Illinois lawmakers may need to go back to the drawing board if they are serious about putting a casino in the city of Chicago.
A state-mandated feasibility study released Tuesday found that the taxes and fees set to be imposed on Chicago casino revenue would make it essentially impossible for a casino operator to make a profit — no matter where in the city the casino is located.
The study by Union Gaming Analytics determined that the effective tax rate on a Chicago casino would be 72%, including the 33.3% additional privilege tax that would apply to a Chicago casino but none other in Illinois, making it "the highest effective gaming tax and fee structure in the US."
At that rate, there would be little to no profit for the casino operator after accounting for operating costs, making it extremely difficult to finance construction of the casino or to remain long in business, according to the study.
"The gaming expansion legislation that allows for a casino in the city of Chicago is very onerous from a tax and fee perspective," the study said.
"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."
Union Gaming Analytics said its findings apply to all five possible casino sites it studied, including the Harborside development at 111th Street and the Bishop Ford Expressway, the former U.S. Steel South Works at 80th Street and Lake Shore Drive, an empty lot near the Chicago White Sox ballpark at Pershing Road and State Street, the former Michael Reese Hospital at 31st Street and Cottage Grove Avenue, and a west side site at Roosevelt Road and Kostner Avenue.
Absent the Chicago-only privilege tax, the study found each of the sites would be profitable, though none as profitable as a downtown casino that would both attract tourists and be more convenient for local residents.
"In order to achieve optimal AGR (adjusted gross receipts) and tax receipts, the casino should be located in a tourist-centric location that also enjoys, if possible, decent access to the local population. Such a facility could likely generate more than $350 million in incremental AGR relative to the highest performing of the five sites at approximately $806 million in AGR," according to the study.
The study also determined that about a third of the revenue at a Chicago casino would be money that currently is gambled in Northwest Indiana casinos.
Chicago Mayor Lori Lightfoot said the study shows more work needs to be done to ensure any Chicago casino is is "financially viable" and addresses "the revenue needs of the city of Chicago."
"While the study confirms our concerns about the tax structure that the Legislature passed, we know that this can be addressed, and we look forward to working with the governor and legislative leaders to revise the legislation and ensure a new casino will be beneficial for Chicago's communities and the entire state," Lightfoot said.
The Illinois General Assembly is due to reconvene for one week periods in late October and mid-November, during which lawmakers could enact legislation reducing or eliminating the Chicago-only privilege tax and making a Chicago casino financially viable.
However, that also would minimize the money Chicago was counting on receiving to shore up its underfunded police and firefighter pension programs, and potentially reduce funding for Illinois Gov. J.B. Pritzker's $45 billion statewide capital improvement program.
In any case, the study projects that a new Chicago casino could not open until 2023 or 2024 at the earliest.