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.

    A trial to approve Detroit’s plan to exit its US$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 US$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. (SD-Agencies)