Taxes will ground Chicago casino, but taking a flier on airport slots could pay off, study finds

Despite issuing a dismal financial forecast that has put a potential Chicago casino on standby, a state-hired consultant determined slot machines at O’Hare and Midway airports could take off for city coffers.

In a brief analysis tucked at the bottom of its highly anticipated 50-page feasibility report on the prospects of a city gambling house, Union Gaming Analytics estimated that installing 500 slots at Chicago’s busy transit hubs could pull in nearly $37 million from globetrotting gamblers each year.

That would out-earn the notorious slots located in terminals in Las Vegas and Reno, the only airports in the United States where travelers currently can take a spin, according to the study released Tuesday.

But potential airport winnings will be moot if Mayor Lori Lightfoot and state lawmakers don’t alter the casino’s 72% effective tax rate under Illinois’ sweeping gambling expansion, a levy the consulting firm deemed too “onerous” to draw any developers to the table. Slots placed at the airport would be run by the operator of the Chicago mega-casino and count against the 4,000 gaming positions allotted to them.

If the casino does get off the ground, that won’t be a problem, according to Union Gaming. It probably won’t need all 4,000 positions in-house “to achieve optimal revenues,” since the Chicago metro area is “is already well penetrated” with nine casinos and thousands of video gaming terminals across the suburbs and northwest Indiana, the study found.

”As such, greater total revenues and taxes would be achieved by [allocating] a few hundred slot machines to Midway and O’Hare airports,” the study said.

They would become just the third and fourth U.S. airports to host gamblers after Nevada’s two largest: McCarran International Airport in Las Vegas and the Reno-Tahoe Airport. Pennsylvania lawmakers passed legislation last year allowing for airport gaming, but no facilities in the state have yet opted into the action.

Like in Nevada, Chicago airport slots would function “namely as an option for some travelers to pass time,” the study said, but as a major international nexus, Chicago slots “should hold greater appeal” among those departing and connecting gamers because they present “a captive audience.”

Union Gaming found the revenue from the 1,475 slot machines at McCarran and 240 at Reno-Tahoe are “well below” Nevada’s statewide average of $151 taken from gamblers daily at each machine. That’s because arriving travelers are typically coming for the full Vegas casino experience, departing gamblers have already blown most of their cash and area residents have more convenient options.

Those wouldn’t be issues at Midway or O’Hare, which was the busiest airport in the U.S. last year. Nearly 40 million commercial travelers passed through O’Hare in 2018, compared to 23.7 million at McCarran and 2 million at Reno-Tahoe, according to the Federal Aviation Administration. Nearly 10.7 million people flew to or from Midway.

The consultant estimated each Chicago terminal slot could take in $200 per day, bringing annual gross revenue from a suggested 500 machines to about $36.5 million.

”Ultimately, slot machines at Chicago airports should perform notably better than those in Nevada’s airports,” Union Gaming concluded.

The existing tax structure — which Union Gaming says cripples developers with razor-thin profit margins — would rake in nearly $18.5 million of that airport slot revenue, with more than $12 million going to Chicago.

Lightfoot’s office said the mayor is focused for now on working with Springfield lawmakers to fix the tax structure, but unlike predecessor Rahm Emanuel, the new mayor has indicated she’s open to the idea of airport slots.

Lightfoot previously told the Sun-Times the city will hold a “significant amount of local control” and she has no intention of turning O’Hare or Midway into what she called a “gambling den.”

“We haven’t set the parameters yet. But there’s gonna be a very, very high hurdle reached before we see any gaming at our airports,” Lightfoot said. “We’re not gonna turn Chicago into a location that’s unrecognizable from where we are.”

City and state officials have floated airport gambling a few times since riverboat casinos were legalized in Illinois in 1991. Most recently, former Gov. Pat Quinn vetoed a 2013 gaming expansion that would’ve cleared slots for takeoff at O’Hare and Midway.

A spokeswoman for Gov. J.B. Pritzker said the Chicago Democrat “worked to help create opportunities for the city of Chicago to generate revenue” with new gaming options — and the decision on installing airport slots “will be up to the city.”

The new law holds that any Chicago airport slots would be located beyond TSA checkpoints, reserved for passengers who are at least 21 and “who are members of a private club,” not the general public.

Fancy club or not, it’s no way to market the city, said the Rev. Tom Grey, a longtime voice against Illinois gambling who’s now a senior adviser for the national group Stop Predatory Gambling.

“It would be an ugly first glimpse for anyone who comes to Chicago,” Grey said. “It’ll take the ‘City of Big Shoulders’ and make it the city of nimble fingers.”