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Will Illinois law allow a proposed Chicago casino to make enough money? Mayor Lori Lightfoot isn’t sure

Chicago Tribune

Tuesday, August 13, 2019  |  Article  |  Juan Perez Jr.

Gambling, Gaming

With word on the odds of success for potential Chicago casino sites due this week, Mayor Lori Lightfoot said Monday she isn’t sure whether a gambling operator can make enough money given the upfront costs they must pay under the current state law.

 

Consultants at Union Gaming Analytics are expected to deliver their view of a city casino’s feasibility by Tuesday — and supercharge speculation about where a massive gambling hall could stand, and if it can make enough money to soften the city’s budget burden.

 

Five potential South and West side locations are under review. But Illinois law requires a state board to suggest, based on Union Gaming’s findings, whether lawmakers should reconsider the terms attached to a casino operator license.

 

As it stands, state law would send one-third of a Chicago casino’s adjusted gross receipts to the city. Currently, the city 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.

 

That might not make sense for a casino operator, Lightfoot suggested.

 

"We asked for the feasibility study, as you know, because we were very concerned that the tax structure that the legislature put in place was one that wouldn’t lend itself to funding of a casino,” the mayor told reporters Monday at City Hall.

"We talked to a number of different financial experts who are in the business of financing casino enterprises, and person after person that we talked to told us that the tax structure that’s embedded into the statute that passed is not one that would allow for a casino operator to be successful because it takes too much money out of the deal upfront. So we will see what the report tells us, and then we’ll respond,” Lightfoot said.

 

The uncertainty may carry implications for the looming city budget.

 

Lightfoot said her first city budget proposal may include revenue from a Chicago casino to close a yawning budget gap that officials have said could approach $1 billion next year.

 

She’s already delayed the release of the city’s budget forecast until the end of the month after weeks of suggestions that the city faces big challenges driven by looming contract costs, debt and pension problems. She plans a prime-time budget address later this month to tell taxpayers what’s in store. But again, Lightfoot said, the feasibility study will determine whether casino revenue gets included in the 2020 budget.

 

 “We have a lot of different scenarios that we’re considering, some of which include a Chicago casino, some which don’t,” Lightfoot said while acknowledging that money wouldn’t start rolling in until late 2020 under the best circumstances.

 

"Even if we got a casino up, and got an economic deal that would make sense realistically, it would be late next year I think before we can count on revenues of any sort. So a lot of it is going to depend on what we see in the feasibility study,” she said.

 

A city casino is authorized to have up to 4,000 “gaming positions” — like slot machines and seats at blackjack tables. Some of those positions can be used to place slot machines at O’Hare International and Midway airports.

 

The state gambling oversight agency selected Union Gaming Analytics to study whether the setup proposed in the new law — under which the city would get a one-third cut of the post-payout revenue to help pay down its pension debt — will be attractive to investors. The report also will examine the ability to finance a city casino and how five potential locations could affect the casino’s fortunes.

 

The floated spots include a parcel near the Harborside golf course at 111th Street and the Bishop Ford Freeway; the former Michael Reese Hospital site at 31st Street and Cottage Grove Avenue; a site near Guaranteed Rate Field at Pershing Road and State Street; the former U.S. Steel parcel known as South Works between 79th and 91st streets along South Lake Shore Drive; and the lone West Side site, at Roosevelt Road and Kostner Avenue.

 

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Notably absent from the list were downtown sites, such as McCormick Place Lakeside Center and Navy Pier, which have been suggested as possible casino locations.

 

Lightfoot, though, continued to suggest that the South and West side locations aren’t the only candidates in play as she declined to comment on how the city might address the drawbacks of the first proposed sites.

 

"I don’t regard them as a finite list. I think there will be other sites that come into consideration after we see whether or not the feasibility study makes a determination as to whether, under any circumstances, this casino could be financed and be operational,” the mayor said.

 

"Those sites were ones that have historically been talked about, over the many, many years that there have been questions about a Chicago casino, but I wouldn’t fixate so much on them because it’s not clear to me that any of those sites are necessarily going to be the ones that will ultimately be under consideration.”

 

Chicago Tribune’s Dan Petrella contributed.