Colorado casino town officials speaking at Thursday’s public meeting of the Colorado Limited Gaming Control Commission shed some light on the impact state-mandated casino closures have had on their communities, with some expressing worry about the long-term economic impacts even after they’re allowed to reopen.
Cripple Creek ‘Turned Into A Ghost Town’
“The closing of casinos has been devastating to Cripple Creek’s economy,” said Paul Harris, the city’s finance director. “We’ve cut our budget $2.2 million, close to 20%, just to deal with second-quarter impacts. We expect we’ll be cutting our budget even further as we see impacts through summer.”
Harris also said planned development projects in the city scheduled before the March 18 closures now face “an uncertain future.”
“Cripple Creek’s gaming industry is the city’s primary economic engine. With the closing, a lot of casino workers were furloughed or laid off immediately. We’ve seen unemployment skyrocket and an increased need for public services,” Harris said.
Things have gotten so bad in Cripple Creek, Harris said the city has had to work with local nonprofits and even local school districts “to make sure everyone has enough food and is able to get by.”
“We were really turned into a ghost town,” he added.
Financial Analysts Report Huge Revenue Losses For Colorado
Casinos in the state were ordered closed in mid-March, shortly after coronavirus was declared a pandemic by the World Health Organization. Cary Walker, a financial analyst at accounting firm RubinBrown LLP who presented at the meeting, said the firm estimates through April 30 alone Colorado has lost $99 million in revenue and $17.7 million in taxes from the lack of casino income. An estimate he called “very conservative.”
One potential silver lining Walker noted was what he described as a pent-up demand among casino patrons who have been unable to indulge in their activity of choice for more than two months. Those enthusiastic to get back to placing bets at local casinos, he said, could help the industry boost its revenue once they open their doors, citing recent reopenings of casinos in Mississippi, Louisiana, and California tribal lands as hopeful examples.
“We can’t make up for lost revenue. Mid-march is one of the most profitable months for the gaming industry, that can’t be replaced. April, one of the next best months, also can’t be replaced. The ability to get back to where we were will take some time. We’re optimistic that 2020 is a one-year blip in revenue trends going forward,” said Walker.
Gilpin County Facing Difficult Choices, Uncertain Future
Gilpin County Manager Abel Montoya spoke in detail about the dramatic effects his county is experiencing due to the casino closures. Black Hawk and Central City are both located in the county.
“We furloughed close to 60 folks including library workers. That service is closed. All of our social gathering, arts, and recreation facilities have also been closed to residents as a result of the financial crisis.”
Montoya said the pain might not end there, however, warning the county may have to lay off as much as 25% more of its employees.
“Those hits would be taken by our sheriff’s office, public works department and other services. Any reduction in staffing there would result in a reduction of services that our county and city needs.”
Montoya further warned that even when casinos are operational again, how soon and whether customers return is still unknown.
“We know consumer sentiment may be reduced for businesses that are high-touch. Which basically means we think casinos aren’t going to be back to 100% maybe for another year, and they may operate at 50% capacity for the rest of this year.”
He said overall, Gilpin County could lose $20-40 million in revenue over the next 5-7 years as a result of the pandemic.
“Our budget is approximately $25 million, so we’re looking at at least a one-year full reduction if not more within the next 5-7 years. That’s a serious strain due to the virus. There’s a lot of uncertainty as to when that might change, and we’re taking measures and preparing for very difficult decisions to ensure we provide county residents with the services they need and expect.”
Social Distancing, Other Necessary Safety Measures Will Prolong Economic Hardship
Even when casinos reopen for business, lingering questions remain about the impact social distancing measures will have on their bottom lines. All officials presenting at Thursday’s meeting mentioned all planning was being done around ensuring the safety of casino patrons and employees.
“Operations will be dramatically different, and vast changes will be required to casino business models, from customer capacity to more rigorous safety requirements. This means increased costs and decreased revenue over the short term,” said Peggi O’Keefe, Executive Director of the Colorado Gaming Association.
Mark Grueskin, who has been legal counsel for the Colorado Gaming Association since 1994, said the shared goal of all involved parties was the same: to shore up the state’s gaming industry while balancing the safety concerns of employees and guests. Striking this balance has proven particularly difficult with a lack of clear information from the state about new safety protocols around casino reopenings.
“Not the least of the remaining questions is what are we going to do to modify our facilities to provide for a safe environment, whether it’s taking devices out of commission, providing for social distancing, or providing safety equipment between devices. What do we have to do to make sure we can open in a reasonable and safe a manner as possible?”
Grueskin warned that opening the state’s gaming industry prematurely could do more harm than good.
“We don’t believe the gaming industry limping back into operation is in the best interest of anyone…no one benefits from a lackluster reopening. The question is, will there be resources that are sufficient to let the industry open in a meaningful way. If it’s not going to be meaningful, you might as well not do it.”
Colorado’s New Sports Betting Market Offers Little Relief For Struggling Casinos
Colorado Limited Gaming Commissioner Richard Nathan asked Grueskin about any potential boost the state’s newly launched sports betting market could provide the local gaming industry. Grueskin, noting sports betting’s thin margins, said he “doesn’t see it as a significant buffer against the economic realities we’re facing today.”
Grueskin also pointed to a “haves and have-nots” situation where certain casinos are concerned. He noted casinos who received an upfront, one-time payment from sports betting providers to use their platforms may be better positioned to weather the closure months. However, he noted, “smaller or mid-size casinos that weren’t fortunate enough to have a sports betting agreement so they could sell their skin…got nothing from sports betting.”
He also pointed to the closure of most major sports leagues as clouding the issue around what the ultimate benefit to casinos’ coffers will be from sports wagers.
“Sports betting is only as effective as the reopening of the sports leagues, but there’s no certainty about that at this point and what it will look like.”
All in all, the continued uncertainty in Colorado around what will happen once Gov. Jared Polis’ May 26 safer-at-home order is set to expire is perhaps felt most acutely by the state’s gaming industry. Polis said last week that state health officials would be basing any further decisions around businesses reopening on data collected through Memorial Day weekend.