Is more gaming in Illinois our best bet?
When Governor J.B. Pritzker and the Illinois General Assembly negotiated expansive changes to gaming laws and regulations in the state, the idea of a casino in Chicago became much more real. However, as more nuances surrounding this casino and the gaming expansion come to light, understanding gaming in Illinois has proved to be difficult. What hurdles does a Chicago casino face? How is the gaming industry as a whole performing in Illinois? How is it taxed? We gathered those details to give you some context.
The 2019 Gaming Expansion
The gaming expansion—included in Senate Bill 690—set in motion several changes in Illinois gaming.
- It permitted licenses for six new casinos, one being in Chicago.
- It permitted five new racetrack casinos (“racinos”) through two measures: allowing three current race tracks to add casino gambling operations and allowing construction of two new racinos.
- It increased the number of permitted video gaming terminals (VGTs) in one non-casino venue from five to six.
- It legalized sports betting and permitted the installation of 5,000 kiosks for this.
- It permitted a huge increase in seats at gaming venues to 80,000, nearly double its current allowance.
Originally, any new revenue from this expansion—more tax revenue from riverboat casinos, race tracks, and VGTs plus one-time license fees for new venues—was meant for the FY2020 budget proposed by Governor Pritzker in February. At some point in this past legislative session, this was scrapped in favor of directing any new revenue towards Rebuild Illinois, the state’s first comprehensive ten-year capital plan since 2019.
A Casino in Chicago
Mayor Lori Lightfoot settled for a revenue-sharing structure with a private casino after initially gunning for a city-owned venue. Following this, the Illinois Gaming Board (IGB) released a study to understand the feasibility of constructing a casino at one of five locations given by Mayor Lightfoot.
The private firm that conducted the study found that none of the five sites could host a lucrative, financially stable casino under the likely tax and revenue-sharing structure. The proposed revenue structure would include standard state taxes (discussed below) in addition to a 33 1/3 % privilege tax on revenue. When put together, this results in 72% effective tax rate on the potential casino.
This does not account for the various one-time fees to be collected by the state within the first three years of that casino’s operation, as well as the cost of redevelopment and construction. All told, something will need to change—the tax structure or the site of the venue—before Chicago sees its own casino.
Gaming in Illinois – Riverboat Casino Taxes & More
Rivers Casino leads the pack on producing the most casino revenue in Illinois. The State of Illinois levies taxes on gaming in several ways. Riverboat gaming (casino gaming) generates state revenue through a graduated wagering tax, license fees, and admissions taxes, all of which is placed in the State Gaming Fund. This reserve serves two purposes, according to the Illinois State Comptroller: funding the IGB and supporting education spending via transfers to the General Fund.
In Fiscal Year 2018, riverboat gaming produced $466.2 million in revenue (this is slightly different from the IGB’s reported $462.1 million in FY2018), with $433.6 million from the wagering tax alone.
Taxes levied from this source have fluctuated since casinos began operating in 1991. Tax revenues have consistently decreased since 2012, when state and local government shares totaled $574.3 million. That’s an 18.8% decrease between those years.
Keep in mind, Illinois collects taxes on other forms of gaming too. The state collects taxes on the following:
- Under the Charitable Games Act, the state collects 5% of net proceeds on charitable games. The proceeds are transferred to the Illinois Gaming Law Enforcement (IGLE) Fund, separate from the Gaming Fund. A third of this is distributed to counties and municipalities for law enforcement.
- The Pull Tabs and Jar Games Act allows the state to collect 5% on raffles. These funds are split between the IGLE Fund and the Common School Fund.
- The Illinois Lottery Law instituted the state lottery. Winnings are taxed at 5%.
- Under the Video Gaming Act, 30% of net profits from a terminal are collected by the state.
It’s important to note that the State of Illinois does not levy the entirety of these taxes. Local governments also levy similarly structured taxes on casinos. To understand this best, let’s turn to Rivers Casino, a Des Plaines venue that leads the pack on producing the most casino revenue in Illinois.
Despite the overall downward trend for riverboat gaming in Illinois, Rivers actually reported increases in revenues, admissions, and taxes paid over the past several years. In 2018, Rivers collected $441.8 million in adjusted gross receipts—the most commonly used measure of revenue for casinos—and produced $195.4 million in tax revenue. Most of this—$170.4 million—was paid to the state, accounting for 44.5% of total riverboat gaming taxes collected that year.
The other $25.1 million was collected by the City of Des Plaines, the casino’s host community. Through its agreement with the casino operator Midwest Gaming, Des Plaines collects 5% of all wagering revenue in addition to $1 per person admitted.
This amount does not entirely remain with Des Plaines. First, $10 million is transferred to the state for its Gaming Fund. The remaining tax revenue is further divided, with 60% remaining with the city for its budget and 40% being distributed among ten “benefiting communities” surrounding Des Plaines. In FY2018, Des Plaines retained $9.0 million for its own use while about $6.0 million went to local communities.
Gaming in Other States
Of course, no state operates in a vacuum. Gaming in Illinois will compete with opportunities provided by its neighbors. So how does Illinois compare with other states in the Midwest? Gaming is a lucrative business elsewhere as it is here, but other states do structure their industries and revenue sharing differently.
For instance, Wisconsin’s biennium state budget includes tribal gaming revenues. These are directed mostly to Native American populations, economic development in the communities surrounding casinos, and tourism promotion. Tribal casinos produced $26.1 million from 2018 to 2019. Wisconsin also uses taxes on lottery ticket sales, race track betting (pari-mutuel gaming), and charity gaming for property tax relief. The state collected $666 million from the lottery alone.
In Michigan, gaming tax revenue is constitutionally required to support education. School districts, higher education, and employee retirement programs all receive funds from the state lottery and casino wagers, which totaled $1.0 billion in FY2018. What’s more, Detroit-area tribal and privately owned casinos brought in $1.4 billion of their own revenue that same year.
The Missouri’s own gaming industry provided the state with $509.3 million. Like Michigan, much of Missouri’s gaming taxes went towards education, with $329 million transferred in FY2018; the state lottery added another $306 million that same year. Tax monies also benefited smaller projects, such as the Veterans Commission Capital Improvement Fund and the Compulsive Gamblers Fund.
Perhaps the most direct competition for Illinois gaming takes place in Iowa and Indiana. A highly saturated industry in Iowa produced $291 million in FY2018 for the state’s Iowa Skilled Worker and Job Creation Fund, capital plan, and general fund. Iowa’s state lottery added $84 million to the general fund and $2.5 million to the state’s Veteran Fund. Indiana taxes the same gaming activities as Illinois. In FY2018, total tax revenue from gaming equaled $966.2 million, much of which was distributed to local governments and state projects and funds. That year, $256 million was transferred to the Build Indiana Fund (for capital projects) whereas $394 million went to the general fund.
Similar to Illinois, the Hoosier State is also expanding gaming, specifically in its northwest counties bordering Chicago. Over the past year, the state and the City of Gary have been renegotiating regulations to allow two riverboat casinos to dock permanently on land. Both of these are within 30 miles of Chicago. Additionally, a proposal for another Gary-based casino is making its way through the city council this month.
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**Meghan Coleman contributed
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