to be that visitors would come for a Tiger game and go home," she said. "And now, much more often, they come early or stay late, go to a restaurant, visit the riverfront. And it's conceivable to me that that same kind of activity could happen around the casinos. We're just not there yet."

Contact JOHN GALLAGHER at 313-222-5173 or gallagher@freepress.com.


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