Clock ticking for Mayor Lightfoot to gain support on Chicago casino ‘compromise’

SPRINGFIELD — The clock is ticking for Mayor Lori Lightfoot to convince enough lawmakers that lowering the state tax rate on a Chicago casino would still make a winning bet for Illinois.

Changes in the language of the state’s new gambling law have mostly been agreed upon to lighten the tax burden on the big city casino to make it viable, in light of a consultant’s report that high taxes would prevent any developer from securing financing.

But sources say Lightfoot is struggling to gain support, even after deploying labor union forces to try to seal the deal in the waning hours of the fall veto session.

Illinois Senate President John Cullerton had hoped to bring a negotiated compromise to the Senate floor Wednesday, but the vote was delayed as the city continues to negotiate with lawmakers. That gives Lightfoot a couple extra hours to try to work her roll calls in both chambers.

A day after Lightfoot visited lawmakers to “build relationships” and make a plea, Cullerton on Wednesday offered up changes that he said would get both the city and state about $200 million a year in revenue once the Chicago casino is up and running.

There’s still a chance both chambers could pass the bill on the last day of veto session Thursday, via a Senate measure that’s in the House. That one-day passage would be a big show of force for the freshman mayor, who as of Wednesday said she remained hopeful the changes would clear the General Assembly.

Cullerton’s casino plan was largely viewed as a goodwill measure to Chicago’s new mayor, a day after Lightfoot’s pleas to Democratic lawmakers to support a Chicago casino.

Despite Lightfoot’s rare visit to a House Democratic caucus, the mayor appeared to still struggle with getting enough votes. Labor unions, including the Chicago Federation of Labor and SEIU, are helping the mayor in Springfield to try to get enough votes. And the Chicago Fraternal Order of Police is also working to pass the measure. But as of Wednesday afternoon, that number was still falling short despite agreed upon language.

Cullerton said the changes came from a “compromise” worked out between City Hall and Gov. J.B. Pritzker’s office.

At an Illinois Senate Executive Committee meeting, Cullerton outlined some of the proposal, which included a change in the overall tax rate and the reconciliation fee.

Cullerton said $135 million would come to the state initially, with the state to get $500 million once a six-year reconciliation fee is paid. With a Chicago casino running, Cullerton said the state would get $250 million annually, and the city would get about $200 million.

The proposed tax structure eliminates the one-third share of the Chicago casino’s gross revenue that was earmarked for the city in the original gambling expansion law.

Instead, it lays out a new graduated system specific to the Chicago casino. The Chicago casino would pay an overall higher tax rate compared to the graduated structure in place for Illinois’ 10 existing casinos and the five new ones in the pipeline — but with a smaller percentage of revenue going to the state.

For example, the state currently takes 32.5% of each existing casino’s gross revenue between $75 million and $100 million. Under the new proposal for the Chicago casino, the state would take 21.4%, with the city pocketing 18.6%.

But the taxing levels laid out in the proposed structure show just how much of a cash cow lawmakers think a big-city gambling mecca — with its 4,000 gaming positions, double other casinos in the state — could be. The highest taxing level outlined in the proposed structure is for revenue beyond $1 billion, of which the state would get 40% and the city 34.7%.

The new proposal also modifies the terms of the hefty “reconciliation fee” that a state-hired consulting firm determined “would wipe out any profits generated for many years, if not decades” for any Chicago casino developer under the original gaming law.

The fee would still be equal to 75% of the casino’s most lucrative 12-month span, but it doubles the time before the casino developer would have to start paying to six years after opening. It also triples the amount of time the developer would have to pay the fee in installments to six years.

Any potential developer would still be on the hook for upwards of $135 million in upfront licensing fees, another reason the consulting firm deemed the tax structure “too onerous” for any group to get financing for the Chicago casino.

Some Senate Republicans questioned why the state should take less money while Chicago gets a bigger cut of the action compared to existing casino towns.

The city’s cut will line its desperately underfunded police and firefighter pension funds.

During the committee, state Sen. Terry Link, D-Vernon Hills, warned the state’s vertical capital plan may be in jeopardy should the Chicago casino fail. Link has been a key player in gambling talks — and Cullerton on Wednesday called Link “very knowledgeable” in the negotiations. Sources have told the Chicago Sun-Times that Link wore a wire in the investigation that ended with bribery charges against former state Rep. Luis Arroyo. Link denies any involvement, and he has not been charged.

“We’ve got to get a Chicago casino,” Link said. “If we don’t open a Chicago casino our vertical capital will be destitute, in my mind, because this is probably one of the biggest — we’re looking at a $120 million upfront fee from the city immediately that would go towards capital, vertical capital, plus all the other money that’s coming from the new casinos once they get vetted by the [Illinois] Gaming Board.”

Link said it’s important to get the casino moving, “and I think the payback is a huge benefit to every casino in the state.”