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pro-gaming lobbyists, the new state taxes on casinos will go down in the record books as the highest tax rate on any industry
in the United States.
But many Republican state leaders - and some Democrats - say the 62-53 vote in the House during the final minutes of the
93rd Assembly on May 31 will cut the throats of businesses, drive jobs out of the state and harm the economy.
Illinois' nine casinos pay taxes based on their annual adjusted gross revenues - gross annual revenues minus the amount
paid to winners, but before expenses. In 1998, legislators approved a five-tiered tax, ranging from 15 percent for casinos
earning up to and including $25 million annually to 35 percent for casinos earning more than $100 million a year.
Under the new legislation, casinos will have to pay the state 70 percent of any revenues above $250 million a year.
Supporters of the increase say this will affect only the three most profitable riverboat casinos - the Grand Victoria in
Elgin, Hollywood Casino in Aurora and Harrah's in Joliet.
But the middle tier of casinos - including the Alton Belle in Alton and the Casino Queen in East St. Louis - will see their
taxes jump 50 percent, up from about 35 percent, depending on their exact revenues.
The higher tax rates will expire after two years or when a 10th casino opens in Illinois, whichever comes first.
Supporters say scaling back the new tax rates after a 10th casino opens will encourage the gambling industry to embrace
that new boat. Gov. Rod Blagojevich said he expects sale of that license will generate $350 million for state coffers next
year.
But legislators including State Rep. Steve Davis, a Democrat from Bethalto - in whose district Argosy's Alton Belle Casino
is located - say the governor-initiated legislation is an obvious attack on one of Illinois' largest cash cows. Davis voted in
favor of the legislation, he said, but only after the gaming industry 'collectively agreed' to a compromised version of the
original bill.
Davis is among a good number of legislators - Democrats and Republicans - who believe the increases will not produce the
money Blagojevich predicts, that they will actually lower the value of the 10th casino license (now tied up in bankruptcy
court) and will force casinos to cut back their operations.
"Once the boats signed off on it, I voted yes," Davis said. "But I'm a strong supporter of gaming. I've always felt that
since we legalized casinos in Illinois, the state of Illinois should support them. I am adamantly opposed to hitting the
casinos with a 70 percent tax increase. We're picking on one of the few things in this state that creates a huge number of
jobs, pumps money into our economy and encourages economic expansion. This is killing the goose that laid the golden egg."
The $500 million price tag the governor has placed on Illinois' 10th casino license is unrealistic, Davis said. "That
license is worth maybe $100,000," he said.
From an inter-state perspective in terms of casino competition, Davis said there's no question that given a choice to build
a new casino in Missouri versus Illinois, Missouri's top tax rate of 20 percent - compared to Illinois' top rate of 70 percent
- is a no-brainer for developers.
"They just won't do it (in Illinois)," he said. "Compare Illinois' (casino tax) rate to Nevada's rate of 6.5 percent and
it's just ridiculous. I'm sure Wall Street is not anxious about loaning money for development in Illinois."
State Rep. Jim Watson, a Republican from Jacksonville, said two-thirds of Illinois' population lives within a 45-minute
drive into a bordering state. Watson voted against the legislation.
"It's scary from a tourism standpoint," he said. "And to casino operators, what incentive have they got left to grow their
business? We're penalizing success."
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The final comprise, approved at the nth hour of the session, includes two key provisions. The first, Davis said, is a
change in the law that allows existing Illinois riverboats on the Mississippi to move into land-based moats; until now, these
casinos had to be stationed on the river. The second provision refers to the duration of the new tax rates; they will remain
in place for the next two years or until Illinois sells its 10th casino license, whichever comes first.
Casino Queen general manager Craig Travers said the moat - and the Queen's planned project to move the casino onto land as
the centerpiece of an entertainment complex - is a moot point for now, in light of the casino's 50 percent tax increase.
"At this point in time, that project is going to be put on hold until we see how much we can adjust our operations in the
next year or two," Travers said. "Fortunately, our company has a minimal amount of debt, so we're in a better position to deal
with this than some other casinos. Operationally, we plan to keep the Queen staffed and operating the way it has been, in
terms of staff and hours. We just have to work as lean and efficiently as we can. There's light at the end of the tunnel, but
at this point, we don't know if it's a light or a freight train."
The Alton Belle, which opened its doors in 1991, employs nearly 1,000 people and produces approximately $112 million in
annual revenues. Phil Roggio, the city of Alton's director of development and housing, said the city receives more than $7
million of that, pumping it into infrastructure to keep the local economy robust.
"This (state tax increase for casinos) has a significant spin-off effect on our city," Roggio said. "The Alton Belle is a
major employer here, and through the revenues we receive we're able to do a lot of really good things including riverfront
development, the construction of new fire stations and a new police station. Especially in an economically distressed area,
this could affect employment levels and reduce the level of city services in Alton."
Alton Belle Casino general manager Rich Laudon said his boat is analyzing possible operational changes that may need to be
made to compensate for a 50 percent tax hike.
"The biggest impact of this is that those of us whose casinos compete with casinos based in another state are at a huge
disadvantage," Laudon said. "We may reduce the hours in our restaurants, but that's about all we've got planned for now."
State Sen. Frank Watson, a Republican from Greenville and the senate minority leader, voted against the casino tax.
"It's their budget," he said, referring to state Democrats. "The Democrats have put this together, and they're going to
have to live with it, unfortunately. It's going to have an impact on the people of this state, and that's the sad part of all
this."
The bill also increases the $3 fee the state charges casinos for each customer, to $5 for the most popular boats and $4 for
the rest. The casinos have traditionally absorbed this fee.
Republican Sen. Dave Sullivan of Park Ridge estimated that in the final hours of May 31 - just before the $53 billion state
budget's midnight deadline - the Democrat-led Senate was approving $80 million in new revenue each minute.
"Even by state spending standards, that's obscene. The public should be outraged by what's occurred," Sullivan said.
According to preliminary revenue estimates from the Illinois Economic and Fiscal Commission, Illinois' casinos collectively
realized $1.6 billion in adjusted gross revenues during fiscal year 2000, a full year after the previous tiered tax increase
in 1998. $450 million of that revenue went to the state of Illinois.
IEFC analysts predict the state's gaming industry, even with the increased casino tax structure in place, will generate
more than $90 million a year in adjusted gross revenues.
editor/publisher: Kerry Smith
email: ksmith@ibjonline.com
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