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Chicago plans 2% tax on sports betting

If approved, the city tax would bring the total rate on gross revenues from sports betting in Chicago to 19%. Such revenues already are taxed at 15% for the state and 2% for Cook County.

People make bets in the sports book area of the South Point Hotel and Casino in Las Vegas in 2018. File photo.
The sports book area of the South Point Hotel and Casino in Las Vegas, shown in 2018.
Associated Press

Chicago would impose its own 2% on gross revenues from sports betting — bringing the total tax collected in the city to 19% — under a revised ordinance poised for City Council approval this week, a move that did nothing to appease casino magnate Neil Bluhm.

Lightfoot has argued there is no hard evidence allowing sportsbooks in and around five city stadiums would “cannibalize” revenue from a Chicago casino.

That’s the scenario outlined by Bluhm, whose Rush Street Gaming company is part of two separate groups vying to build a Chicago casino. Bluhm’s Rivers Casino in Des Plaines already has a sportsbook that stands to lose business if sports betting is legalized in Chicago.

But in an apparent attempt to satisfy both Bluhm and recalcitrant Council members, the Lightfoot administration’s revised sports betting ordinance headed for approval before the Council’s License and Zoning Committees includes a 2% city tax on gross revenues from sports betting in Chicago. Such revenues already are taxed at 15% for the state and 2% for Cook County.

“We’re in good shape to move this forward. And I look forward to making sure that we get our fair share of the revenues from this,” the mayor said Monday.

Noting that two percent matches the county tax, she said, “It’s only fair that the city of Chicago also obtain revenues as a result of this new venture by the sports teams.”

At an unrelated news conference Monday, Lightfoot said City Hall must shoulder the financial burden for “any infrastructure work” needed to accommodate sports betting in Chicago as well as for “regulatory oversight.”

“We need to make sure that there are sufficient resources for us to be able to do it,” she said.

Bluhm was not appeased by the proposed city tax, which is not imposed on sports betting at his Rivers Casino in Des Plaines.

“That 2% is nothing. It’s small potatoes. The 2% will be somewhere in the area of $1 million. But we believe and have studies that say that the loss of casino revenue will be in the area of $11 [million] or $12 million a year,” Bluhm told the Sun-Times.

“While people are betting on sports at Wrigley Field or United Center — fantastic locations [that] will open two-and-a-half years before a casino, so people will be used to going there — they won’t be at the casino ... betting on casino games. For every dollar of sports betting you’re losing, you lose about $3 or $4 of casino revenue. ... While they’re there, they walk around and play slot machines. They play roulette. They play blackjack. That’s the big money for both the city and state.”

The United Center, home to both the Bulls and Blackhawks.
The United Center, home to both the Bulls and Blackhawks, would be among the sports stadiums in Chicago able to add sports-betting facilities on site under a proposed ordinance. The city now wants to add its own 2% tax onto gross revenues from sports betting.
Getty

The casino is a “very tough deal in Chicago because the tax rate” is so high, Bluhm said, even after the General Assembly lowered it at Lightfoot’s request. That’s why several major players in Las Vegas took a pass.

Asked about withdrawing from the Chicago casino sweepstakes if the full Council approves the revised sports betting ordinance, Bluhm said: “We haven’t made that decision yet.”

Mara Georges, the former city corporation counsel now representing the United Center and Wrigley Field Holdings, called the 2% city tax a “mistake” that could push the total tax on sports betting to a “breaking point.”

Georges noted Chicago’s professional sports teams and their fans “already pay one of the highest, if not the highest, amusement taxes in the country between the city and the county.” The amusement tax would be paid by “anyone even coming into one of these stadiums where the sportsbook is going to be,” she said.

“Imposing an additional tax on sportsbooks creates an unlevel playing field between the city and the sportsbook in the suburbs, which is the Des Plaines sportsbook,” Georges said.

“The higher you make the tax, the more likely you are to push people online to do their sports betting. [Already], more than 86% of people do their sports betting online. This tax will [also] push people to the suburbs to do their sports betting as opposed to the city. And, at some point, it’s a point of diminishing returns where, the higher the tax, the less revenue raised. … When you look at sportsbooks across the country, those with the highest taxes generate the least amount of revenue.”

Georges laughed when asked if the proposed 2% tax was a “bone the mayor is throwing” to Bluhm, whose family has close ties to Lightfoot.

Lightfoot has received more than $200,000 in campaign contributions from Bluhm’s daughter Leslie and her sister Meredith Bluhm-Wolf. She has also received $131,491 from the family of Bulls and Sox owner Jerry Reinsdorf, the Wirtz family that owns the Blackhawks and from Laura Ricketts of the billionaire family that owns the Cubs.

“It’s probably what she feels has to be done to get the ordinance passed. I don’t know that I agree. … The time to add a municipal tax was when the state legislation was being drafted and negotiated,” Georges said.

But, she added: “If this is what it takes to get this ordinance passed, we won’t stand in the way of the passage of the ordinance.”

Neil Bluhm, chairman of Rivers Casino, chats with a reporter during the public opening of BetRivers Sportsbook, the first brick-and-mortar sportsbook approved by the Illinois Gaming Board, at Rivers Casino in Des Plaines, Monday morning, March 9, 2020.
Neil Bluhm, chairman of Rivers Casino, chats with a reporter in March 2020 during the public opening of BetRivers Sportsbook, the first brick-and-mortar sportsbook approved by the Illinois Gaming Board, at Rivers Casino in Des Plaines.
Ashlee Rezin/Sun-Times

Ald. Walter Burnett (27th), chief sponsor of the sports betting ordinance, called the 2% tax the price that must be paid — not to appease Bluhm, but to win the 26 Council votes needed to lift Chicago’s ban on sports betting.

“A lot of aldermen were actually concerned about, what was the city’s benefit out of all of this besides the infrastructure money that was going to the state and gonna be spent back in the city. This will help to satisfy a lot of aldermen in reference to that,” Burnett said.

“The city needs to be something more out of it. … This will give us a continuous flow of extra cash to help balance our budget.”

As for the sports moguls, Burnett said: “I’m sure they’d rather not do it. but they didn’t complain about it. It’s a win-win for everyone.”

Georges noted Monday that, even at 17% the existing tax on sports betting in Cook County is “sixth-highest” in the nation. Three of the five states with higher rates effectively have a “monopoly,” with sports betting controlled by the state lottery, she said.

“At some point, the tax gets so high that revenues go down and the municipality does not accomplish what it had hoped to accomplish,” she said.

Bluhm scoffed at the suggestion that the 2% city tax would give his Rivers Casino in Des Plaines an advantage.

“The casino in Des Plaines is almost 20 miles away. It’s a long ride. It’s right near the airport. For most of the time, it takes an hour to get there. It is a different market,” he said. “Des Plaines has nothing to do with this.”

Neil Bluhm’s Rivers Casino in Des Plaines already has a sportsbook operation that stands to lose business if sports betting is legalized in Chicago.
Neil Bluhm’s Rivers Casino in Des Plaines already has a sportsbook operation that stands to lose business if sports betting is legalized in Chicago.
Ashlee Rezin/Sun-Times