Horse subsidy hurdle

A few days after Gov. Rod Blagojevich signed a measure into law intending to help the state’s horse racing industry, the measure hit a hurdle. Chicago-area casinos filed a lawsuit in Will County Circuit Court arguing the new act is unconstitutional.

The act imposes a 3 percent tax on the profits of four riverboats: Empress Casino and Harrah’s Casino in Joliet, Hollywood Casino in Aurora and Grand Victoria Casino in Elgin. An estimated $36 million would go into a new “Horse-Racing Equity Trust Fund” to help improve and market the racetracks.

The complaint is filed against the Illinois Racing Board, which would administer the fund, and state Treasurer Judy Baar Topinka, who would transfer the money. The boats said they will pay the tax, but the complaint requests the money be held until the court rules whether the act is constitutional.

The casino companies gave three reasons they believe the act violates the state constitution: 1) Taxing one private industry to subsidize another ailing competing industry doesn’t count as using tax dollars for public purposes. 2) The tax is unfair because it only applies to four Chicago-area riverboats, not five others operating downstate. 3) The legislation was written to benefit particular racetrack owners with no legitimate state purpose.

Of course, the Illinois Casino Gaming Association supports the challenge. Executive Director Tom Swoik said he hasn't read the complaint, yet, but he believes the lawsuit sets a precedent and is symptomatic of a broader problem. “One of the reasons it was filed was because of the inequities the business community has in this state,” he said, adding some of the business fees the governor imposed earlier are still stuck in court.

Rep. Ruth Munson, an Elgin Republican who represents the district including the Grand Vic., said that’s exactly why she was one of the 37 reps who voted against the bill before it was sent to the governor. “What we’re saying to businesses is, if you’re very successful in the state of Illinois, we’re going to penalize you. And we’re going to give [the money] to a less successful industry, your competitor,” she said. And she warned the act would take profits away from the Grand Victoria Foundation, which wouldn't be able to donate as much to local not-for-profits.

Rep. Bob Molaro, the Chicago Democrat who sponsored the measure in the House, called from outside his doctor’s office after getting knee surgery this week. He said the lawsuit was expected, but what is unexpected is that the judges will overturn the legislation. First, he said the legislature already voted to impose a graduated wagering tax on riverboats, which is based on the casinos’ total income minus the amount they give out to winners. “Obviously, places like Elgin are paying a heck of lot more tax than places like Rock Island,” he said.

Second, Molaro said he expects the courts to take a narrow look at the issue. “[Judges] don’t get into what the business climate of the state should be,” he said. “That’s for the legislature to decide, not the courts.”

Side note Waiting for his doctor’s appointment, Molaro gave me some humble advice: “Don’t get old.”