Many thanks to The Allegheny Institute of Public Policy, which recently reported on the financial woes of the Rivers Casino in Pittsburgh, PA. This casino has suffered financial setbacks since it’s inception in 2008, and has seen its credit rating drop to “selective default,” which is the lowest it can receive from Standard & Poor’s. It received this recent rating reduction after both the General Retirement System and the Police & Fire Retirement System of the city of Detroit invested a significant amount of funding to help the casino arise from debt.
While the irony of receiving a credit reduction after a substantial investment from municipal pensions is startling, the larger issue is the wisdom of investing public dollars in gaming. Recently, legislation was introduced that would dismantle both boards, which have lost millions of dollars over the last several years due to poor investments. In addition, the trustees of both pension funds have spent hundreds of thousands of public dollars on travel expenses in a constant effort to “stay educated.”
Education is important, but one would think that such expensive education would include mention of the unsafe nature of investing in gambling. Trustees need only to look in their own backyard at the ongoing bankruptcy of Greektown Casino for an example of how these investments can struggle or ultimately fail.
Sadly, this is just another example of questionable financial tactics in a city that is toying with the notion of declaring bankruptcy. The funding of public pensions is an interesting debate, but with a declining economy, every action that trustees take with public funds must be calculated and as safe as humanly possible. Investing such a large amount in a casino that is continuously failing is not an example of stellar management. In the end, it may be retirees, and ultimately taxpayers, who end up “going bust” in this investment.