Democratic Chicago Mayor Lori Lightfoot went to the Illinois Springfield capital this week in hopes of convincing state lawmakers to support a new, reduced tax scheme for her city’s casino. She left without with any major progress.
In August, a feasibility study conducted by Las Vegas-based Union Gaming and commissioned by the Illinois Gaming Board (IGB) concluded that no casino operator would be interested in investing in a Windy City integrated resort due to the excessive tax structure. The analytical firm said under the state’s current gaming expansion law, gaming revenue at the Chicago casino would be effectively taxed at 72 percent.
Lightfoot met with various Illinois lawmakers Tuesday to obtain support for an amended tax arrangement, but largely came up empty handed.
We feel like things are moving forward in a positive direction, but we’ve got to get the language finalized and get it to the respective chambers so that legislators can see what the outlines of the legislation look like,” Lightfoot said following her meetings.
Illinois Gov. J.B. Pritzker (D) signed the gaming expansion package in July. In addition to the Chicago integrated resort, it authorized five smaller regional casinos in the southern suburbs. The legislation also allows the state’s 10 riverboat casinos to move ashore.
The One Percent
Union Gaming says – from its understanding of the complicated casino expansion tax law – the Chicago property would be subjected to an approximate 39 percent tax on its adjusted gross receipts (AGR). But unlike the riverboats and suburban casinos, the Chicago property would additionally be faced with a 33.3 percent “City Privilege Tax,” effectively bringing the tax on gaming to 72.3 percent.
After factoring in operating expenses such as payroll, marketing, and utilities, Union concluded that under the present tax law, the owner of the Chicago casino would see a profit of only one percent.
“To the extent a casino operator could pare down expenses and realize modest revenue and profits from non-gaming amenities (as we have projected herein), total enterprise profit margin would, in a best-case scenario, likely equate to a few pennies on the dollar – and that would require the casino to be developed without incurring any debt, as we believe no traditional financing would be available for such a development as debt servicing would likely well exceed any modest profits generated,” Union concluded.
Back to Drawing Board
Despite Lightfoot’s seemingly unproductive visit to Springfield, she and Pritzker are painting the Chicago casino’s odds of coming to reality in a positive light.
It’s good for the city, it’s good for the state, so we will be working very hard to try to get something through,” Pritzker stated. “There is still some negotiation discussion going on, but I am hopeful … we will be able to get it through.”
The Illinois General Assembly is scheduled to adjourn its fall session on Thursday.