Colorado County Underscores Casino Closure Hardships

The COVID-19 outbreak has cost gaming operators hundreds of millions of dollars in lost revenues, which in turn has hurt hundreds of state, county and local governments that rely on these monies to fund critical services. Of the gaming beneficiaries, none may have been hit as hard as Gilpin County, a 6,000-person municipality in the mountains of Colorado.

Half of the county’s employees were furloughed or laid off since all Colorado commercial casinos closed their doors in March. USA Today projects it will be the county hit hardest by a pandemic-induced recession.

With no timeline for casino reopening yet, Gilpin County Commissioner Gail Watson told state officials Thursday her county is preparing to cut 25% or more of its budget.

“This is going to be really painful for our small county,” Watson said.

Lost Gilpin County Casino Revenues

What had been scheduled as an evaluation of the state’s gaming tax rates became a living autopsy of the industry during Thursday’s meeting of the Colorado Limited Gaming Control Commission. As commissioners heard remote, video conference testimony, ostensibly to consider the state’s tax brackets, elected officials and industry analysts presented a dire picture of dwindling tax dollars.

Watson testified that half the county’s budget came from gaming dollars, money that has stopped coming in for more than two months. Due to dwindling gaming tax revenues, Gilpin County has furloughed 52 of its roughly 200-person full-time and seasonal employee staff, which also led it to close its community center.

“With the casinos shuttered, it’s just devastating to our county,” Watson said.

Home to Black Hawk and Central City, two of the three municipalities permitted to house casinos in Colorado, Gilpin County accounts for most of the state’s gambling dollars, with Black Hawk alone accounting for 82% of that total.

For the state, that means millions in lost dollars that will either force officials to find new revenue sources or makes cuts to the budget. In Gilpin County, this budget crunch could cripple its ability to clear its roads (a major concern for mountain communities nearly 9,000 feet above sea level) and maintain the county jail.

“Our feeling is that this is hurting everyone and that this pain has to be shared. There’s no way around it,” Watson said. “Unfortunately, we know from the 2008 recession that gaming takes quite a while to reach pre-recession levels.

“We’re looking at a very scary financial landscape for the next few years.”

Other Counties Struggle

Gilpin County is far from alone.

Officials Thursday were also concerned about gaming prospects in Teller County, home to Cripple Creek, the state’s third and smallest gaming community. In the early 1990s, voters approved a constitutional amendment permitting the three historic mining towns to offer casino games, and more recently expanding permitted gaming offerings and extended operating hours.

As the casinos grew more profitable, so did interests from larger casino companies, which have taken an increasing share of the towns’ 33 combined casinos. The larger gaming conglomerates are able to better weather the economic downturn, but officials worry some of the remaining locally owned “mom-and-pop” casinos may never be able to reopen their doors.

Statewide Impact

Colorado is one of the few states with these small casinos, but it is far from the only beneficiary of legal gaming.

More than 40 states have some sort of Native American or commercial gaming operation, which generates billions of dollars in taxes each year. At the onset of the coronavirus outbreak, the American Gaming Association estimated just eight weeks of nationwide casino closures would take $43.5 billion worth of economic impact.

In the past two weeks, roughly 100 of the nation’s nearly 1,000 commercial and native American casinos have reopened, but even the quickest to reopen have done so after weeks of closures. An important step toward full recovery, the slow reopening process is still just a minor reprieve to the billions in economic losses, most of which won’t be fully understood for months or years to come.

In the Colorado gaming towns, the closures have already been devastating to the local economy.  Having already gone more than two months without a single visit, Colorado officials still don’t have a firm timeline for when casinos can reopen their doors.

Even then, they will assuredly do so with drastically reduced capacities, as has been the case in the handful of jurisdictions that have begun to reopen casinos. Officials further worry that months of stay-at-home orders will deter visitors from traveling up to the mountains in the first place.

Gilpin County Administrator Abel Montoya told gaming board commissioners Thursday the county garners as much as 3 million tourist visits a year, all of which could be impacted by service cuts from lost gaming dollars.

“A 10% to 12% cut is substantial, but when we’re talking about 25% to 50% cuts to our services, that’s just huge,” Montoya said. “That’s going to have a huge impact to the safety of the general public that visits us from the entire state and probably some folks that from out of state as well.”

Sports Betting

Colorado’s smooth online sports betting rollout has been a bright spot in the otherwise dismal gaming industry, even if it hasn’t been a financial boon. With online casino gaming and poker banned and casinos as well as horse tracks shuttered, online sports betting will be the state’s only source of gambling dollars this month.

Four sportsbooks began accepting bets from mobile devices when sports betting began May 1, and there are now six options for bettors as of Thursday, with up to 27 more expected to come online in the coming months and years. Eligible bettors can register for one of the licensed sports betting sites in Colorado without having to visit a casino to register.

But like brick-and-mortar casinos, online sportsbooks have been devastated by the virus.

With popular American sports leagues such as the NHL, NBA, and MLB likely shuttered for at least another month, sportsbooks have not had many options for customers. On Thursday afternoon, DraftKings’ Colorado site’s promoted sports were table tennis and Belarusian soccer.

The state’s first revenue sports betting report should come out next month, but will likely be just a fraction of original estimates. Colorado Politics reports officials are now projecting $1.5 million in tax revenues for the entire year, down from the initial $9.6 million estimates when the law passed in 2019.

“There are some benefits to sports betting in the near term,” Mark Grueskin, a legal counsel for the Colorado Gaming Association, told commissioners Thursday, “but the issue, obviously, as you know is sports betting is only as effective as the reopening of the sports leagues. At this point it’s just a matter of conjecture.”

Sportsbooks make up a small fraction of most casinos’ revenues to begin with and were championed by the Colorado casinos largely as an amenity to attract players to more lucrative offerings. That reality, combined with mandates that the bulk of sports betting tax dollars go to water conservation efforts, means sports betting produces a trickle of new revenues, even in the best of scenarios.

Unclear Future Remains

Commissioners were buoyed by testimonies that eager customers were flocking to the first batch of reopened casinos, sparking hope that Colorado’s may not be far behind. But whatever optimism came from the gaming control commission meeting was tapered by the overwhelming revenue declines and the intractable uncertainty about Colorado’s gaming future.

In the meantime, local government is looking for aid from state and federal authorities, but the byzantine administration process, limits on applicant eligibility, and intrinsic difficulties for gaming entities seeking federal dollars make external assistance difficult. Officials recognize the gaming dollars local officials have used to fund budgets will not be fully or even partially replaced until casinos patrons return.

Grueskin told commissioners that since it was too early to predict when casinos could reopen it was impossible to project when Colorado gaming could return to pre-coronavirus levels and when communities such as Gilpin County could recover these lost revenues.

“I don’t know you can make a projection on economic performance when you don’t know when casinos will be able to open their doors, and what the health status of the casino population is going to be, or what will be their concerns at that point,” Grueskin said. “I don’t have any facts and figures to give you. I only know what we’re facing, which is a well of uncertainty.”