Video Gambling in Bars Holds Promise of Handsome Revenues
On Chicago’s gritty far southeast corner, which in the past few decades has seen factories rust and grandiose plans for a Lake Calumet airport fizzle, a couple of dozen neighborhood bar and restaurant owners gathered at the Knights of Columbus hall on a late winter evening to learn about the latest big-ticket plan: video gambling.
Alderman John Pope (10th Ward) told them he believed that a “large majority” of City Council members would soon join him in voting to lift the ban on gambling in Chicago, placing the city in a state program that will allow as many as five video gambling terminals in any business that has a license to sell liquor for on-site consumption.
“We’re interested in putting people to work; we’re interested in putting money in people’s pockets; and, honestly, we’re interested in legalizing what is happening already,” said Mr. Pope, referring to illegal gambling that takes place in many Chicago bars.
Illinois officials estimate that video gambling, legalized last summer by legislators and Gov. Patrick J. Quinn, will generate more than $1 billion a year in total revenues from at least 45,000 new machines across the state. The video gambling revenues will be taxed at 30 percent.
That would mean hundreds of millions of dollars for the financially struggling state, making it the most important source of money for Illinois’s first major spending spree on public works in a decade, officials predict. Proponents promise a long list of construction projects, like school and park fieldhouse renovations, new streetlights and rapid transit improvements.
But a deeper look reveals that the state will receive a far less lucrative deal from gambling than did other states that have adopted similar video gambling plans. The new gambling initiative is a richer deal for Illinois’s politically connected video gambling industry than for similar operators in other states. Moreover, state regulators say it will be nearly impossible for them to police the new form of gambling as closely as they scrutinize the state’s casinos.
Concerns about the regulation of gambling have festered since the days of Al Capone and could make the passage of a Chicago video machine ordinance far less certain than Mr. Pope predicted. Mayor Richard M. Daley has not yet publicly endorsed the issue, and if Chicago does not approve video gambling, the state’s potential new source of revenue would decrease sharply.
If video gambling does become a reality, the vast majority — 70 percent — of revenues from the new machines will be divided evenly between the liquor license holders and the companies licensed by the state to own and operate the new gambling terminals.
The state’s share from video gambling is set at 25 percent, and 5 percent of total gambling-machine revenues are left for municipalities. Even at that low rate, Illinois projects a potential $534 million a year in tax revenue.
Illinois’s share of video gambling revenue is in stark contrast to the situation for the state’s nine casinos, and a 10th planned in Des Plaines. The casinos must turn over in taxes as much as 50 percent of what they earn.
The new video betting legislation in Illinois is also far more lucrative for the gaming industry than in other states with similar laws. In South Dakota and West Virginia, the state gets 50 percent of what is earned at video gambling terminals in liquor-licensed establishments. In Oregon, where the state owns and operates the machines, the share jumps to 73 percent.
“Why are they giving this away for so little?” said Bridget Gainer, a Cook County commissioner who supported a measure banning video gambling in the unincorporated parts of the county. “In a rush to please the industry, we got stuck with a terrible deal.”
In forging the deal in Springfield, the gambling industry benefited from lobbyists with close connections to government leaders. One lobbyist, Joseph Berrios, is chairman of the Cook County Democratic Party and a close ally of Michael J. Madigan, the Illinois House speaker. Another is Tom Cullen, who worked for Mr. Madigan for 12 years, according to the organization’s Web site.
Video Gaming Technologies, a major manufacturer in Tennessee, also employs clout-heavy lobbyists: the firm of Michael Kasper, lawyer and treasurer for Mr. Madigan’s state Democratic Party organization. Mr. Kasper’s firm also includes David Dring, the former spokesman for Tom Cross, the Illinois House Republican leader.
The legislation received bipartisan support in both chambers of the General Assembly, and Governor Quinn signed it into law in July.
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