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* The Reader’s Deanna Isaacs looks at the state of a Chicago casino…
To be successful, the consultants concluded, a Chicago casino would have to be located downtown, where tourists would be likely to visit it. And even then, they said, given the “onerous” tax burden the legislature had stipulated, it was unlikely to be profitable enough to get financed.
But they had a suggestion: drop the city’s one-third revenue share, and a downtown casino could be in the hefty 20-plus percent range of annual profit that’s typical of the industry.
So here’s where we stand now: locked into private ownership, but without a feasible neighborhood location and minus the city’s one-third slice of the anticipated revenue pie. In other words, suckered into giving up the exact selling points that made the deal seem worth doing. And what are the long-term effects? Bigger profits and a prime location for the private casino owner, while the city gets some low-paying jobs likely to be offset by the social costs of a hugely expanded predatory industry.
Lightfoot, who has personal and former business connections to people in the gambling industry, says the city will go back to the legislature this fall to “fine-tune” the law (even though the expansion has already cost her all her Springfield leverage). The Illinois Gaming Board has 90 days from the time it received the study to come up with recommendations for those changes, and Union Gaming Analytics has suggested one: If the law were changed, the city could, in fact, be the casino owner, trading its one-third tax on adjusted gross revenue for any possible profits; financing the casino development with municipal bonds (thereby transferring all the risk to the public); and hiring a professional gaming company to run the operation.
* Greg Hinz also takes a look…
For instance, the chief Senate sponsor of the casino bill, Lake County Democrat Terry Link, argues that if Chicago thinks the taxes are too high to finance a casino it can take less or offer its own inducements, maybe free land or a big tax increment financing grant.
“There’s ways they have to help developers without going to the General Assembly,” Link told me. And there’s good reason to think that the consultant’s report overstated the risk that high taxes could kill any Chicago casino, Link added. “I don’t think there’s a shortage of developers willing to go in there.”
One idea I’ve heard discussed is to cut that special [33 percent] Chicago tax. Slashing it by, say, half could increase that 3 percent operating margin to around 20 percent, making the casino financially viable, one government insider told me. […]
Revenues from the Chicago casino now are targeted to pay debt service on the governor’s vaunted new $45 billion capital program. With other revenues sources from legal sports gaming and cannabis a little shaky and possibly running short of what was projected, Pritzker will have reason to compromise, says one insider. “He’s already spent the money” on the capital program, says that source. And even if the state has to cut its taxes a bit on the Chicago casino, “He’ll still be able to tell people that the state is getting more money overall than it would have otherwise.” […]
Another wrinkle: The deadline in the law for new casinos authorized in other portions of the state to apply for state licenses is Oct. 15. But it’s possible not all of the locations will be ready by then. Which means that the legislature may have to reopen the gambling bill in its November veto session.
* Tribune…
After settling for a deal she said she knew was bad in the first round of casino negotiations, Lightfoot will be under a brighter spotlight and be working with less leverage as she tries to revamp the agreement to Chicago’s advantage during the the legislature’s two-week veto session this fall. […]
Aside from lowering the city’s 33.3% share of the revenue, any changes to make a Chicago casino more financially feasible likely could mean creating a unique set of rules. Other casino towns get only 5% and in some cases have to split that with nearby localities.
In addition to city’s share, the Chicago casino operator also would have to pay a $250,000 application fee upfront, a $15 million “reconciliation” fee when the license is issued and up to $120 million in gambling position fees — which cost $30,000 each. The casino is authorized to have up to 4,000 gambling positions — such as slot machines and blackjack tables — with some slot machines possibly going to O’Hare International and Midway airports.
After three years, the casino would have to pay a fee equal to 75% of its post-payout revenue from its most lucrative 12-month period, minus the fees paid upfront per gaming position.
* Related…
* ‘Not a done deal’: Waukegan residents push back against casino while supporters push for proposal backed by business that fueled local elections: Like several opponents, Verratti raised concerns about the level of spending tied to Bond and Tap Room Gaming in the recent aldermanic elections and pointed to the ongoing campaign promoting a North Point Casino proposal backed by Bond and Warner Gaming. Of the nearly $400,000 donated to aldermanic candidates across Waukegan’s nine wards since December 2018, 85% came from four organizations tied to Bond or the video gambling industry, according to a News-Sun analysis of state-mandated campaign disclosure forms. Of the six candidates that received money from these groups, four won.
posted by Rich Miller
Wednesday, Aug 21, 19 @ 2:27 pm
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Wait wait
Hang on here
I need to sit down
Do you mean to tell me…that the word “casino” does not produce $1B/yr in tax revenue out of thin air by next fiscal year???
I’m gonna need a second opinion on this one
Comment by Will Caskey Wednesday, Aug 21, 19 @ 2:38 pm
A profit sharing arrangement is easier to fund than having the City and State taking their cut off the top.
Keep both City and State out of hiring and operating decisions. Neither is to be trusted.
Comment by Last Bull Moose Wednesday, Aug 21, 19 @ 3:02 pm
I guess I just assumed, based largely on the proposed tax rates, that Chicago would have to construct/finance the facility and then hire an operator to run it.
Sounds like Terry Link was operating from the same assumption. The question is, how does City Hall think this is gonna work?
Comment by 47th Ward Wednesday, Aug 21, 19 @ 3:10 pm
But the squad said all corps should pay 70% in taxes -no worries…..
Comment by Golly Gee Wednesday, Aug 21, 19 @ 5:35 pm
Is the RFP and see what responses you get. If you don’t get any good ones, then change the conditions.
Comment by Not It Wednesday, Aug 21, 19 @ 5:54 pm
So the city is going to have to end up financing it, what ever could go wrong…
Comment by 44th Wednesday, Aug 21, 19 @ 8:04 pm
So the Las Vegas consultants said this is an unattractive bad deal for casino developers…so we should redraw of the law to make it a bad deal for Chicago residents instead? Perhaps all of this is based on bad policy assumptions and the 5th floor should do the hard political work of making some progressive revenue ideas a reality. I haven’t heard most Chicagoans clamoring for a casino.
Comment by Veil of Ignorance Wednesday, Aug 21, 19 @ 8:06 pm
Veil of Ignorance has a good point. Let’s not forget how the casino industry cried about the high taxes when Thompson passed the original gaming bill. Then they cried again when Edgar raised the tax on the casinos. They all seem to be in business still.
I don’t put a lot of credence in a Las Vegas consultant that works for the casinos.
Lightfoot seems to have made an error here…Hopefully it wasn’t willful.
Comment by Norb McAndrew Thursday, Aug 22, 19 @ 12:21 pm