Cover Story — The 2010 boomtown of Black Hawk

By Suzanne Paulman

Business is once again on the upswing in Black Hawk, the rural mountain city established in 1859, which currently boasts a local population of about 100 residents. It all started in 1859 when prospector John H. Gregory from Georgia discovered lode gold in a nearby ravine, effectively making Black Hawk part of Colorado’s larger Pikes Peak Gold Rush. As a result, Black Hawk’s primary industry became milling or extracting gold from the raw ore brought in from the mines.

Black Hawk became known as “The City of Mills.” The state’s gold rush was over by the late 1880s and the mountain city faced the acute danger of becoming another historic mining ghost town.

Black Hawk’s fortune changed forever more than a hundred years after the end of the late 1800s gold rush. That’s when the voters of Colorado cast their ballots in 1990 in favor of establishing limited stakes gaming in three of Colorado’s struggling old mining towns: Black Hawk, Central City and Cripple Creek. Black Hawk’s economic savior, the gaming industry, became its new gold rush on gaming’s opening day of Oct. 1, 1991. The city became a new boomtown over 19 years by embracing the gaming industry and judiciously managing the resulting financial boom.

This October the 40 casinos of Black Hawk, Central City and Cripple Creek posted revenues of $64.7 million, an increase of about 5 percent compared to posted revenues of $61.7 million in October last year. Black Hawk’s 18 casinos reported $47.4 million in adjusted gross proceeds or approximately 73 percent of Colorado’s gaming revenue. Central City’s seven casinos reported $5.9 million or about 9 percent of the state’s gaming revenue. Cripple Creek’s 15 casinos reported $11.3 million or 18 percent of the revenue. AGP is basically defined as the amount wagered by bettors less the payouts by casinos.

In preserving and encouraging Black Hawk’s boomtown status, Mayor David Spellman and City Manager Michael Copp continue to implement a financial strategy developed by the city several years ago. Recent controversial decisions made by the city in adhering to its financial plan included terminating intergovernmental agreements with neighboring Central City.

At the weekly City Council meeting on Dec. 1, several resolutions were presented as agenda action items, including Resolution 24 titled, “A Resolution to Encourage the Increase of the City’s Market Share Through a Temporary Rebate of Certain Device Taxes.” The second paragraph of the proposed resolution states, “the city believes the local purpose of limited stakes gaming is not only to restore and preserve the city, it is also the stimulus that revives economic vitality, promotes other amenities and creates jobs.”

Black Hawk originally established an occupational tax of $800 per gaming device in 1990 and reduced that tax in 1994 to the current $750. In comparison to the other two Colorado gaming cities, Central City taxes at $1,000 and Cripple Creek less at $720 per device. The total annual fees for a single device (slot machine or table game), including transportation, and water and sewer funds, total $955 in Black Hawk, $1,265 in Central City and $1,200 in Cripple Creek.

With the adoption of this resolution, it means that the city is ready to sacrifice a portion of its revenue by temporarily reducing taxes or offering a rebate of $25 per device when certain financial conditions are met. The starting point for the rebate occurs when Black Hawk “achieves a sustained seventy-seven percent (77 percent) market share based on Adjusted Gross Proceeds in any one consecutive quarter.” Additional financial incentives are also available to the gaming industry based primarily upon Black Hawk’s corresponding increase in the industry’s market share.

Above all, Black Hawk seeks to be “reasonable and responsible” in its approach to taxation “to encourage the development of gaming” within the city in ensuring both the city’s and industry’s continued financial success. A recent comparison of annual tax rate impacts in seven major gaming communities, including Black Hawk, Central City, Cripple Creek, Biloxi, Miss., Council Bluffs, Iowa, Kansas City, Mo, and Reno, Nev., showed only Reno at $49,000 besting Black Hawk at $96,000 in offering a lower total tax impact on the gaming industry. Council Bluffs had the highest impact at $139,000.

One of the latest decisions relating to the city’s financial plan is the severing of an intergovernmental agreement with Central City in providing shuttle bus transportation between the two cities. The shuttle provided service to more than 463,000 riders this year with about a third of them traveling to Central City casinos. The annual cost of the shuttle service is approximately $1.2 million with Black Hawk contributing about $800,000 or 65 percent to the cost and Central City contributing about $400,000 or 35 percent.

When Black Hawk requested that Central City pick up 50 percent or $600,000 of the shuttle’s tab, Central City declined to do so. Black Hawk will continue to run a shuttle service within its city limits, terminating service to Central City and its casinos on Dec. 29.

The city of Black Hawk understood its stake in the gaming industry when Colorado voters approved gaming in the early 1990s. The city thereafter developed an astutely comprehensive business plan that allowed the city flexibility in reacting to future financial conditions. Whoever heard of a government entity willingly reducing its constituents’ taxes in protecting and enhancing its major — possibly even sole — stream of revenue? What a plan.

In the second part of this editorial next week we’ll look at the steps Black Hawk took in providing significant financial contributions to the Gilpin County School District RE-1. By the end of this year, the city will surpass the amount of $1 million in contributions toward school programs, etc. We’ll also expand on how Black Hawk continues to play at the top of its game through strategic financial planning in its rebirth from a mining to gaming boom town.