JOLIET – Joliet already was grappling with declining gambling taxes, when things got worse in July: The city stopped getting any money from that source.
The state is holding onto the local share of taxes, another maneuver in the high-stakes game of Illinois budget impasse politics, and another signal the future of gaming revenue can be a gamble for local government.
And that’s on top of the findings from a recent report from the Illinois Commission on Government Forecasting and Accountability, which details how gambling revenue has been on the decline in Joliet and other cities in the state despite a rise in video gaming.
For now, the state has grabbed onto all the tax money generated by casinos and video gaming.
Joliet and other local municipalities stopped getting their share of gambling taxes in July, when Gov. Bruce Rauner contended he had no authority to distribute the money without a state budget in place.
State government is keeping nearly $5 million that Joliet officials expect to see some day – assuming the state budget crisis is resolved.
“We’re more concerned about what they could do,” said James Ghedotte, finance director for the city of Joliet. “Let’s say the state doesn’t solve their budget problems. They’re running out of money.”
Ghedotte worries the state might look for a way to keep the local share of gaming taxes. The city already is fighting Rauner’s proposal to keep the local share of state income taxes, which amounts to $7 million a year in Joliet.
In the meantime, the city has large enough reserves to cover expenses, Ghedotte said.
“We’re OK,” he said. “But if we don’t get it, we won’t be OK. They’re getting the interest on it, and we’re not. We want our money.”
Gambling taxes are the third-largest source of city revenue.
Joliet gets about $19 million a year from gambling taxes. That compares to $44 million in sales taxes and nearly $33 million in property taxes.
In a five-year look at local tax revenue from Illinois casinos, Joliet has been getting less each year since 2010, when gambling generated $24.4 million for the city, according to “Wagering in Illinois,” the recent report from the Commission on Government Forecasting and Accountability.
Gambling decline in Illinois
Joliet isn’t alone when it comes to declining gaming revenue.
Gambling is experiencing a slowdown statewide, even with the proliferation of the video gaming industry – Illinois’ newest market, according to the state report. The findings in the report raise the question of whether gambling expansion would be as lucrative as some state lawmakers believe.
State taxes generated from the lottery, race tracks, video gaming and riverboat casinos in fiscal 2015 in Illinois stood at $1.184 billion – representing a 5.8 percent decrease from the year prior, according to the report. Even the growth in video gambling was not enough to offset the $24 million loss in riverboat gambling revenue and the $125 million decrease in lottery revenue.
Riverboat gambling fell 1.9 percent while admissions were down 5.3 percent. Lottery profits fell for the first time in six years and horse racing revenues were flat.
Harrah’s Casino in Joliet remains the second biggest moneymaker in Illinois behind the state’s newest casino, Des Plaines’ River Casino, but revenue continues to dip.
The success of Des Plaines’ casino appears to be coming at the expense of other casinos in the area. Both Joliet casinos have seen steady revenue declines over the years, though Hollywood experienced a slight uptick between 2014 and 2015.
Impact of gambling expansion
Increased competition from video gambling also appears to be taking a toll on the state’s 10 casinos.
Even with two casinos in town, Joliet opted to embrace video gambling. The city ranks third behind only Springfield and Rockford among the cities with the highest number of video gambling machines.
As of August, Springfield had 542 machines, while Rockford had 432 and Joliet had 254. Joliet has just under 70 establishments, while Rockford has 91 and Springfield has 126.
Three casinos – including Hollywood Casino in Joliet – reported modest revenue increases between fiscal years 2014 and 2015, but those were offset by declines at the state’s seven other casinos, the report stated. Revenue from the lottery fell and from race tracks remained relatively flat.
Even with mounting state budgetary pressures and a desire to generate additional revenue, the numbers paint a grim picture for some state lawmakers’ long-sought attempts to further expand gambling. Some proposals include a new casino in the untapped Chicago market, allowing slots at race tracks, increasing the number of gambling machines allowed at establishments and allowing riverboat casinos to go beyond the 1,200-machine limit. For video gaming, there’s now a five-machine limit per establishment.
The annual report’s findings confirm the suspicions of Tom Swoik, executive director of the Illinois Casino Gaming Association, that gambling expansion would benefit the state only short-term with one-time influxes in tax dollars due to construction, new jobs and immediate economic impact.
“We’re not creating any more gamblers. We’re moving them from one venue to another,” Swoik said, pointing to the 2011 opening of River Casino in Des Plaines.
Riverboat gaming revenue spiked statewide in 2011 by 19.9 percent thanks to Des Plaines’ new casino, but those gains were short-lived and at the expense of the state’s nine other casinos. The following year, statewide revenue increased by just 1.8 percent, and dipped in 2014 by 7.4 percent and 3.5 percent in fiscal 2015.
Swoik said he expects a similar scenario would unfold if Illinois were to further expand the gaming industry in an already saturated market.
“We have more licensed gaming facilities than Nevada,” he said.
CASINOS AND VIDEO GAMING
Joliet gambling tax sources
Casinos – $19.6 million
Video gaming – $152,000
Casinos – $18.8 million
Video gaming – $380,000
Casinos – $19.02 million forecasted in budget
Video gaming – $245,000 at end of June