City bets on casino dollars for streets, college program

2013-12-22T00:00:00Z 2014-02-26T17:47:13Z City bets on casino dollars for streets, college programMarc Chase marc.chase@nwi.com, (219) 662-5330 nwitimes.com
December 22, 2013 12:00 am  • 

HAMMOND | More than half of Hammond's streets have been rebuilt by a floating pot of gold -- in the form of what is now the Horseshoe Casino boat -- since the mid-1990s, according to city records.

It's also the tens of millions of dollars each year keeping popular Hammond government programs and infrastructure afloat and the cash at the center of one of the city's recent sunken ships in the form of a federally convicted councilman.

The casino revenue Hammond reaps each year pumps a collective $7.4 million into the political power wielded by Hammond City Council members, largely to rebuild streets and further other projects and another $3.5 million doled out by Mayor Thomas McDermott Jr. for parks, infrastructure and other financial goodwill.

It also funnels about $2.5 million every year into a program intended to attract and retain residents by offering four years of college tuition for the children of city homeowners.

Though only a small percentage of the casino pie, thousands of dollars in these proceeds also were at the heart of a political pay-for-play scandal that landed a councilman in federal prison.

City officials say the annual $32 million in municipal casino gaming revenues from Horseshoe Casino on Hammond's lakefront make possible projects and perks in the city that otherwise wouldn't occur via tax money.

But critics of the way the city spends some of the money argue more of it should be going to needed infrastructure projects -- including streets, sewers and sidewalks -- rather than pet political projects.

Meanwhile, city officials struggle with some of the same challenges as other communities receiving revenues from gaming boats that year-over-year see shrinking revenues, in part because of increased game competition in neighboring states.

The formula

The funding Hammond receives each year for this cornucopia of street, social and economic development projects depends largely on Horseshoe Casino's  business success.

Since Hammond began receiving casino revenues through agreements brokered with the boat in 1996, the city has raked in more than $290 million in municipal revenues, according to state gaming figures.

Each year, the city receives a portion of the casino's admissions tax, wagering tax and other payments and revenues based on a graduated system of percentages.

The convoluted formula for the city's take translates into about $32 million per year funneled into Hammond government coffers. The amount far eclipses the annual revenues received by East Chicago or Gary from their respective gaming boats.

Paving the way

About half the money each year goes to infrastructure projects -- the biggest single category of casino revenue spending, according to city financial records reviewed by The Times.

In 2012, the most recent year for complete gaming financial figures, $9.4 million alone went into streets, stormwater drainage, sewer, sidewalk and street lighting projects, city figures show.

Another $3 million funded parks and recreation infrastructure projects and $2.7 million to repay debt, largely incurred by past infrastructure projects, city records show.

Much of the gaming revenue funds infrastructure through what city officials call the Hammond Jobs Bill. Between 2012 and 2015, the city expects to use about $12.1 million in casino funds used for 16 priority road, bike trail and flood control projects, leveraging an additional $45 million in federal construction funds for the city.

City engineer Stan Dostatni said prior to the emergence of municipal gaming revenues in Hammond, streets often lay in various states of disrepair.

“There was no money for decades for residential streets” prior to the casino revenues, Dostatni said. “Federal funding was only for major thoroughfares.”

Hammond Mayor Thomas McDermott Jr. said the 55 percent to 60 percent of Hammond streets that have been completely rebuilt since gaming came to town is the biggest single success story of the funding.

Streets are one of the biggest issues resonating with voters -- and therefore one of the largest potential pitfalls for politicians seeking re-election.

"My dad has told me this from when he was mayor, and it's true," McDermott said. "Streets and flooding are the biggest issues that have existed in Hammond. Our rebuilds through casino funds have been improving that issue significantly."

Slicing the pie

Most of the infrastructure money is funneled to projects through the discretion of the mayor and the city's six district council members.

Under the city's gaming revenue ordinance, Mayor Thomas McDermott Jr. controls the biggest portion of that pie, with 30 percent going into a discretionary fund he controls. Right now, that equals about $3.5 million per year.

Each of the six district council members also receive a 10 percent share, equaling about $1.25 million, largely for road and other infrastructure projects within their districts.

Councilman Anthony Higgs, who represents Hammond's 3rd District, acknowledged the money has been key to rebuilding crumbling streets and related infrastructure in his district.

The high level of revenue over the years has allowed the city to rebuild  sewers and storm drainage under the roads, not just resurfacing, Hammond officials said.

But Higgs said a rebuild of a stretch of road within his district -- such as the projected 2014 project to rebuild Kenwood between Calumet and Columbia -- often runs equal to or more than his discretionary funds for one year.

The Kenwood rebuild is projected to cost $1.3 million.

"That takes up all of my individual casino funds for that year," Higgs said. "I applaud Horseshoe for giving us the resources, but we need to start thinking about the best ways to use them."

And the casino revenues are shrinking year to year, he noted.

In the past few years, district council members were accustomed to receiving more than $2 million in their discretionary gaming funds annually. That number is now about $1.25 million, the city reported, in part because of declining gaming revenues and shifting more of that money to paying municipal debts.

And Hammond also has become reliant on some casino revenues to support day-to-day municipal operations. In 2012, about 30 percent of casino revenues went to the city's general fund.

Further lessening money available for streets and infrastructure are "off-the-top" projects, some of which are popular with voters but expensive and potentially difficult to sustain in the future, city officials said.

Off the top

Some of the Hammond projects funded with casino revenues are dubbed "off the top" by city officials because they're funded first, leaving what remains to be divided among the mayor and district council members' infrastructure funds, city Controller Robert Lendi said.

Projects funded first include $500 property tax rebates provided to senior citizens and the city's disabled. Those rebates total about $1.8 million.

About $2.7 million per year in debt payments also came off the top in 2012, according to city records, as did $1.8 million paid to the Northwest Indiana Regional Development Authority.

Another off-the-top project is the College Bound program, which offers the children of city homeowners up to $10,200 per year for four years at colleges or universities.

In 2012, the city used about $2.7 million in casino revenues -- or 7 percent of the overall gaming revenues -- to fund College Bound.

McDermott championed the program when it began eight years ago as an economic development tool, aimed at retaining and attracting homeowners in an urban city that has hemorrhaged population in recent years.

The program met rave reviews from constituents who have packed city forums regarding extending the initiative. The city reported giving 183 students from the class of 2012 a scholarship, a 20 percent increase over the previous year's graduating class.

Higgs is one of the growing number of city voices who sees the value in College Bound but would like to see more of the casino revenues going to streets and infrastructure.

McDermott agrees with the sentiment and believes another funding source should be identified to sustain the college program in the future.

The mayor said he proposes using about $4 million per year in newly acquired water fee revenues to fund the ever-growing college program. The new cash is flowing in from the city's recent boost in fees it charges the nearby Illinois cities of Chicago Heights and Calumet City, which purchase Hammond water.

Under that plan, College Bound funding no longer would rely on gaming funds, potentially freeing up more money for infrastructure, McDermott said.

Stealing from the house

Though the vast majority of the mayor's and council members' discretionary funds can be tracked directly to infrastructure projects, one former councilman recently put the system in the spotlight when he was caught essentially stealing from the house take.

Former Councilman Al Salinas was sentenced earlier this year to three and a half years in federal prison after pleading guilty to accepting about $10,500 in kickbacks from a tree-trimming contractor after steering work within his district to the contractor.

The crime occurred while Salinas represented Hammond's 2nd District, a position he had held since 1995. He also pleaded guilty to failing to file several years' worth of tax returns.

The money for the work Salinas funneled to the tree trimming service came from Salinas' discretionary gaming revenues.

Salinas authorized at least $310,000 in contracts to Dave's Tree Service from 2009 to 2011, court records state. Dave’s Tree Service made 11 payments to Salinas during that period, in amounts ranging from $500 to $1,500, to obtain the work, according to federal court files.

Higgs noted that while nearly all discretionary gaming revenues have funded legitimate infrastructure, the Salinas case has caused the city to keep a closer eye on the store.

He said one program being funded from casino revenues, for instance, involved placing various dumpsters throughout the districts for neighborhood cleanup initiatives. That program, which consumed more than $350,000 between 2009 and 2011, was disbanded following Salinas' criminal indictment, Higgs said, in part because of the scandal created by Salinas.

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