A new report said existing plans for building a casino in Chicago were “not financially feasible,” a setback for one source of funding for Illinois’ new $45 billion statewide capital spending plan.
However, Gov. J.B. Pritzker and Chicago Mayor Lightfoot both said they remained optimistic about securing a deal that could attract investors.
The new $45 billion statewide infrastructure plan depends, in part, on revenue from a casino in Chicago.
Las Vegas-based Union Gaming Analytics studied the proposals at the request of the Illinois Gaming board. It concluded that none of the five proposed Chicago casino locations would be profitable enough to attract investors. The feasibility study blamed the existing tax and fee structure for making a Chicago casino unrealistic.
“We believe a reasonable casino developer would not move forward with a greenfield casino project that has, at best, a low single-digit profit margin,” the authors wrote in the report. “To the extent a casino operator could pare down expenses and realize modest revenue and profits from non-gaming amenities (as we have projected herein), total enterprise profit margin would, in a best-case scenario, likely equate to a few pennies on the dollar – and that would require the casino to be developed without incurring any debt as we believe no traditional financing would be available for such a development as debt servicing would likely well exceed any modest profits generated.”
Chicago Mayor Lori Lightfoot said the concerns raised in the study were issues that city officials were aware of and already discussing. The mayor called the legislative process “one of compromise,” and said she was optimistic that a deal could be reached between the City of Chicago and state lawmakers.
“What I look forward to is working with the governor and the legislative leaders to roll up our sleeves and work hard on a bill that gets it right.”
Pritzker said the potential revenue from a Chicago casino was too big to not make it a reality.
“I look forward to working with the City of Chicago, the City Council, the mayor and the General Assembly and the Gaming Board.”
Pritzker called potential revenue from the Chicago casino “significant.”
“It’s important for all us to focus on what’s best about this,” he said, citing the revenue and jobs a casino would create.
Lightfoot said she also viewed the revenue potential as too big to pass up.
“The incredible upside potential of a casino in Chicago that will dwarf the revenues that have been generated by any other casino in the state by many magnitudes,” she said. “So, getting this right is in everybody’s interest, not just Chicago.”
She said that if “done right,” a Chicago casino would generate “substantial revenues for the state.”
The report said a Chicago casino has the potential to become the highest-grossing facility in the state by a wide margin. Rivers Casino, in suburban Des Plaines, generated $441.8 million in adjusted gross receipts in 2018, making it the most profitable casino in the state.
However, even with the potential for highest-grossing casino in the state, the required taxes and fees in the Chicago plan would make it unpalatable for developers.
“The reconciliation fee alone would wipe out any profits generated for many years, if not decades under the AGR tax structure,” the report said.
The feasibility study cited the “onerous tax and fee structure” as the main impediment for the prospective casino. The Illinois gambling legislation that allowed for a Chicago casino also requires a third of the casino’s gross profit to go toward a “privilege tax” that would be paid on top of the existing tax structure required by all casinos in the state.
Union Gaming Analytics concluded: “We believe no traditional financing would be available for such a development.”
The Illinois Gaming Board has 90 days to review the study and develop recommendations.