Published July 1, 2006 | July 2006 issue
An analysis by the Detroit Free Press has found that the state missed out on an estimated $337 million in casino revenue from state Indian tribes since 1999 because, of all things, it allowed other tribes to open casinos.
In 1993, the state signed compacts allowing seven tribes to open casinos; tribes would pay 8 percent of slot-machine profits to the state, and an additional 2 percent to local communities. However, if those seven tribes ever lost their exclusive rights on slot machines, they could forgo the 8 percent payment to the state.
That's just what happened when the state allowed four additional tribes to open casinos in 1999. Tribes managed to open just two of the newly approved casinos; each promised an 8 percent payment to the state, yet both stopped in 2004 when the state lottery expanded a keno program.
That's not to say that government revenue has suffered entirely from an expansion of gambling. State voters also approved three casinos in Detroit in 1996. (This move technically could have triggered nonpayments by gaming tribes, but payments didn't stop until later.) Though one ultimately became affiliated with a state tribe, Detroit's three casinos are more heavily regulated and must pay certain taxes and fees. These casinos generate $100 million in annual revenue for the state and city, well above the contributions lost to the loophole in the original compacts with tribes.
—Ronald A. Wirtz