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* I’ve been telling subscribers about this idea for several days now, and the Tribune buried this nugget at the very end of an article about the gaming expansion negotiations…
One of the sticking points in the gambling package is the involvement of minorities. Rep. Bob Molaro (D-Chicago), one of the leading negotiators, said many House Democrats now like the idea of setting aside up to 25 percent of the ownership in a new riverboat license for minorities and women. Shares would be priced at $5,000 to $10,000 and a lottery could be used to help determine who gets to invest, Molaro said.
This was actually Speaker Madigan’s idea.
* Question: What do you think of this plan to allow middle class minorities and females to buy into new boats, apportioned by a lottery? By comparison, the system used with the defunct Rosemont boat required minority and female investors to demonstrate that they had an extra million dollars lying around. Senate President Emil Jones wants that proposal implemented for any new boats.
posted by Rich Miller
Monday, Dec 3, 07 @ 10:28 am
Sorry, comments are closed at this time.
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Under this plan, how would the remaining 75% of the ownership be determined?
Comment by grand old partisan Monday, Dec 3, 07 @ 10:37 am
TBD.
Let’s stick to the question at hand, please.
Comment by Rich Miller Monday, Dec 3, 07 @ 10:38 am
Since most minority set-aside requirements are actually a gambit for politicos to steer contracts to friends, I suspect Sen. Jones will HATE it, but it sounds great to me.
Comment by Anonymous Monday, Dec 3, 07 @ 10:38 am
I think it is a good opportunity for middle class women and minorities to buy-in.
Yet, here is my question - what is good for the goose is good for the gander, right? Why not make all of the ownership a lottery? White people have to do it, too.
If you go Madigan’s route, what you will have is a couple rich white people controlling 75% of the casino and making all the decisions. The remaining 25% representation becomes diluted - with none of those minorities having any say, because there 1,000 of them splitting up a small pot.
So, in effect, 25% of the profit will be shared by the minorities, but they will, in effect, have 0% representation.
I say - make the whole thing a lottery. I want a piece of the action, too.
Comment by GoBearsss Monday, Dec 3, 07 @ 10:38 am
all over the world ethnic groups are fighting over the natural resources of their respective countries. casinos are the new natural resources of the USA. wow. if that doesn’t say something about our country, i don’t know what does. minority ownership of our new “natural resources” needs to be addressed somehow. it seems to me, that Go Bearsss has a point, ownership with no decision making capability would not be fair. so allow the lottery but also allow minority owners a vote in the running of the casinos.
Comment by b-dogg Monday, Dec 3, 07 @ 10:51 am
Whatever, I simply don’t trust the system at all. Either they will be cousins of the Strogers, the Jones or the Jackson’s etc.
-They will be minorities with italian or Irish names…(fronts)
The system should be open to all.
If I had faith in the system, I may be more open minded. I hate these set-aside programs because they all go to cronies.
Comment by Wumpus Monday, Dec 3, 07 @ 10:51 am
As far as discrimination goes, this makes more sense than other proposals.
Comment by Cal Skinner Monday, Dec 3, 07 @ 10:52 am
Having been one of the original IGB staff, as long as a person is found to be licensable under the statute it doesn’t matter what gender or race that individual is. But to tell an investor (or pool of investors) that they have to have so many women…so many minorities…could raise problems. Will the statute require a certain level of financial investment or can the woman/minority be an “owner” in name only simply to satisfy the statute? Will the statue change apply to existing owners when they come up for license renewal or only to new applicants? Will an applicant that is already comprised of a majority of women/minorities be required to have a certain percentage of white males to qualify for a license to bring “minority” participation up to the statutory bar?
I have no problem with the requirement, but lawmakers should make sure they understand all the ramifications before they add the provision.
Comment by Common sense in Illinois Monday, Dec 3, 07 @ 10:55 am
This is exactly the reason that any new license be publicly owned.
It the goal of the casino is to be revenue for the local government and state, why are we creating an elite ownership for a small number of political insiders? They will not be bringing anything to the table other than a desire to siphon off a part of the revenue stream.
Remember also the investors of the Rosemont license who teamed up with what the State Board determined to be questionable element. They were an elite group of individuals who thought they had signed on to a sure thing. When things went bad, they began to demand special treatment. If you had bought stock which went down, who do you turn to get your money back. Special treatment of the special people who were awarded their shares.
Saying not to quasi-private ownership should be easy to do. However if the legislature is unable to show any backbone, then the shares should be auctioned off to the highest bidders to maximize the revenue from this giveaway.
Ownership of the casino should be 100% State and local government. Operations can be bid out to the lowest bidder. Capital expenses can be handled the same way. Smallest percentage of the profit stream wins.
Heck, I oppose the expansion of gambling in Illinois, but if I was offered a share, I would jump at such a sure money maker.
Comment by plutocrat03 Monday, Dec 3, 07 @ 10:58 am
What happens if something falls through again. Didn’t that happen at Rosemont and they ended up sueing the taxpayers to recover their investments ? Very bad idea.
Comment by Anonymous Monday, Dec 3, 07 @ 10:59 am
Hey, I am female. Sign me up. I want a few shares.
Comment by Leigh Monday, Dec 3, 07 @ 11:00 am
Why would you have a lottery rather than an auction? Maybe those of you who better understand IL politics (all of you) can explain that to me. My finance-oriented mind wants to know why you’d ever sell ownership for less than what the highest bidders will pay. But I guess I’m missing some obvious political issue…
Comment by Greg Monday, Dec 3, 07 @ 11:03 am
Can I sign my girls up? Or would that make me a front?
Why not just set the price at 5K and lottery it off to anyone? Odds are……..
Comment by Pat Collins Monday, Dec 3, 07 @ 11:04 am
===What happens if something falls through again.===
That’s the chance you take.
Comment by Rich Miller Monday, Dec 3, 07 @ 11:06 am
Why would you have a lottery rather than an auction?
Because then the “right” people wont get the “proper” percentage.
Actually, if it were like any biz and anyone could open one up, we’d not have this problem
Comment by Pat Collins Monday, Dec 3, 07 @ 11:09 am
It’s a good idea. If Madigans new gaming board does the lottery it should be fair and unbiased…whoa Rod won’t like that!
Comment by downhereforyears Monday, Dec 3, 07 @ 11:17 am
I think you would have to make the size of the investment larger than 5K because of some of the costs.
First either before or after the ‘lottery’ you would need to background check the person/persons/entity that won that share to ensure that they met the requirements. Not only ethnically but that they didn’t have a criminal background, member of the outfit, etc. Figure a background check like that would cost at least a grand or two.
Secondly would the shareholder be allowed to sell their share to anyone at anytime or would there be restrictions? If so are they the same restrictions for a non minority holder?
Have to say this idea is better than letting the state have a big say in who gets a piece of that pie.
Comment by OneManBlog Monday, Dec 3, 07 @ 11:18 am
I think it is an excellent idea — provided that the minorities and women are clearly told that their money is at risk. In Emerald, the M&W tried to bring up the idea that their dough was not at risk and they deserved to get it back.
I would also not like to see the big boys get a preferred position vis a vis the small investors. That is, the class of stock owned by the big boys have a prior claim on dividends and in the case of bankruptcy a prior claim (after debt holders) on the residual assets. In fact, if there were two classes of ownership, perhaps the M&W would be in the preferred class with a fixed rate of return satisfied before distribution of the remaining profits.
But the assumption of risk acknowledgement is of primary importance. This is not a charity.
Comment by Truthful James Monday, Dec 3, 07 @ 11:23 am
OneMan seems right: hello friction costs! I don’t know the history of this process, but on its face it appears that the state would be giving away free value to some random (or not random) small-scale investors. There’s a reason companies don’t do ipo’s by $5k lottery awards. If state executives had a fiduciary duty to their citizens, this sure would be inviting a lawsuit. Just make it public or private; these attempts to integrate public funding with a little bit of market forces sprinkled here and there are a joke.
Comment by Greg Monday, Dec 3, 07 @ 11:25 am
he state would be giving away free value to some random (or not random) small-scale investors.
Are you familiar with how analog cellular frequencies were awarded?
Comment by Pat Collins Monday, Dec 3, 07 @ 11:31 am
OneMan: Any change in ownership of a license must be approved by the Board under current statute. Hence an owner cannot sell or give away any shares he/she controls without the expressed approval of the Board. And, I agree that the initial investment must be 1.) substantial and 2.) at as much risk as any other investor/licensee.
Comment by Commonsense in Illinois Monday, Dec 3, 07 @ 11:34 am
I did not mean to imply that private ownership is the best solution. The government should own the license. The managers might be private enterprise, but their take would be by contract.
Comment by Truthful James Monday, Dec 3, 07 @ 11:40 am
I like the idea mentioned by others of doing a lottery for all of it. That said I support the set aside. Mnay folks discuss the problem of abuse in steering this benefit to freinds etc. That problems remains regardless of the set aside so I do not think it is a poinbt against setting aside a minimium number ofr minorities and women. However, within the set aside they should have a minimium for minorities. They need some kind of ability to revoke or re-sell a share if the true owner is not a minority or women but is just a shell or front. Difficult to enforce, but better then nothing.
Although the whole ownership thing smakcs of nothing but insider deals, so the best bet would be to do a state wide lottery for all interested investors, for 100%.
Comment by Ghost Monday, Dec 3, 07 @ 11:51 am
I’m so opposed to the expansion of casinos, in general and as a ridiculously stupid way to solve a state’s financial crisis, that it’s difficult to focus in on the question at hand.
I guess I’d liken it to the stock market. In the last 5, 10, 20 years there’s been a huge push to have the average middle-class or even lower-middle class person invest. Some people at that economic level make money from it, but they are relatively few. Those few are then used to justify the huge numbers of people from that same economic sphere that lose money or don’t benefit. And if you’re wealthy, you’re always doing well, and if the middle or lower middle class is doing OK, you’re doing the fantastic.
Does anyone really think that having middle-class minorities and women being small investors in the casinos is going to lessen their negative impact on the community as a whole? Poor and desperate people will still get exploited, but a handful of minorities and women (and $5000 isn’t exactly chump change anyone I know has lying around) will get to share in the exploitation.
Comment by Sacks Romana Monday, Dec 3, 07 @ 12:04 pm
Why do any set asides? If you have the money and you feel this is a good investment, go for it. Of course you lose if it goes bad, just like any other investment. No crying later about how much it hurts. I doubt the Emerald group would have been upset if their investments had gone well. Chance you take. Just like gambling.
Will there be insiders? What deal does not have them. The lottery may be a good idea to control some of that, but someone will figure a way to load up the purchase options. All my millions are curretly tied up with my Nigerian investments, but I would try for a piece of this.
Comment by zatoichi Monday, Dec 3, 07 @ 12:08 pm
What the legislature should do is limit the bidding on new licenses to publiclt held companies. That would allow any citizen in Illinois the opportunity to but a piece of the boat simply by buying stock in the company. Mayor Daley is already on record saying that any operator of looking to run the proposed Chicago casino would have to be publically traded.
The only way to remove the stench of backroom dealing in the casino expansion is to open it up to all investors and removing the secrecy.
Comment by Mike Noonan Monday, Dec 3, 07 @ 12:09 pm
I don’t like quotas, and this one is particularly severe against white males, who seemingly wouldn’t be allowed in at all. And please don’t point out that the remaining 75% would likely be owned by white males. It certainly wouldn’t be me, any family member, nor even anyone I know. Because the uppity, muckidy-muck mega rich happen to be a minute fraction of white males, the white male middle and lower class who are no better off than anyone else in their income bracket are always the ones being punished.
The logic seems to go as follows: Because a very small number of white males own everything, we will compensate minorities and females by making the other 99% of white males give up any hope of ever getting an opportunity of bettering their lot.
Far be it that they should take a few million away from a megarich white male and give that to a minority to then make that newly rich minority capable of competing with the rich white guy and his rich buddies. Nope! Let’s take it from the poor schmo making $50,000 a year trying to pay his oppressive income and real estate taxes, feed and educate his kids, and essentially just survive. Never mind that Rich White Guy would blow the same pre-tax $50k that has to last Average White Guy an entire year in one night in Vegas.
Sorry if it’s a rant, but even after 30 years this reverse discrimination is still killing innocent people.
Comment by Snidely Whiplash Monday, Dec 3, 07 @ 12:13 pm
Noonan raises a good point, but I think that might run afoul of current gambling laws regarding mob influence and require a change in the statute.
The disadvantage is you can’t do background checks for mob ties/influence on stockholders of a publicly traded company, which is constantly changing anyway.
The good news is that the Feds and the SEC do a fairly good job on regulating publicly traded companies, Enron not withstanding.
That said, Madigan’s solution is better than the Jones proposal.
Comment by Yellow Dog Democrat Monday, Dec 3, 07 @ 12:23 pm
Snidely since being wealthy at the start tends to allow one to perpetuate wealth. And since it tends to pass donw family lines, the restrictions on minorities and women in the past which squeezed them out of a lot of existing business still have impacts today. The problem of wealth accumulated in white males is self perputating. That said I agree that it would be better to have a program that gives anyone who can come up with the 10k a shot at ownership in a lottery style sale. it would be a great opportunity for the State to provide investments for all, and lottery off the shares 1 a peice to everyone who is interested. Limit the purchase for everyone to only a single share, unless not all shares sell. let the public buy into this in its fullest sense.
Comment by Ghost Monday, Dec 3, 07 @ 12:31 pm
I know I’m being politically naive, but perhaps Ghost’s point speaks to means-testing rather than a race-based test? And is there such thing as a connections-based test?
Comment by Greg Monday, Dec 3, 07 @ 12:51 pm
being wealthy at the start tends to allow one to perpetuate wealth
But it doesn’t. A lot of “past wealth” evaporated as large firms put mom/pop shops out of business. More went as descendents made bad choices. That’s just not true.
restrictions on minorities and women in the past
And your plan for restricting it to those people, and not post 1965 immigrants and their descendants is?
Comment by Pat Collins Monday, Dec 3, 07 @ 12:53 pm
To Sacks Romana: Sorry but that horse has already left the gate, this is about who owns it now….not whether we have them or not.
Comment by downhereforyears Monday, Dec 3, 07 @ 1:15 pm
Up until just recently any person; regardless of gender or race, has had an equal opportunity to own a percentage of the company owning the current IL gaming licenses right now.
Harrah’s -Joliet & Metropolis (HET), Penn National- Aurora, Joliet (Empress) and (PENN), Boyd Gaming East Peoria Pair-a Dice (BYD), MGM Elgin Grand Victoria (MGM) are all publicly traded companies for now and shares are readily available. I would be surprised if a good percentage of each is not already held by minorities or women. Any interested minoritites or women can go buy their stock right now. The only one’s not available now I believe are Casino Queen in East St. Louis, and Casino Rock Island in the Quad Cities.
Harrah’s and Penn are in the process of being taken private now however, and Boyd may likely be next, so the only opportunity for outside ownership of their locations would be in this government imposed fashion, which presumnably is only applicable to new licenses, and not existing one’s.
If the ownership of the gaming license is otherwise privatley held, and shares are not publicly available, then statutorily setting aside shares in the licensed entity; only for minorities or women would be discriminatory to white men who would otherwise be excluded from this lottery scheme, and would probably not withstand an equal protection suit I do not believe. I also do not believe that you could require Illinois residency as a condition of licensure, unless it was applicable to all licenses; and all licensed owners of each license due to the same equal protection issues. As a consequence you could also end up with out of state (carpte bagging) minorities and women participating in any such lottery as well.
If minorities and women want in; the legislature should point them to the Illinois Gaming Board to apply, or for the auction if there will be one, or to the NASDAQ or the NYSE if they simply want a small piece, and can not afford the whole thing.
Comment by Common Shareholder Monday, Dec 3, 07 @ 1:26 pm
it sounds like a way for state government officials to get buy in from middle class minorities bevause they couldn’t find any other new revenue streams to beef up coffers…if they really are “minorities” in the first place…the track record on these types of provisions is pretty poor…how about also appointing more minorities to the gaming board?
Comment by Loop Lady Monday, Dec 3, 07 @ 1:44 pm
When Greeks first immigrated to the United States at the turn of the last century, our government labeled them as “Asians” until sometime after WWI.
As a Greek American, does this mean I too can buy into a casino?
Comment by LouisGAtsaves Monday, Dec 3, 07 @ 2:02 pm
I’ll take 1/1000 of a share, please. Where do I sign?
Comment by Wanna get away Monday, Dec 3, 07 @ 2:08 pm
Absolute idiocy. We shouldn’t be depending at all on casinos, and if we’re forced to by the cravenness of our politicians, it should at least be publicly owned so that it actually steers revenue to the public purse. I can’t think of a better way to discredit and ultimately doom affirmative action than this, which is unfortunate because there are some places, like management hiring or professional school admission, where affirmative action is still necessary.
Comment by Angry Chicagoan Monday, Dec 3, 07 @ 3:10 pm
I can’t believe that no one here recognizes the idea that there is no need at all for selling any share of these enterprises at all.
It is all a sham to pay back insiders for their connections.
Keep the license in the hands of the public bid out the services and capital costs.
Comment by plutocrat03 Monday, Dec 3, 07 @ 3:16 pm
Silly proposal for all the reasons listed.
Comment by Fan of the Game Monday, Dec 3, 07 @ 3:39 pm
This is a solution in search of a problem. Past discrimination will not be remedied one iota by this bogus setaside, which anyway will not survive the inevitable court challenge. The idea not only violates equal protection laws; if limited to Illinois residents, it will trigger a flood of retaliatory laws in other states against IL based casinos. Old-timers will remember the “Buy Illinois” and similar in-state procurement laws that were in vogue in the 80’s. They did little to help IL companies, but caused retaliatory laws across the country. Most have been altered or repealed.
The nominal investment required would violate SEC regs if it were a private investment, which would require higher minimums as well as minimum net worth of $2.5 million and income of $100,000 or more, fwiw. As noted above, the cost of vetting the investment would probably exceed the value of the capital itself at the $5000 level. (AA would like to be a fly on the wall the day someone has to go explain “friction cost” to Pres. Jones.)
Most importantly, Hello, Emil, THE STATE IS BROKE! We can’t afford to give away 23% of anything, let alone a freakin’ casino. Even the Congress had the “testicular virility” to finally start auctioning off radio “spectrum” (frequencies) to the highest bidder after many fortunes were made off of “free” cell licenses in the 1980’s. (AA even made a few bucks.)
The GA is crazy, and of course the insane doofus, is the insane doofus, if they don’t sell this thing to the highest responsible bidder.
Noonan’s idea of limiting to public companies should be debated.
Public ownership=bad idea. Exhibit A: CMS. Oh, but no, AA, you say. The public owner will turn it over to the all-knowing private sector who will do a splendid, uncorrupted job of running the joint, because, well, they are the private sector. Exhibit B: IPAM.
Comment by Arthur Andersen Monday, Dec 3, 07 @ 6:36 pm
It still will probably fall into the hands of friends, relatives, contributors anyway but sign me up, oops, I mean sign my wife up
Comment by Concerned Voter Monday, Dec 3, 07 @ 6:50 pm
Middle Class? huh?
There should also be a provision to say the investors need to be in for the long haul and not be allowed to cash out after a year or two. As it is now, this is nothing but a get rich quick scheme for a chosen few.
Comment by Anon Monday, Dec 3, 07 @ 7:28 pm
If minority and female investors want to own a piece of Illinois gaming, they can do it right now. Buy stock in existing Illinois casinos. Joliet and Alton boats are publically held companies. The others most likely are too.
Comment by Reformed Monday, Dec 3, 07 @ 11:02 pm