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The Chicago casino is likely dead—unless someone agrees to take less

Crain's Chicago Business

Wednesday, August 14, 2019  |  Article  |  Greg Hinz

Gambling, Gaming

Tax rates or casino profit margins will have to be slashed if the proposed Chicago casino is to become real. And the deal will have to pass Springfield—again.

If the long-envisioned Chicago casino is going to get built, someone is going to have to take less—maybe a lot less. Any volunteers?

The answer is no, at least so far. And that's just the problem after today's blockbuster state consultant report that might as well have been subtitled, "The Cost of Greed."

The report, prepared for the Illinois Gaming Board at the request of the city of Chicago, made crystal clear its conclusion that the General Assembly is overtaxing the proposed gambling facility, hitting it with "onerous" rates of up to 72 percent of gross revenues. As a result, it said the facility will at best make its investors a profit of 3 percent a year and perhaps slightly better if located downtown—exclusive of financing costs.

Mayor Lori Lightfoot and Gov. J.B. Pritzker promptly papered over any disputes they may have and promised to work on a compromise. But there were mixed signs that state lawmakers are willing to go along—especially before an election year in which suburban and downstate legislators will be under pressure not to be seen as "caving in" to Chicago.

"Call me skeptical," said state Sen. Terry Link, D-Waukegan, the chief sponsor of the bill authorizing the Chicago casino, as well as new gambling outlets in his home Lake County and other locales around the state. "They’ll have to do a lot more convincing to get me" to agree to cut the tax rates.

"All of us would like the largest profit margin we can," added Link. Whoever builds the casino "is still going to make a lot of money."

That's not how Lightfoot sees it.

The mayor strongly pressed for the consulting study and has been saying for months that she’s concerned the current tax structure is so high that the $750 million or more needed to develop the casino may not be financeable. 

"We've got to get this tax structure right or we cannot get anything done," Lightfoot told reporters after the report was released, suggesting that, if someone took less, the state and city together could gain from an "incredible opportunity. It's in everyone’s interest."

But Lightfoot didn't offer to slash the 33 percent tax on gross casino receipts the city is scheduled to get if the casino is built. That money is targeted to fill city police and firefighter pension holes, and if the money doesn't come from casinos, it will have to come from taxpayers another way. Nor did Lightfoot drop her longstanding request that the city get ownership of the casino, something that would allow it to pocket profits rather than taxes.

Also not getting specific was Pritzker. Other state taxes comprise most of the rest of that combined 72 percent tax load, but he said only that he'll work to "refine" the city casino legislation.

House GOP Leader Jim Durkin, who is close to Lightfoot, chose to emphasize the positive. "I look forward to working with Mayor Lightfoot and Gov. Pritzker on any adjustments that need to be made and hopefully we can address any issues in the upcoming veto session," he said in a statement.

But Link isn't the only skeptic in Springfield. "I don’t think you're going to see a knee jerk, 'oh my God, blow it up and start over,'" said a top insider who asked not to be named. And the question of city ownership "always has invited a new level of politics."

Can this deal still be saved? Maybe. But it's going to be a tough sell, especially since other would-be casino cities already got what they want. In Springfield, casino bills don't get far unless everyone is united. On this one, they're anything but.