http://www.businessinsider.com/r-detroit-rolls-dice-by-relying-on-casino-cash--2014-08
( What could go wrong by banking on gambling revenues like this ? )
DETROIT/NEW YORK (Reuters) - Detroit's reliance on casino cash to help fund a recovery from the city's historic bankruptcy is a high-risk bet on what is an increasingly shaky source of income.
http://www.zerohedge.com/news/2014-06-07/death-and-decay-detroit-real-time-seen-streets
( What could go wrong by banking on gambling revenues like this ? )
Detroit Is Rolling The Dice By Relying On Casino Cash
Thomson Reuters
A trial to approve Detroit's plan to exit its $18 billion bankruptcy, the largest municipal crash in U.S. history, begins in late July. Flawed revenue projections may undermine its feasibility, creating a key legal hurdle to win approval by the court. On a practical level, a revenue shortfall could knock the city down just as it is getting back on its feet.
Detroit Emergency Manager Kevyn Orr projects that wagering tax revenue from three local casinos, the city's third largest source of cash, will remain essentially steady as far ahead as 2023.
Orr has described the gambling taxes as Detroit's most stable source of money. But casino revenue has declined of late in Detroit itself and in recent years traditional gambling hubs like Nevada and New Jersey as well as relative newcomers to the wagering scene, such as neighboring Ohio, have seen swoons.
"Projecting casino revenue is notoriously difficult," Moody's Investors Service casino analyst Keith Foley said. "But nobody is saying it is going to get better."
For instance, casino revenue from Atlantic City has roughly halved since 2007, a drop no one saw coming, Foley said. Total U.S. casino revenue in 2012 was still just shy of a 10-year peak of $37.5 billion set in 2007, according to the American Gaming Association.
A litany of factors stack up against Orr's forecast, industry analysts and experts say: younger people show little interest in gambling, the casino market is saturated, and thousands of local residents are likely to see their wages drop due to the bankruptcy plan.
Bill Nowling, a spokesman for Orr, says the casino tax projection is conservative and was calculated by Detroit's financial restructuring advisors, Ernst & Young. He said the calculations were also based on anticipated Michigan unemployment rates "continuing to improve and inflation to hold at or below 1 percent annually."
He declined to elaborate on projections but said if they were too high, Detroit "will live within its means and will match spending with available revenue."
The casino revenue has already been the subject of legal wrangling in the bankruptcy. In April, the bankruptcy judge approved a deal brokered by Orr that kept the casino revenue from being diverted to two creditor banks.
THE RISK OF A DROP
In fiscal year 2013, casino taxes brought in $174.6 million, down 3.7 percent from $181.4 million the year before, according to Orr's latest plan of adjustment filed in May. That was nearly 17 percent of Detroit's general fund revenues, with only income taxes and state funds larger revenue sources.
Orr's plan predicts it will continue to drop to just over $168 million in 2015, then recover to its 2012 level by 2023, at a growth rate of 1 percent a year from 2016 until 2023.
But just a 1 percent annual downturn in wagering taxes after 2016 would lead to a more than $25 million shortfall in 2023 alone, according to calculations by Reuters.
Overall, revenue at the three casinos fell 4.75 percent in 2013. The decline has continued so far this year, with revenue over the first four months falling more than 6 percent from a year earlier.
"Obviously they are going to have to justify this projection at trial," said Richard Larkin, director of credit analysis at investment bank HJ Sims. "Casino revenue is not a traditional, long-term revenue source."
A flaw in projecting casino revenue "could signal far deeper problems with city's plan of adjustment and the city's intended plans for recovery," said Peter Hammer, a law professor at Detroit's Wayne State University.
"It decreases substantially the confidence you have about the viability of the rest of the plan, which involves much more complicated issues," Hammer said.
Moody's Foley has a similar concern about the casinos: "What if Detroit has another 5 percent decline next year? Then their budget is already way off track."
After all, Detroit is not alone in seeing a fall off in casino revenue. It is down in Illinois, Indiana, Iowa, Nevada, Pennsylvania, Missouri, Connecticut, Atlantic City and Ohio in the past two years, according to figures from each state.
TEMPORARY OR LONG-TERM DECLINE?
Analysts and backers of Orr's projections say there are factors that might mitigate a slide in Detroit's casino revenue, compared to other areas. State law allows only three gambling houses in the city, a cushion against more competition. The city is the most convenient gambling center for southeast Michigan, northeastern Indiana and northwest Ohio.
Jennifer Kulczycki, a spokeswoman for the company that owns one of the city's casinos, Greektown, said that while revenue had softened, "we are optimistic for things to return to previous levels - and then some. The Detroit market is 14 years old and it has been very resistant."
A central issue is whether these declines are temporary or permanent.
In an April report, Moody's Foley warned that Detroit's bankruptcy threatens a reduction in gambling spending because city employees face lower pensions and retiree health benefits under Orr's restructuring plan. The city is Detroit's second biggest employer, according to Crain's Detroit Business.
Demographics are also a worry, said Alex Calderone, a business turnaround specialist based in Michigan, who was part of the team that took the city's Greektown Casino-Hotel through bankruptcy between 2008 and 2010. Greektown is up and running under a new owner - Dan Gilbert, the founder and CEO of Quicken Loans, who is investing heavily in downtown Detroit.
Standing in the casino, surrounded by the cacophony of slot machines and clouds of cigarette smoke, Calderone asked: "Where are the young people?" There is no replacement for the predominately older age group who gamble, he said.
"Young people have little inclination to play slot machines," according to a recent analysis by Deutsche Bank. It cited research by the Meczka consulting group, which said only 18 percent of people aged between 21 and 35 visit casinos.
IN AN URBAN DESERT
Experts also look to Las Vegas as a leading indicator in gambling behavior. According to the Center for Business and Economic Research at the University of Nevada, more people now visit the Vegas strip to eat and go night clubbing than gamble.
But Detroit is not Vegas. Casino-hotels on the Vegas strip such as Caesar's Palace and Wynn Las Vegas have spectacular nightly shows, and high-end bars, restaurants and shops. Moreover, Detroit's casino tax is based on gambling revenue alone.
While Detroit's biggest casino, MGM Grand Detroit, part of MGM Resorts International<MGM.N>, would not look out of place among the glass and marble casinos of the Vegas strip, it and the nearby MotorCity sit in a virtual urban desert. Their surroundings are bleak - a far cry from glitzy - and perpetually warm - Las Vegas.
Last year revenues fell 6.3 percent at the MGM and 1.2 percent at MotorCity, and have continued to drop this year. Greektown's revenue fell more: from $352.1 million to $328.3 million, or 6.8 percent.
In contrast to its larger two rivals, Greektown is in need of a makeover. Its carpets are old, its facilities drab.
But plans for a full face lift have been scaled back. According to a February filing with the Securities and Exchange Commission, Gilbert's company that owns Greektown, Athens Acquisitions LLC, said a planned $150 million renovation had been cut back to a $25 million to $50 million refurbishment.
"In a casino that's basically just changing the carpet," said Ken Adams, a gaming consultant.
http://www.zerohedge.com/news/2014-06-07/death-and-decay-detroit-real-time-seen-streets
The Death And Decay Of Detroit, As Seen From The Streets
Submitted by Tyler Durden on 06/07/2014 11:27 -0400
From The Detroit News: http://www.detroitnews.com/article/99999999/METRO01/130718001#ixzz344wKCaZV
With the stock market hitting record highs day after day, it is easy to move on and forget that one of American's once premier cities, Detroit, has been bankrupt for nearly a year. But out of mind doesn't mean out of sight, especially now that Google has launched its street view Time Machine, which provides for 7 years worth of street images, capturing the time shift of the tumultuous period period starting in 2007. One blogger who decided to take this time lapse data and apply it to the city of Detroit is GooBing Detroit who, as the following time-lapse photos demonstrate, has captured Detoit's unprecedented slow-motion collapse into death and decay in what is the closest we have to "real time."
Perhaps what is most stunning about the following series of photos is not the ultimate fate of the bankrupt city, but how quickly a once vibrant metropolis has succumbed to blight and sheer desperation.
Hopefully not coming to a street near you.
All photos from the Goobingdetroittumblr depict various areas and streets in Detroit, then and now.
2009
2011
2013
Montlieu between Gilbo and French, City Airport Neighborhood. Top to bottom Google streetview circa 2009, 2011 and 2013.
2007
2009
2011
July 2013
September 2013
Chene between Palmer and Ferry. 15 of the 20 properties on this block have been, or are subject to, tax foreclosure. Looked like a nice bakery.
2009
2013
Healy Street north of Hamtramck
2009
2011
2013- July
2013 - August
Exeter between 7 Mile and Penrose, Northern Detroit.
Brightmoor neighborhood.
Around 7 Mile, West Side
Northwest, near Grand River
West Golden Gate, Detroit
Southwest Detroit
East side, near Alter Road
Patton Street, NW Detroit
Feel like you can kind of see how this scene unfolded:In the top photo, the tree is blocking the view of that yellow house in the middle — that house isn’t in great shape, but it’s ok. The house to the left has neatly trimmed hedges and a chair on the porch. The house on the right has been gutted by fire.I imagine that middle house - since it’s been demo’d by 2012 - caught on fire and caused the further damage to the house at the right. Whoever had been living in the nicely maintained house on the left, moved out, and that house was gutted.In the last photo — with the nicely maintained house farthest to the right — you see another nice house on the left, with a boarded up, but fairly stable, house in the middle. By 2012, both nice houses are gutted, as is the boarded up one in the middle.
Springwells Village
Near City Airport. Wonder why they didn’t take down the one next door while they were at it…
From top to bottom: 2008, 2009, 2011, 2013. Hickory Street between Manning and Pinewood, northeast Detroit.
Of the 12,093 properties in this Detroit neighborhood, 1,037 are owned by the City of Detroit, mostly due to tax foreclosure. Another ~4,500 are either subject to tax foreclosure right now, or will be in the next year or two.
Eastwood between Queen and MacCray, Northwest Detroit. Just east of Osborn, in “Burbank”… if anyone actually calls it that. Of the 34 properties on this block, 24 have been tax foreclosed, 13 are at risk of foreclosure, and precisely 1 property is in good tax standing.
Corner of Thaddeus and S. Leigh Street, Southwest Detroit. That’s a lotta washing machines…
Hazelridge between Celestine and MacCray, Northeast Detroit
This block is incredible. Still pretty dense with housing, but only one of them is occupied. If you go a block to the west, the housing stock changes to brick and the neighborhood looks pretty stable.The New York Times visited this block during the Motor City Mapping survey:"Blight, as Karl Baker, one Detroit resident, has seen, tends to spread. Along his block of Hazelridge Street on the East Side, he is the only remaining tenant. “Everyone went bye-bye,” Mr. Baker said the other day as he walked up the center of the silent street to get to his house since no sidewalks had been shoveled.Most of the houses nearby are standing but abandoned, and visitors have clearly passed through — empty liquor bottles lie along debris-covered floors near broken windows and doors, every memory of a metal appliance or gutter seems to be gone from some of the homes, and two old couches that were dumped along a lawn are now blanketed by a thick layer of snow.The last neighbor left six months ago, he said, and the single streetlight overhead has not worked for months. “I love the quiet, but if something went wrong, the city isn’t going to come,” Mr. Baker said. “They don’t do anything.”
Hoyt between Liberal and Pinewood, Northeast Detroit
Arndt between Elmwood and Ellery, East Side, Detroit
Lady waving to the street view car in the first image, c. 2009. Nearby the Heidelberg Project, and in the style, though not sure if a Tyree or not.
From the Detroit News - latest updates ....
BANKRUPT DETROIT: Continuing coverage
Automakers to contribute $26M to DIA's share of 'grand bargain'
The Detroit Institute of Arts is expected to announce Monday that the city's hometown automakers will contribute about $26 million toward the museum's $100 million share of a fund to aid city workers' pensions, The Detroit News has learned.Council votes to transfer DIA assets to trust
The City Council today voted to endorse Emergency Manager Kevyn Orr's plan to transfer assets of the Detroit Institute of Arts to an irrevocable trust in exchange for $661 million in aid for city pensions.Detroit retirees split on plan to cut pensions
Detroit — A divided crowd filed out of Fellowship Chapel Thursday, some vowing a fight, others saying they will likely concede to pension cuts as part of Detroit's historic bankruptcy.Gov tries to seal bankruptcy deal with Detroit retirees
Gov. Rick Snyder had a message today for other distressed municipalities that might ask the state for cash in light of an unprecedented rescue package for Detroit.Creditors seek to delay Detroit bankruptcy trial until fall
Detroit — A group of holdout creditors wants to delay a trial over the city's debt-cutting plan by two months, a request that threatens to delay Detroit's emergence from bankruptcy court.Police and fire retirees have questions, concerns about Detroit bankruptcy plan
Detroit — The city's Police and Fire Retirement System on Wednesday fielded hours of questions from a crowd of several hundred that packed the IBEW Hall on Abbott Street during its first informational meeting on Detroit's bankruptcy Plan of Adjustment.Detroit's 'grand bargain' sweeps ahead
The Michigan Senate on Tuesday greenlighted the state's participation in Detroit's bankruptcy 'grand bargain,' approving $195 million in aid for Detroit pensioners and long-term oversight of city finances.
From The Detroit News: http://www.detroitnews.com/article/99999999/METRO01/130718001#ixzz344wKCaZV
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