HomeGambling RoundupChicago Mayor Loses Tax-Lowering Effort

Chicago Mayor Loses Tax-Lowering Effort

Chicago Mayor Lori Lightfoot tried and failed to get Illinois lawmakers to lower the effective 72 percent tax rate on a future Chicago casino, an “onerous” burden that Union Gaming said would scare off investors. But some legislators rejected her compromise offer, calling it a special deal for Chicago.

Chicago Mayor Lori Lightfoot has failed to persuade state legislators to lower taxes on a future Chicago casino. In the final hours of the veto session, lawmakers passed a watered-down bill regarding background checks on applicants for casino and sports betting licenses. The casino, part of sweeping gaming bill passed earlier this year, has been stalled since a feasibility study by Union Gaming Analytics indicated the state’s “onerous tax and fee structure” would keep investors away.

According to the study, the new law would impose an effective tax rate of 72 percent on a Chicago casino. Operating expenses would consume 30 percent of revenue, meaning costs could surpass revenue—even though the Chicago casino probably would be the highest-grossing operation in the state with 4,000 gaming positions, twice as many as other casinos in the state. A Chicago casino operator could expect only about 1 percent profit—at the most—as other Illinois casinos achieved 20 percent, the study said.

Lightfoot visited with lawmakers in Springfield during the six-day fall veto session, but failed to gain enough support among Democrats to bring a proposal to the House floor for a vote. She said, “While we are disappointed that a much-needed fix to the gaming bill won’t be made during this compressed veto session, the Chicago casino is still very much in the sightline thanks to the progress we’ve made with our state partners. I look forward to continuing our conversations about advancing the casino starting in January.”

Lightfoot added, “The General Assembly made important technical changes that were needed to ensure the smooth operations of the gaming legislation, but work remains to make sure the Chicago casino opens. The governor is committed to continuing to work with the city and other stakeholders to finalize this important element.”

Governor J.B. Pritzker is counting on revenue from the Chicago casino to help fund his signature $45 billion capital projects plan. His spokeswoman Jordan Abudayyeh said, “The governor has said from the outset that it’s important for all parties to get the Chicago casino right, including maximizing the opportunities for jobs for residents and revenue to address our financial obligations, and if the city’s gaming legislation reaches his desk, he will sign the bill.

“Over the past several days, staff from the city, both the House and the Senate and the governor’s office have discussed the contours of a proposal, and there has been broad agreement from the parties. Our understanding is that legislators will be filing a bill shortly, and the governor would encourage lawmakers to support it.”

State Rep. Bob Rita, who shepherded gaming legislation through the House, said he’s been working with Lightfoot’s office “to try to figure out what we can do to get over the goal line.” He said some “sideline issues” stalled support in the House Democratic caucus. “We had a short window here and a lot of moving parts,” Rita stated.

State Rep Kelly Cassidy noted, “We took a leap of faith, but this body, as somebody said, needs to stop the regionalism and take a leap of faith that will allow Chicago to move forward appropriately and responsibly with a casino that will fund the projects that are going to be built all over this state.”

According to the new law, the Chicago casino would taxed under the same graduated system as Illinois’ 10 existing casinos—plus it would pay an additional 33.3 percent privilege tax to be located in the city. The revised plan, supported by Lightfoot and Rita, would have created a new graduated tax system specific to the Chicago casino with a higher overall tax rate compared to existing casinos but with a smaller percentage going to the state and a larger portion earmarked for the city.

For example, an existing casino pays a tax of 15 percent of gross revenue from slot machines up to $25 million. Under the proposal, the Chicago casino would have been taxed at 22.5 percent of gross revenue, with 12 percent of that going to the state and 10.5 percent going to the city for its police and firefighter pension funds.

However, several Republicans considered that proposal to be a special deal for Chicago. Most existing casino host cities receive a 5 percent cut of their casinos’ gross revenue.

Some suburban House Democrats expressed concern that the five South and West Chicago sites studied by consultants all could cannibalize business from the new south suburban casino authorized in the new gambling law. The Illinois Gaming Board recently accepted four applications for the single south suburban license.

State Rep. Will Davis said, “We think they should be looking downtown. They didn’t look downtown. They didn’t look anywhere between McCormick Place and Navy Pier. If Chicago touts itself as a tourist city, if that’s where all the tourists are, why would we not want to put that kind of facility in that box?”

Meanwhile, the Illinois Gaming Board recently announced it would release sports betting license applications and regulations. Sports wagering was legalized in the new gambling bill. Gaming Board Administrator Marcus Fruchter said, “We expect to begin releasing applications for sports wagering and rules governing those applications in advance of the December board meeting. We are moving forward with sports wagering work. We are making some progress there and we expect to be able to share something with everyone in December barring some unforeseen circumstances.”

Casinos, racetracks, and sports venues with 17,000-seat capacities or more may apply for a license at $10 million and offer have sports betting on the stadium grounds or within a five-block radius. That would include Wrigley Field, Guaranteed Rate Field, Soldier Field, United Center and AllState Arena.

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