Tuesday, October 11, 2011

Gaming revenues down as Quinn continues to mull expansion

By Jamey Dunn

A legislative commission report paints a bleak picture for Illinois gaming revenues, and Gov. Pat Quinn says he plans to have specifics by the end of the month on what he wants for a gambling expansion bill.

The Commission on Government Forecasting and Accountability released a report that says total gaming revenues for the state in 2011 reached their lowest level since 2001. The state's take of riverboat, horse racing and lottery revenues for last fiscal year was about $1 billion.

Revenue for riverboat gambling decreased by almost 6 percent from Fiscal Year 2010 and made up almost 34 percent of total gaming revenues. Four years ago, riverboats contributed about 52 percent of gaming revenues. The report said revenues from riverboats are at the lowest since FY 1999.

The report pointed to the economic downturn and increased competition from neighboring states as possible causes for the drop. However, the numbers continue to suggest that the biggest contributor to the drop in Illinois casino revenues is the indoor smoking ban. “Since the indoor smoking ban began in January 2008, adjusted gross receipts for Illinois riverboats have fallen a combined 30.7 percent from pre-smoking-ban levels,” the report stated.

COGFA’s report also warned against expecting consistent revenue increases under a gaming expansion plan that will be a topic of debate during the legislature's fall veto session. “Many estimate a significant amount of one-time revenues and recurring revenues would come from gaming expansion. However, factors such as a reduced tax rate and cannibalization will make it challenging for substantial amounts of new state revenues to be realized. Lowering the tax rates would likely increase the amount spent by gaming operators on the casino[s], which, history has shown, could lead to higher attendance. … But large increases in overall adjusted gross receipts will be necessary to offset the loss of revenues from the lower tax rates and from the expected loss of revenues from existing gaming facilities that would be cannibalized by the new casinos.” The report estimates that revenues from legalizing video poker in some bars and restaurants across the state would not start coming until "FY2013 at the earliest." The state has been dragging its feet getting the licensing process off the ground and had to rebid a contract for a necessary computer system because of mathematical errors made when totaling costs associated with bids.

Quinn again pointed to fears of saturating the gaming market as he talked to reporters in Chicago today about the gaming expansion passed by the legislature last spring. “I just think it’s top heavy, I’ve said that all along. You can’t over-saturate the gambling market in metro Chicago or anywhere else. If you have too many positions and casinos, they hurt each other, and they don’t really add to the revenue. And I don’t think the people really want our state to become the Las Vegas of the Midwest.” Quinn has voiced support for a provision of the bill that calls for the creation of a casino owned by the city of Chicago.

Meanwhile, lawmakers have said negotiating with Quinn over Senate Bill 744, which would allow for slot machines at horse racing tracks, as well as five new casinos, have been difficult because Quinn won’t say what he wants. Quinn countered today that legislators have not been specific about changes they are willing to make. “I haven’t seen anything specific or tangible from the legislature. All I know is what they did on May 31.” He said he would release specific changes he would like see “later this month.”

Senate President John Cullerton put a procedural hold on the bill in the hopes of negotiating with Quinn. The governor has pointed to that move as an indicator that the plan is flawed. “Obviously they know they have some defects there, because they haven’t sent it my way,” Quinn said. He added, “obviously they’re afraid of my review, and I think they should be.”

Skokie Democratic Rep. Lou Lang, a sponsor of SB 744, said he expects the fate of the expansion will be decided one way or another when lawmakers return later this month. “The plan would be to have some finality to this gaming issue during veto session.” Cullerton backed a plan to draft a so-called trailer bill that would make changes to the original legislation and then send both bills to the governor to be signed at the same time. “I’ve been pushing for a trailer bill. … It would be very tough to pass a new gaming bill or an amended gaming bill that makes substantial changes,” Lang told Illinois Issues.

But Quinn came out strong today against reworking the plan with a trailer bill. “They have a bill. If they don’t think the bill is good enough, they should go back to the drawing board and pass another bill that’s better,” Quinn said. “Do it right the first time. If it’s not right the first time, it’s got to go in the reject pile, and [lawmakers have] got to go back to the drawing board.” When asked if he would veto SB 744, if given the chance, Quinn said, “I think anybody with common sense, if they saw that [bill], would probably throw up their hands in shock and disbelief that we would have gambling expansion in Illinois without proper oversight.”

For more on video poker and the challenges the state faces in implementing it, see Illinois Issues April 2010.

For more on the upcoming veto session, see Illinois Issues October 2011.

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