Jim Reid, Gilpin County. On August 25, 2023, a town hall meeting was conducted regarding the November Gilpin County Ballot Issue 1A. This ballot issue proposes to continue the current 2.57 mill levy, which sunsets this December. If passed, the mill levy would take effect in 2024 and generate approximately $1,308,450 dollars for the Parks and Recreation Department ,which includes the Community Center. A video of this town hall meeting, the ballot wording, and a Q&A section can be found at https://gilpincommunitycenter.org/mill-levy/ .  

This article will focus on Gaming revenue. It will not address tax increases due to property valuations. Two reasons for this: first, State proposition HH if passed will have an effect on property tax amounts, but the outcome will not be known until after the November election.  Second, the County Assessor has not published data regarding the tax impact and will not be able to until after the election.  

Having said that, it is worth noting, specific to this mill levy, businesses will pay about 61% of the $1,308,450 or $798,155; vacant lots and other property owners about 17% or $222,437; and finally, residential owners 22% or $287,859. This information comes from the town hall Q&As. So, while Gaming revenue under the proposed mill levy will not contribute to the Parks and Recreation department, casinos will be providing a large proportion of the funding through property taxes.

This article will first provide an explanation of how Gaming tax revenue is collected and distributed to the counties and towns where Gaming exists. Following that, an examination of Gaming revenue separate from other Gilpin County budget components will be presented. Next, an inspection of non-Gaming revenue and how it differs from Gaming revenue will be detailed.  Then a look at the percentage of Gilpin’s overall revenue that Gaming comprises, followed by comparing total revenue to total expenditure. Finally, there is discussion about future Gaming revenues and a summary. Be of stout heart: there is a lot of information to follow.

The Colorado Division of Gaming is the unit in the Colorado Department of Revenue that regulates all Gaming, including setting Gaming tax rates, collection, and distribution. Gilpin and Teller counties receive revenues but do not regulate tax revenues – the State does. 

Gaming taxes are calculated on the casinos’ adjusted gross profit (AGP), which is comprised of Gaming revenue minus payouts. All gaming tax revenue is deposited into the State’s Limited Gaming Fund. Once tax revenues are deposited, and prior to distribution, the Division of Gaming’s expenses are paid. 

After expenses, Gaming Tax revenue is distributed as follows: 50% goes to state programs allocated at the discretion of the state legislature, 28% goes to the State of Colorado for historical preservation programs, 10% goes to Black Hawk, Central City and Cripple Creek proportionate to revenue generated in each municipality, and 12% goes to Gilpin and Teller Counties, again proportionate to revenues. In-depth information regarding Gaming can be found at https://sbg.colorado.gov/industry-statistics-gaming – look at Fact Book & Abstract section.  

The following graph looks at Gaming revenue from 2007 through the current County budget of 2023. The information displayed on the graph was extracted from the Gilpin County budgets. County budget information can be found at  https://gilpincounty.colorado.gov/departments-offices/finance-department/financial-documents. 

The horizontal axis shows the year and the vertical axis shows Gaming revenue in the millions.  The numbers along the graph line represent revenue at various years.

Gaming revenue is not a steady revenue stream; it is volatile, takes years to recover from economic downturns, and is unpredictable. As evidenced, from 2007 to 2009 Gaming revenue dropped from $10.3 million to $8.2 million, a 21% drop in revenue to the County over two years.  This was during the Great Recession of 2008. It was not until 2016 that Gaming revenue surpassed 2007 levels. It took eight years for the Gaming industry and revenue to the County to recover. 

In 2020, four years after attaining pre-Great Recession Gaming revenue levels, casinos were again financially impacted, this time by the pandemic. During this period, from 2019 to 2020, Gaming revenue dropped from $11.7 million to $6.7 million, a 42.5% drop in Gaming revenue to the County. 

In 2021, the County received $10.7 million from Gaming, but that was still $1 million  less than the pre-pandemic 2019 revenue. 2022 saw $15.3 million in Gaming revenue – a $4.6 million increase over 2021; however, that increase did not cover the $5 million decrease in 2020 nor the $1 million lower revenue in 2021.  

The County is still recovering from the pandemic impact. During this period, as during the Great Recession, the County had to use reserve cash funds to meet expenses. Additionally, it made budget cuts, including closing the Community Center and associated programs like the after-school programs and senior programs.

A major takeaway: Gaming revenue is not a steady revenue stream over time; it is volatile, and it can take years to recover from an economic downturn. The County does maintain a General Fund balance that helps cover Gaming losses in the down years. In good years like 2022, the County can replenish its fund balance in order to continue to protect against future gaming revenue losses. The 2023 budget projects a $21.1million balance. 

Also, in the years 2008 to 2016 the County was not able to spend on capital improvements. This is discussed in a little more detail below. In the community, there is a view that the County was able to maintain the Community Center prior to 2019, so why not now? This needs a qualifier: yes, it was kept open, but the building was not maintained and is in need of capital improvements such as a new roof. Along with increases in revenue, a mill levy helps free up capital that can be used for improvements.

Gaming revenue cannot be looked at without considering other County revenues sources. Non-Gaming revenue is composed of property taxes from commercial businesses, residential properties, and other assets such as vacant lots and agricultural land. In addition to this revenue are grants and fees that the County imposes.

The horizontal axis shows the year, and the vertical axis shows Gaming revenue in the millions.  The numbers along the graph line represent revenue at various years.

The graph shows a steady growth of revenue with little impact from the Great Recession or the pandemic. These revenues show much less volatility and show continuous growth over the years 2007 to 2023. Additionally, there were no losses due to economic downturns, as opposed to Gaming revenue which fluctuates up and down and which is very sensitive to the economy. 

A large proportion of this revenue is from mill levy-driven property taxes. This income is not affected by economic downturns because mill levies stay constant. This is one of the arguments for having Parks and Recreation funded by a mill levy. Funding would be immune to economic downturns and the County would avoid having to close the Community Center as it did in 2020 due to Gaming revenue losses. The other benefit to a mill levy is that it frees up more capital for improvements to the Community Center’s infrastructure.

Another interesting question to ask is: what percentage of the overall Gilpin County revenue does Gaming comprise?

Horizontal axis shows years, vertical axis shows percentage and numbers along the graph line shows the percentage of Gaming revenue of the overall revenue for any given year.

What percentage of the overall Gilpin County revenue does Gaming cover? In 2007 and 2008 Gaming revenue made up 57% of the County’s revenue stream. Starting in 2009, that percentage drops to 49% and, except for 2010 when it was 53%, it has stayed below 50% through 2023. It fluctuates from 49% to 31% (2020).  

So, while some may argue that Gaming revenue is a great source of income, it typically is less than 50% of the overall revenue stream with extreme drops during bad times. In 2008 it was only 44% of the overall revenue stream, in 2020 only 31%, and in 2021 only 39% of overall revenue.

Revenue also needs to be considered in light of expenditure. We can argue about how much revenue there is but without plotting that against expenses it is a meaningless exercise.  

The effects of the Great Recession and the hit to Gaming revenue were mitigated, starting in 2009, by non-Gaming revenues and using the County’s Fund balance to cover Gaming losses. That is why 2009 and 2020 downturns do not look as drastic as when looking at Gaming revenue alone. 

As shown previously, non-Gaming revenue holds steady through economic downturns.  From 2012 to 2019, expenditure and revenue were roughly equivalent – remember, it was not until 2016 that Gaming revenue returned to its pre-recession levels. Due to this equivalence, capital improvements were limited in order to maintain a balanced budget.  

Starting in 2020, the overall revenue (blue boxes) started a trend line upwards as did expenditure (orange boxes). Overall revenues increased due to Gaming rebounding from the pandemic along with property values going up. At the same time, expenditure rose as a result of inflation and the implementation of capital projects to address much needed improvements. There is now a five-year capital improvement plan that was put in place in the 2023 County budget.

What about future Gaming revenue? First, trying to forecast future Gaming revenue is impossible at best. Statistical models would be unreliable because of the volatility in the Gaming revenue stream and the inability to foresee events such as the subprime mortgage meltdown in 2008 and the pandemic in 2020.  

What also adds difficulty is that Gaming revenue is managed on a fiscal calendar that goes from July 1 to June 30. Thus, Gilpin, which is on a January 1 to December 31 fiscal calendar, does not know the exact Gaming revenue until after June 30 and does not receive monies until August and September. 

Gaming revenue can be estimated by going to https://sbg.colorado.gov/industry-statistics-gaming. However, it’s not possible to compute the exact amount of Gaming revenue that will be distributed because management expenses are not included in these tables. It does appear that Gaming revenues will continue to be good this year.  The 2024 County budget should come out in December of this year and contain the Gaming revenue for 2023.

Now for the crystal ball. Economists are saying that people’s savings from the pandemic years are being exhausted, thus less spending. Plus, inflation continues to be an issue, along with the possibility of a recession in 2024. Looking at the first two months of the new 2023-2024 Gaming Fiscal year it shows that July’s 2023 Adjusted Gross Profits (AGP) – gross profits minus payouts – has decreased 3.32% from July 2022. August 2023 has decreased 2.47% from August 2022 – a decline of $5.7 million from the same time period of the previous fiscal year. The Gaming fiscal year of 2022-2023 had only one negative month, April, with a 0.24% decline. Not the kind of start casinos like to see.These numbers are abstracted from the website noted above.

To summarize, Gaming revenue is volatile and sensitive to economic downturns. It takes years to recover Gaming revenue after an economic downturn. Due to the volatility of Gaming revenue, the County must maintain enough cash reserves to cover Gaming losses when they occur. Also, because of Gaming revenue volatility, it is nearly impossible to predict future Gaming revenue with any accuracy. Gaming revenue over the last decade has made up 42% to 49% of the County total revenues on a yearly basis. The first two months of the current Gaming fiscal year shows a decrease in revenue of $5.7 million compared to last year.

When Gaming revenue began in the 1990s, it helped make Gilpin solvent and continues to provide Gilpin County a needed revenue stream. Yet, it is not making Gilpin County rich by any means, and does provide challenges such as volatility and taking years to recover from economic downturns. It does not provide a pool of discretionary funds. The County is pursuing a mill levy for Parks and Recreation to provide a steady revenue stream that is insulated from Gaming revenue vicissitudes.

An additional bit of information that people may be interested in. How much will homeowners pay in taxes if the mill levy passes?