Casinos have best year yet: $1.34 billion January 15, 2008 BY HEATHER NEWMAN FREE PRESS STAFF WRITER http://www.freep.com/apps/pbcs.dll/article?AID=/20080115/ENT11/801150316/1002

Billions of Reasons for Thanks Detroit's casinos have a billion reasons to say thanks to their customers: $1.34 billion, to be exact. For the seventh year in a row, MGM Grand, MotorCity and Greektown casinos have pulled in more than a billion dollars in revenue. Last year's numbers were the strongest yet, despite a slumping economy and lots of construction, relocations and renovations that closed part or all of two casinos for days at a time. MGM Grand and MotorCity led the income race last year, as they did in 2006. MGM Grand brought in $513.5 million, about $24 million more than in 2006, despite the growing pains associated with building a new facility.

Taxes Paid MGM paid about $60.7 million in state wagering taxes, only about $1.5 million more than in the previous year, thanks to a tax rollback it became eligible for when its new hotel was complete in early October. MotorCity followed close behind, despite construction that closed access roads and led customers in occasionally tortuous routes around to the buildings at the Lodge and Grand River. It brought in $480.2 million, up from $468.7 million in 2006. Because MotorCity's hotel was not complete until Nov. 28, its tax breaks were not as large as MGM's. MotorCity paid about $58.1 million in state taxes. Bringing up the rear was Greektown Casino with $341.3 million in revenues, down from $345 million in 2006. The casino dealt with construction-related and parking problems all fall and had to compete with MGM's and MotorCity's new facilities. Greektown's own hotel and entertainment complex is to be completed in the fall.

Stipulations Each must provide a 400-room hotel, plus other amenities. The two hotels built so far have increased the costs for the casinos to do business, but occupancy has trailed Detroit averages, leaving them a less than moneymaking proposition. Until the hotels were completed, the casinos paid 12.1% of their adjusted gross receipts to the state and 11.9% to the city. Counting annual fees and other administrative charges, they pay an effective annual tax rate of 24%. The state's cut goes into the school aid fund; the city's into a general fund for hiring police officers, improving neighborhoods and providing other city services.

Economics Casinos here have been given monopoly protection. Without Taxes MC MR D $ Casinos here have been given monopoly protection. What does that mean? TR AC Profits TC Q0 Customers

Economics Taxes can be treated as a downward shift in demand. Why? With Taxes MC MR D $ Taxes can be treated as a downward shift in demand. Why? TR (w/ tax) AC Q1 Q0 Customers

Economics How much tax revenue? Why? What happens to quantity? With Taxes MC MR D $ How much tax revenue? Why? What happens to quantity? Lots of the revenue is in cash; what does that suggest? Tax Receipts TR (w/ tax) AC Q1 Q0 Customers