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Odds favor more gambling

Jan 6, 2003  •  Post A Comment

With state government drowning in red ink and City Hall finances weak, odds are rising fast that Illinois lawmakers soon will authorize the biggest expansion of legalized gambling in decades.

A combination of adding gaming positions at existing riverboat casinos, allowing slot machines at horse racetracks and activating the still-unused 10th state casino license would net the strapped Illinois treasury $1 billion or more per year, under proposals being circulated by industry proponents.

An even bigger jackpot is likely if Mayor Richard M. Daley revives his plan to bring huge land-based casinos to Chicago.

But while those lures appeal to politicians who otherwise will have to cut services or increase taxes, any large-scale expansion of gambling is uncertain and faces stiff opposition.

Simmering feuds between casino and horse-racing interests could scuttle an expansion plan. And no legislation will get far unless Gov.-elect Rod Blagojevich throws his full support behind a specific proposal-something he hasn’t done yet.

“It really depends on what Blagojevich does,” says the Rev. Tom Grey, executive director of the Chicago-based National Coalition Against Gambling Expansion. Given the state’s revenue woes, “we could see a wholesale expansion that would make us the Las Vegas of the Midwest.”

Politicians have been reluctant to claim such a distinction. But the political climate has changed to some extent, says incoming Illinois House Majority Leader Tom Cross, R-Oswego.

“There’s a growing likelihood that expansion will stay on the bargaining table longer than it has in the past,” he says.

For the state, the priority will be finding more money wherever it can. Over the holidays, Mr. Blagojevich’s transition team privately told him the bad news: Illinois now faces a $1.2-billion budget shortfall this fiscal year, with an additional $3.6 billion in red ink expected in fiscal 2004, which begins July 1.

The menu of options presented by the team includes some revenue-raisers, such as closing corporate tax loopholes ($300 million) and decoupling the state’s inheritance tax from the federal tax ($250 million), as well as some budget cuts, such as a 2% across-the-board slash in spending that would save $500 million.

But those figures fall far short of the need, insiders say. With Mr. Blagojevich strongly resisting tax hikes, some other source of funds-such as borrowing or gaming-is necessary.

Accessible funds

The easiest-to-reach pot of new gaming money is from the sale of the 10th casino license, which had been earmarked for Rosemont. The state’s share of the sale proceeds is estimated at $100 million to $300 million. Douglas Scofield, Mr. Blagojevich’s deputy governor for policy and communications, says launching the casino has widespread backing in the new governor’s camp.

But at this point, the state is mainly a spectator in U.S. Bankruptcy Court as Chicago-based Emerald Casino Inc.-forced into bankruptcy proceedings by Rosemont last summer-prepares to auction off the license.

Industry analysts say higher state taxes imposed on casino revenues in 2002 have diminished the value of the license, shrinking the state’s cut from the sale. Casino operators have launched a lobbying campaign to scale back the 50% tax bracket for the state’s highest-earning casinos. They also want 8,700 more gaming positions, on top of the 12,000 already allowed at the 10 casinos.

But racetrack owners are pushing a more ambitious plan they say will generate as much as $1 billion for the state. They want 8,000 to 10,000 additional gaming positions, which would be split between the casinos and the five Illinois racetracks. The track owners have pledged to share their profits from slots with horse owners, trainers, jockeys and harness drivers.

As state subsidies devised during the 1990s to prop up horse racing crumble under the state’s budget pressures, track owners say their chances of replacing the subsidies with slots will never be better.

“We have to get something that solves the whole horse-racing industry’s problems and the state’s budget problem,” says William H. “Billy” Johnston Jr., CEO of Maywood Park Racetrack and Balmoral Park in Crete. “We’re not asking for a handout. Give us a chance to earn it.”

But Tom Swoik, executive director of the Illinois Casino Gaming Assn., worries that racetrack slot machines will dilute the Chicago-area casino market and damage business at some of the top-performing casinos in the state.

“They’re talking about adding four or five new facilities,” he says. “How much of an impact it has is a matter of location. Look at the competition the Aurora and Elgin boats would have if there were slots at Arlington Park and Maywood.”

City casino a wild card

Casino boat operators also are keeping an eye on Chicago, where Mayor Daley showed renewed interest in a land-based, city-owned casino by sending up a trial balloon in the fall. One or more casinos on the lakefront or downtown would quickly become the state’s biggest moneymaker.

Sources close to the mayor say he remains intrigued by gaming’s revenue potential for the city. If Chicago’s first-quarter 2003 revenues are soft, “you have to believe that gaming will move up on the mayor’s priority list,” says one source close to him.

The strength of gambling expansion faces an early test this week, when the Illinois House votes on a bill guaranteeing state subsidies and track owner entitlements for the owners of Sportsman’s Park in Cicero, who closed their track in the fall and intend to continue running races at neighboring Hawthorne Race Course.

Other track owners have opposed the legislation, hoping to squeeze a competing track operator out of business. But recent easing of that opposition could signal that the horse-racing chiefs have made peace with each other and intend to reach out to casino operators in order to lobby for gaming legislation this spring.

“It behooves all of us to make a deal,” says Maywood Park President Duke Johnston.