With Chicago casino plans in flux, video gambling operators make their pitch

If state lawmakers and Mayor Rahm Emanuel can’t reach a deal on a Chicago casino, could video gambling machines at bars and restaurants within the city help fill both governments’ budget holes?

Yes — and to the tune of more than $300 million a year, a trade group that represents the video gambling industry said during a legislative hearing Monday.

To date, a highly skeptical Emanuel and the City Council have refused to lift Chicago’s ban on video gambling terminals, which are now in 900 communities statewide. Although the mayor has opposed the machines in the past, Chicago’s financial condition has worsened — which might get him to reconsider his position, especially if his casino quest fails.

Emanuel is asking the Legislature and Gov. Bruce Rauner to approve a city-owned casino that would shore up Chicago’s severely underfunded police and fire pension funds and provide hundreds of millions of dollars in tax revenue to the state. Legislators have as strong an incentive as Emanuel to get a gambling deal done in light of last week’s Illinois Supreme Court ruling on pensions — a decision that deepened the state’s multibillion-dollar budget crisis.

That said, a city-owned casino likely would need to be a part of a larger expansion of gambling — including four new casinos in other towns and video gambling at horse tracks — to win enough votes to pass in the Capitol. Even though tourism, business and labor leaders touted the economic benefits of a city casino during the House Executive Committee hearing, it’s still a rough sell given all the moving parts.

The potential allure of video gambling is that Emanuel wouldn’t need any help from Springfield to bring it to Chicago, as gambling machines began being installed throughout the state in 2012 under a change in state law.

Against that backdrop, the Illinois Gaming Machine Operators Association used Monday’s hearing as a platform to tout Chicago as the largest untapped market for its product. The city is among 400 municipalities in Illinois that don’t allow video gambling terminals.

According to the trade group’s analysis, Chicago would become home to 13,598 gambling terminals — the equivalent of roughly 11 state casinos — if City Hall allowed them. Those machines would generate $304.8 million a year in taxes, with $254 million of that to go to the state and $50.8 million to the city. The city’s share of those taxes would increase every year, to $69.4 million in 2020, according to the analysis.

A city-owned casino would generate at least $457 million a year, with more than $200 million of that to be paid to the state in taxes, according to state projections. The city would keep all profits after building the casino and paying a private manager to run it — costs that are still largely unknown.

The state’s existing casinos have decried video gambling, saying it is “cannibalizing” gamblers from their establishments and saturating the gaming marketplace.

In 2012, Emanuel cited other issues, telling the Chicago Tribune that video gambling “is not right for the city” because of concerns about children seeing it on most city blocks. “I am absolutely, 100 percent against it in every part of the fiber in my body,” the mayor said then. “And it will not happen on my watch.”

Emanuel’s press office didn’t return messages Monday.

Mike Gelatka, president of the video gambling trade group, laid out a scenario in which video gambling terminals could work in concert with a downtown casino.

“As far as expansion, Chicago has a huge upside if it’s allowed into the city,” Gelatka told state lawmakers. “Even with the casino as maybe a main focus . . . that would be perfect for a downtown area for bringing in the tourists and attracting conventioneers. . . . I think there’s an outside ring for the rest of the city that’s full of small businesses that would benefit from” gaming terminals.